John Lykouretzos Long Sealed Air: Invest For Kids Presentation

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is John Lykouretzos of Hoplite Capital who pitched long Sealed Air (SEE).


John Lykouretzos' Presentation at Invest For Kids Chicago 2016

•    $2.6 billion AUM, Tiger Cub, equity long/short, established 2003

•    Largest holding is Sealed Air (SEE)

•    Started in bubble wrap, now has three businesses

•    Highly integrated into customers’ processes = good pricing power

•    History of management was very good and then quite bad; new CEO named in 2012 and turnaround, results have been impressive; overhauled strategy, executives, pricing, cost structure, compensation; focus now on FCF

o    Turnaround is far from over – [EBITDA] margins have another 400 basis points to expand

•    Pricing power remains, even after CEO has aggressively raised price multiple times in recent years; customers have no choice; also now getting paid as a percentage of the savings generated for the customer
o    Estimate 1-2% price increases per year through 2022; mix improving too; 2% volume growth

•    Limited capital intensity and no M&A appetite – 10% of shares likely to be repurchased each year

•    Normalized FCF per share going from ~$2.89 in FY16 to $4.49 in FY18

•    Diversey (cleaning and sanitation segment) is somewhat of a comp to Ecolab; acquired in 2012 in an ill-conceived move, leaving the company over-levered and lacking direction

o    Will spin off this business; it could grow faster as an independent company – it needs investment in its salesforce, whereas SEE’s other businesses do not

•    Target price: $60 in 2016, $70 in 2017, $84 in 2018, $102 in 2019


Be sure to check out the rest of the presentations from Invest For Kids 2016.

Hoplite Capital Discloses Sinclair Broadcast Group Stake

John Lykouretzos' hedge fund Hoplite Capital has filed a 13G with the SEC regarding shares of Sinclair Broadcast Group (SBGI).  Per the filing, Hoplite now owns 5.2% of the company with over 6 million shares.

This is a newly disclosed equity position for the hedge fund and the filing was made due to activity on June 25th.  You can view other portfolio activity from Hoplite here.

Per Google Finance, Sinclair Broadcast Group is a "diversified television broadcasting company. The Company owns or provides certain programming, operating or sales services to more television stations."

Hoplite Capital Reveals SunEdison Stake

John Lykouretzos' hedge fund firm Hoplite Capital has filed a 13G with the SEC and revealed a new equity position in SunEdison (SUNE).  Per the filing, the hedge fund now owns 5.99% of SUNE with over 16 million shares.

The filing was made due to activity on February 26th.  Omega Advisors' Lee Cooperman highlighted his fondness for SUNE a few months back as well, as the company is spinning off its money-losing semiconductor business.

Per Google Finance, SunEdison is "formerly MEMC Electronic Materials, Inc is engaged in the development, manufacture and sale of silicon wafers. The Company is a developer and seller of photovoltaic energy solutions. Through Solar Materials and Solar Energy (SunEdison), it is a developer of solar energy projects. The Company operates in two segments: semiconductor materials and solar energy. The Company’s Solar Energy segment includes the operations of its old Solar Materials segment, as well as its SunEdison business. In the Semiconductor Materials, the Company offers wafers with a variety of features. The Company’s wafers vary in size, surface features, composition, purity levels, crystal properties and electrical properties

You can view some past portfolio activity from Hoplite here.

Hoplite Capital Adds to H&R Block Stake: Q3 Letter

John Lykouretzos' hedge fund Hoplite Capital is out with its Q3 letter.  In it, we see that they added to positions in Sea World Entertainment (SEAS), Monster Beverage (MNST), and H&R Block (HRB) during Q3 as shares sold off but their theses remain unchanged. 

HRB is their largest position and Lykouretzos writes,

"While HRB has recently announced that it will no longer be selling its bank to Republic Bancorp, we are confident they will either sell the bank or shut it down and pursue a more shareholder-friendly capital structure."

The hedge fund also exited their stake in Intuitive Surgical (ISRG) during the quarter as their thesis was incorrect.

This year, ISRG shares tumbled from $500 down to $420 after the second quarter and then continued to cascade to current levels of $369.  Numerous other prominent hedge funds like Viking Global were long shares of ISRG at the end of the Q2 so we'll have to wait and see if others sold in Q3 when the next batch of 13F filings come out.

Some of Hoplite's shorts include a semiconductor manufacturer and a wireless telecom operator in an emerging market.  They've recently added to shorts in companies that supply equipment to mining companies or that have exposure to mining in general and these are some of their top shorts.

Their Q3 letter also mentions that they were short a "handset manufacturer" that spiked when part of the company was acquired, and we assume that this position was Nokia (NOK).  As we detailed this week, Dan Loeb's Third Point bought NOK recently.

At the end of Q3, Hoplite had gross exposure of 150.7% and was 54.9% net long.


For more of the latest hedge fund letters, head to:

- Greenlight Capital's Q3 letter

- Third Point's Q3 letter

- Cobalt Capital's Q3 letter

- Corsair Capital's Q3 letter

John Lykouretzos' Presentation on Starbucks (SBUX): Ira Sohn

We're posting up notes from the Ira Sohn Conference.  Hoplite Capital's John Lykouretzos gave a presentation on going long Starbucks (SBUX).  Note: This is his largest disclosed equity long per the most recent 13F filed with the SEC.  He just initiated the position in Q1.

Lykouretzos started at Tiger Management as an industrial analyst, PM. He then launched Hoplite in 2003.  He thinks about owning and shorting businesses, not stocks. No pair trades, no short ETFs.

Long Starbucks (SBUX):  $54 now. $90 price target in next 3 years. $42B market cap. Net cash $1.7B. Two main drivers:

1. Coffee market is large, growing rapidly, driven by "premiumization" $76B market, not cyclical. Single serve is gaining share, still only 10% of coffee market. US single serve is only 8% of market, but growing at 55% CAGR. K-cups are driving the market, from 5% to 18% share. Stores getting better, mobile payments, etc.

2. SBUX will capitalize; CPG, China growth. CPG growing, K-cup now 17% share from 8% a few months ago. China growth; brand like NKE or AAPL. In US, it's a morning coffee business, in China, it's an evening/afternoon with food, great margins, best in the company. Not undiscovered, but "winners keep on winning"


P.S. - Don't miss other presentations from David Einhorn, John Paulson, Bill Ackman & more: notes from Ira Sohn Conference 2012.