Corvex Management Goes Activist on ForeScout Technologies

Keith Meister's hedge fund firm Corvex Management has filed a 13D with the SEC regarding shares of ForeScout Technologies (FSCT).  Per the filing, Corvex now owns 7.2% of ForeScout with over 3.34 million shares.  However, the 13D is being filed jointly with Jericho Capital Asset Management which also owns shares, bringing their collective exposure to 14.5% of the company with over 6.68 million shares.

The filing shows Corvex as buying throughout September and October initially at prices around $35.xx but really ramped up their buying when shares traded down to $25.xx.

The 13D also contains information about their new activist stance: "After the close of business on October 18, 2019, the Corvex Persons agreed with the Jericho Persons to work together to engage with the Issuer and its management regarding its business and prospects. The Corvex Persons and the Jericho Persons believe that combining their complementary expertise, skill sets and perspectives will be beneficial in discussions with the Issuer. The Corvex Persons and the Jericho Persons anticipate having private discussions with the Issuer as soon as practicable."

Per Yahoo Finance, ForeScout Technologies "provides network security products in the Americas, Europe, the Middle East, Africa, the Asia Pacific, and Japan. It offers CounterACT that provides for visibility and control capabilities across campus information technology and Internet of Things (IoT) devices, operational technology devices, data center physical and virtual devices, and cloud virtual devices; and SilentDefense, which offers visibility and control capabilities within the operational technology portion of the network."

Corvex Management Increases CenturyLink Position

Keith Meister's activist firm Corvex Management has filed an amended 13D with the SEC regarding its stake in CenturyLink (CTL).  Per the filing, Corvex now owns 6.6% of the company with 36.54 million shares. 

They've increased their stake recently by acquiring a net of 550,000 shares of common stock on August 3rd and 17th, while also acquiring 5 million shares underlying call options.

At the end of the second quarter, Corvex only owned 18.99 million shares, so they've clearly been out accumulating more exposure in recent months. 

CenturyLink is Corvex's largest position.  Their total CTL stake is comprised of 19.58 million shares of common stock and 17 million shares underlying call options.  Of the calls, 4 million of those shares have an exercise price of $28 and expiration of October 20, 2017.  Another 8 million of those have a strike of $30 and same expiration date, while another 5 million are in January 2018 $23 calls. 

We've also highlighted previous portfolio activity from Corvex here.

Per Google Finance, CenturyLink is "n integrated communications company. The Company is engaged in providing an array of communications services to its residential and business customers. Its segments include business, which provides strategic, legacy and data integration products and services to small, medium and enterprise business, wholesale and governmental customers, including other communication providers, and consumer, which provides strategic and legacy products and services to residential customers. Its communications services include local and long-distance voice, broadband, Multi-Protocol Label Switching (MPLS), private line (including special access), Ethernet, colocation, hosting (including cloud hosting and managed hosting), data integration, video, network, public access, Voice over Internet Protocol (VoIP), information technology and other ancillary services. As of December 31, 2016, it served approximately 5.9 million broadband subscribers and 325,000 Prism TV subscribers."

Corvex Management Adds To Energen Position

Keith Meister's activist firm Corvex Management has filed an amended 13D regarding shares of Energen (EGN). Per the filing, Corvex now owns 8.8% of the company with over 8.51 million shares.

This is an increase of over 1.1 million shares since late June when Corvex was previously buying EGN.  The filing notes they were buying in early July and as recent as July 19th. They bought between $47.11 and $50.57.

Corvex's stake is actually comprised of 8.1 million shares of common stock and various stock options. They have 415,200 shares underlying call options that have an exercise price of $50 and expiration of October 20, 2017. They've also sold the same amount of call options with an exercise price of $60 and the same expiration in October. Also, they've sold the same amount of put options with an exercise price of $40 and expiration of January 19, 2018.

For more on this fund, we've highlighted how Corvex has bought another stock recently.

Per Google Finance, Energen is "an oil and natural gas exploration and production company. The Company is engaged in the exploration, development and production of oil and natural gas properties and natural gas. Its operations are conducted through subsidiary, Energen Resources Corporation and occur within the Midland Basin, the Delaware Basin and the Central Basin Platform areas of the Permian Basin in west Texas and New Mexico. The Company is focused on increasing its oil, natural gas liquids and natural gas production and proved reserves through active development and/or exploratory programs in the Permian Basin. As of December 31, 2016, oil, natural gas liquids and natural gas represented approximately 60%, 20% and 20% of its reserves. As of December 31, 2016, its development activities added approximately 327 million barrels of oil equivalent (MMBOE) of reserves from the drilling of 623 gross development, exploratory and service wells and 73 well recompletions and pay-adds."

Corvex Management Ups CenturyLink Stake

Keith Meister's activist firm Corvex Management has filed an amended 13D with the SEC regarding its position in CenturyLink (CTL).  Per the filing, Corvex now owns 5.6% of CTL with over 30.99 million shares.  This is made up of 18.99 million shares and 12 million shares underlying call options.

This is an increase of around 1 million shares from the beginning of May when Corvex first revealed its stake in CTL.  The latest filing was made due to activity on June 16th and it notes they bought CTL at $25.91.

We previously highlighted Meister's presentation on CenturyLink at the Sohn Conference New York.  CenturyLink is merging with Level 3, which Meister thinks is a game changer.

Per Google Finance, CenturyLink is "an integrated communications company. The Company is engaged in providing an array of communications services to its residential and business customers. Its segments include business, which provides strategic, legacy and data integration products and services to small, medium and enterprise business, wholesale and governmental customers, including other communication providers, and consumer, which provides strategic and legacy products and services to residential customers. Its communications services include local and long-distance voice, broadband, Multi-Protocol Label Switching (MPLS), private line (including special access), Ethernet, colocation, hosting (including cloud hosting and managed hosting), data integration, video, network, public access, Voice over Internet Protocol (VoIP), information technology and other ancillary services. As of December 31, 2016, it served approximately 5.9 million broadband subscribers and 325,000 Prism TV subscribers."

Corvex Management Adds To Energen Stake

Keith Meister's activist firm Corvex Management has filed an amended 13D with the SEC regarding its stake in Energy (EGN).  Per the filing, Corvex now owns 6.6% of EGN with over 6.39 million shares.

This is up from the 5.37 million shares Corvex owned at the end of May when they previously filed a 13D. 

The latest filing was made due to activity on June 14th and it notes that Covex acquired over the counter American style call options and sold over the counter European style put options.  You can view all their transactions here.

You can view other recent portfolio activity from Corvex Management here.

Per Google Finance, Energen is "an oil and natural gas exploration and production company. The Company is engaged in the exploration, development and production of oil and natural gas properties and natural gas. Its operations are conducted through subsidiary, Energen Resources Corporation and occur within the Midland Basin, the Delaware Basin and the Central Basin Platform areas of the Permian Basin in west Texas and New Mexico. The Company is focused on increasing its oil, natural gas liquids and natural gas production and proved reserves through active development and/or exploratory programs in the Permian Basin. As of December 31, 2016, oil, natural gas liquids and natural gas represented approximately 60%, 20% and 20% of its reserves. As of December 31, 2016, its development activities added approximately 327 million barrels of oil equivalent (MMBOE) of reserves from the drilling of 623 gross development, exploratory and service wells and 73 well recompletions and pay-adds."

Corvex Management Boosts Energen Position

Keith Meister's activist hedge fund Corvex Management has filed a 13D with the SEC regarding its stake in Energen (EGN). Per the filing, Corvex now owns 5.5% of EGN with over 5.37 million shares. This is up from the previous 1.34 million shares they owned at the end of the first quarter. 

The filing was made due to activity on May 22nd.  The 13D notes that they've been quite active buying call options and selling put options and you can view the full list of transactions here.

They've had discussions with management and Corvex feels that:

"(Energen) has some of the most attractive leaseholds for oil and gas development in the Permian Basin. However, despite this leading asset position, the Issuer’s operational performance has fallen short of its peer companies, leading to underperformance both in terms of financial results and shareholder returns. As a result, the Reporting Persons’ believe the Issuer needs to strongly consider what actions can be taken to enhance and maximize shareholder value – including a review of the potential value delivered to shareholders through a change of control transaction given the recent wave of acquisitions in the Permian Basin at per acre values well in excess of the Issuer’s current implied value."

For more on this fund, Keith Meister also recently presented at the Sohn Conference New York and you can catch up on his presentation here.

Per Google Finance, Energen is "an oil and natural gas exploration and production company. The Company is engaged in the exploration, development and production of oil and natural gas properties and natural gas. Its operations are conducted through subsidiary, Energen Resources Corporation and occur within the Midland Basin, the Delaware Basin and the Central Basin Platform areas of the Permian Basin in west Texas and New Mexico. The Company is focused on increasing its oil, natural gas liquids and natural gas production and proved reserves through active development and/or exploratory programs in the Permian Basin. As of December 31, 2016, oil, natural gas liquids and natural gas represented approximately 60%, 20% and 20% of its reserves. As of December 31, 2016, its development activities added approximately 327 million barrels of oil equivalent (MMBOE) of reserves from the drilling of 623 gross development, exploratory and service wells and 73 well recompletions and pay-adds."

Sohn Conference New York Notes 2017: Ackman, Einhorn, Meister & More

Below we're posting up notes from the Sohn Conference New York 2017.  It featured top hedge fund managers sharing their latest investment ideas all to benefit pediatric cancer research.  We've also posted up the emerging manager presentations from Next Wave Sohn.


Notes From Sohn Conference New York 2017

Bill Ackman (Pershing Square): Long Howard Hughes (HHC)

He argued strong management and solid real estate locations as the main reasons to own the company.  Note that Ackman is the Chairman of the co.  We've posted up Ackman's slideshow presentation from Sohn here.



David Einhorn (Greenlight Capital): Short Core Labs (CLB)

Cyclical stock, expects earnings to disappoint.  Oil prices won't have a 'v' shaped recovery.  Company's annual report shows 65% decrease in oil prices over two years and then a 100% increase in price, a literal 'v' chart.  Says stock is pricey and that they're exposed to the least desirable parts of the market.  Exposure to international oilfield capex budgets which won't recover.  Fair value could be around $62, or over 40% lower.  Recall that Einhorn has also been short Pioneer Natural Resources (PDX) in pitch at previous conferences.



Larry Robbins (Glenview Capital): Long DXC Technology (DXC), FMC (FMC), Quintiles IMS (Q)

DXC has already doubled over the past two years but he thinks it can double again given the huge increase in earnings power.  FMC purchased businesses that Dow and DuPont dumped as part of their merger.  Thinks FMC benefits as the others had to divest this in order to get their big deal done.



Keith Meister (Corvex Management): Long CenturyLink (CTL)

Thinks the company's merger with Level 3 is a game changer.  Filing a 13D with the SEC today disclosing a 5.5% stake.  Says consolidation in telecom will continue due to more data.  If economy is doing well = more data growth which is good for CTL.  If economy doing bad = a 9% dividend yield versus a 10-year Treasury potentially falling back to 2%.  Would never have invested if it weren't for the merger.  Stock priced as if things are in decline permanently.  Sees 40% upside with dividends in base case, but potential return as high as 50-70% if there's corporate tax reform.



Clifton Robbins (Blue Harbour Group): Long Investors Bancorp (ISBC)

Has seen deposit and asset growth continue, should benefit from less regulations and tax reform as well.  They own around 9.9% of the company and one of their partners just joined the board.  Stock could be worth between $17 and $19.  Fortress balance sheet.  Have grown loans 22% CAGR.  Co has $1 billion in excess cash to allocate.  Could potentially be an acquisition target since it's a strong regional bank.  Has previously pitched this name at another conference a few years ago.  Also noted his firm is focusing more now on the importance of environmental, social and governance (ESG) in investing.



Chamath Palihapitiya (Social Capital): Long Tesla 2022 Convertible Bonds

He called Elon Musk this generation's "Thomas Edison."  Thinks playing the bonds means no money lost as long as the company is worth at least $15 billion.  Argues company will have 5% of car market in the next decade.  They don't spend on advertising or a dealer network, don't have unions, etc.  Very capital intensive.  Called TSLA "unmodelable."



Josh Resnick (Jericho Capital):  Short Frontier Communications (FTR)

Massive debtload and deteriorating EBITDA which is a bad combination.  Has been short for five years, from $4 down to $1.50, longest short of his career.  Thinks company goes bankrupt.  32% of revenue comes from voice (phones) and thinks it declines sharply.  Losing market share to cable as well.



Jeff Gundlach (DoubleLine Capital): Emerging market outperformance (EEM) vs S&P 500

Not very bearish on the US dollar, but also not a bull.  American stock market seems to be overvalued. Questioned the herd mentality around index funds.  Go long EEM short SPY and leverage it up 1x.  Also said he's now on Twitter: @TruthGundlach to fight back fallacious media reports.



Debra Fine (Fine Capital): Long DHX Media (DHX/B on TSE)

Creator, buyer and distributor of children's TV content in Canada.  Thinks fair value is C$20-C$30.  The change in how video is consumed has increased need for children's content.  Says new content buyers like Netflix, Amazon and YouTube are driving up prices.  Notes that children's content drives merchandise and licensing dollars.  Children's content ages well and is usually cheaper to produce.



Davide Serra (Algebris Investments): Short U.K. gilts (bonds), Long UniCredit (UCG:BIT)

Brexit doesn't really help the UK economy, thinks it costs U.K. around 7% of GDP (~$200 billion).  Thinks European stocks are at an inflection point.  Big gap versus S&P 500 over past eight years and that's about to change.  Also talked long UniCredit, thinks Europe is overdue for consolidation efforts.  Italian banks been penalized for high share of nonperforming loans which creates opportunity as the company is fixing this and then added tailwinds of interest rates normalizing.  We previously highlighted Dan Loeb & Third Point's thesis on UniCredit.



Brad Gerstner (Altimeter Capital): Long United Airlines (UAL)

Thinks skepticism of the airline industry that's been pervasive for years is too negative.  Led to lower multiples despite margins that were uptrending.  Sentiment shouldn't be that low.  Millennials are traveling more than their parents did so airlines can be a secular grower.  Altimeter settled proxy contest with UAL last year.  Sees 18% increase in EPS to around $16.75.  More conservative base case is $13 a share by 2020.  Consolidation of the industry cannot be overstated and has basically resulted in an oligopoly.  Planes are full and price wars are long gone so there's pricing power now.  We've also highlighted how Warren Buffett likes airlines now too. Shares could double.



Kevin Warsh (Former Fed Governor):

Thinks a lot about tail risks and tail outcomes.  Feels most assets aren't ready for downside surprise.  Says to watch capex going forward.  If companies are spending, the economy still has further legs.  If there's a cut, not so sure the economy can keep it in high gear to go forward.  Biggest question for him is if lower inflation continues with slow growth.  Thinks institutional credibility rather than the printing press will be biggest asset going forward.



Tal Ben-Shahar (Potentialife): General advice: Do less

If you want to be happier, do less as quantity affects quality.  Reduce multi-tasking and find time for play, for friends, for family.



Sohn Contest Winner Dylan Adelman: Long eBay


Be sure to also check out notes from Next Wave Sohn which featured emerging managers pitching their investment ideas.

Keith Meister's Thesis on YUM Brands China Spin-Off; Talks Pandora & Williams

Keith Meister of activist firm Corvex Capital was just interviewed by CNBC where he talked about YUM Brands (YUM), Pandora (P), shareholder activism and more.  On the market in general, he said he's bullish on his individual positions but not necessarily the market in general.  He notes, "I'm not a buyer of the market here, per se.  My guess is we're more near a top than a bottom."

Meister on YUM Brands Spin-Off

Corvex is the largest shareholder of YUM and will spin-off its China business to shareholders on November 1st and he believes it's "1 plus 1 equals more than 2."

He notes that the remaining HoldCo will be a 98% franchised, asset light business in the quick service food industry.

Meister says the China co is a different story as 7,500 restaurants (KFC, Pizza Hut) in China gives them a huge advantage as they were first to move and have become the dominant player there in the QSR space and they can now go into tier 2 and tier 3 cities.  He acknowledges that it will be a volatile ride, but says it can be an 'up and to the right' chart over time.

He argues it should trade at 10-12x EBITDA after spin-off, but acknowledged it could start trading around 8x which would basically be trough earnings.  "The market's not gonna make it easy to own YUM China, but that's where I think the best return will be."

He feels the remaining HoldCo will trade more like an annuity, with smoother returns. 

On shareholder activism, Meister says that these types of investors are simply trying to buy good businesses, help make positive changes, and acting like an owner in the public markets.


Meister on Pandora (P)

Meister still owns Pandora (P).  When asked if they're going to sell themselves, he said he didn't know.  He compared the company to competitor Spotify and notes the gap in valuation as one is private and one is public.   He argues that music is so core to many tech players these days (Apple, Amazon, etc) and he says "so it's a hugely valuable piece of property for someone who wants to win."

He concedes the streaming business is a commodity business, but argues that Pandora isn't due to the built up userbase as an asset.


Meister on Williams (WMB)

The Corvex founder also talked about Williams (WMB) and has left the board and commended the company on the work done.  He personally feels that the company has "undermaximized the opportunity set" over the past 5 years.

He thinks it could probably be worth more as part of another entity.  He thinks consolidation is happening and you don't want to be left out.  "It's hard to build new pipeline, so it makes existing pipeline more valuable." 

We'll post up the video of the interview once it's released.  Be sure to also check out CNBC's interview with David Tepper from yesterday, as well as their conversation with Carl Icahn.

Corvex Management Trims Fidelity National Financial Position

Keith Meister's activist firm Corvex Management has filed an amended 13D regarding their position in Fidelity National Financial (FNF).  Per the filing, Corvex now owns 4.8% of FNF with over 13.19 million shares.

This is a decrease of over 5.93 million shares from the end of the first quarter.  They were selling at various points in June, July, and as late as August 2nd.  The bulk of their sale came at a price of $36.58.

You can view other recent activity from Corvex here.

Per Google Finance, Fidelity National Financial is "is a provider of title insurance, technology and transaction services to the real estate and mortgage industries. The Company's segments include Title, Black Knight, FNF Core Corporate and Other, Restaurant Group, and FNFV Corporate and Other. Its business is organized into groups, including FNF Core Operations and FNF Ventures (FNFV). The Company offers title insurance through its title insurance underwriters: Fidelity National Title Insurance Company, Chicago Title Insurance Company, Commonwealth Land Title Insurance Company, Alamo Title Insurance and National Title Insurance of New York Inc., which collectively issue more title insurance policies than any other title company in the United States. The Company, through its subsidiary, ServiceLink Holdings, LLC (ServiceLink), provides mortgage transaction services, including title-related services and facilitation of production and management of mortgage loans."

Keith Meister & Eric Mandelblatt Step Down From Williams Board

Keith Meister's activist hedge fund firm Corvex Management has filed an amended 13D regarding its stake in Williams Companies (WMB) jointly along with Soroban Capital's Eric Mandelblatt.

Per the filing, the two gentlemen have stepped down from Williams' board of directors since the company was unwilling to replace Alan Armstrong as CEO.

You can view Meister's resignation letter here and Mandelblatt's here.

The 13D notes that their respective stakes in the company remain unchanged.

Per Google Finance, Williams is "an energy infrastructure company focused on connecting North America's hydrocarbon resource plays to markets for natural gas, natural gas liquids and olefins. The Company's segments include Williams Partners, Williams NGL & Petchem Services, and Other. Its Williams Partners segment consists of its consolidated partnership in Williams Partners L.P., including gas pipeline, which consists of interstate natural gas pipelines and pipeline joint project investments, and midstream business, which provides natural gas gathering, treating, processing and compression services. Its Canadian midstream operations include an oilsands off gas processing plant, NGL/olefin fractionation facility and the Boreal Pipeline. The Williams NGL & Petchem Services segment consists of Texas Belle pipeline, domestic olefins pipeline assets and Canadian growth projects under development. Its Other segment includes corporate operations and Canadian construction services company."

Corvex Management Boosts Signet Jewelers Stake, Files 13D

Keith Meister's activist hedge fund Corvex Management has filed an amended 13D with the SEC on shares of Signet Jewelers (SIG).  Per the filing, Corvex now owns 8.3% of Signet with over 6.52 million shares.

The filing notes that Corvex "commend the Issuer for the announcement in its quarterly earnings call on May 26, 2016 of its commitment to conduct, along with its advisor Goldman Sachs, a strategic evaluation of its credit portfolio.  The Reporting Persons strongly support the Issuer’s review of credit portfolio alternatives, and believes that it is essential that the Issuer complete this review as quickly as reasonably practicable, and thereafter promptly both announce to the shareholders and implement the actions which were determined to create the greatest enhancement to financial and shareholder value."

Corvex also indicates they purchased shares of SIG in April and May with the bulk of the activity coming on May 26th at $98.25 per share.

The firm previously owned 5.93 million Signet shares at the end of the first quarter.

Per Google Finance, Signet Jewelers is "a retailer of jewelry, watches and associated services in the United States, Canada and the United Kingdom. The Company's segments are the Sterling Jewelers division, the UK Jewelry division, the Zale division, which consists of Zale Jewelry and Piercing Pagoda, and the Other segment. The Other segment includes subsidiaries involved in purchasing and conversion of rough diamonds to polished stones. The Company operates retail jewelry stores in various real estate formats, including mall-based, free-standing, strip center and outlet store locations. It operates approximately 3,620 stores and kiosks across approximately five million square feet of retail space. The Sterling Jewelers division operates approximately 1,540 stores. Its stores operate nationally in malls and off-mall locations as Kay Jewelers, and regionally under various mall-based brands. Zale Jewelry consists of brands, including Zales Jewelers and Zales Outlet."

Delivering Alpha Conference Notes: Richard Perry, Eric Mindich, Bill Ackman, Nelson Peltz, Jeff Smith & More

The 2015 Delivering Alpha Conference hosted by Institutional Investor and CNBC is currently taking place and we wanted to highlight some of the thoughts from top investment managers on the best ideas panel and other panels.  Here's a brief summary of what each manager said:


Delivering Alpha Conference 2015 Notes

Richard Perry (Perry Capital): He feels Puerto Rico could possibly be the 51st state and thinks it's an interesting place to invest; he said GO bonds are safe and will trade at par. Perry argued that Greek bonds trading at 50 cents on the dollar could eventually return to par as there's a 'meaningful possibility' that a Greek bailout would actually be followed through.


Eric Mindich (Eton Park Capital):  He said that it's mostly individual investors in the turbulent Chinese A shares market.  He called the H shares more interesting.  He's a bit troubled by the future of the euro due to the situation in Greece.


Nelson Peltz (Trian Fund):  Peltz talked about his activist investment in DuPont (DD) and noted that he'd "rather be rich than right."  He continues to like PepsiCo (PEP) and thinks the company can deliver earnings growth each quarter but could do better.  Commenting on McDonald's (MCD), he said that the culture needs to be flipped on its head and it could take years.  Peltz feels Pentair (PNR) has the potential to become a platform company.  He said he has two new positions, one industrial and one he's not naming which account for 1/3 of his capital.  We recently highlighted some of Trian Fund's portfolio activity here.


Bill Ackman (Pershing Square): Ackman likes businesses that will withstand the test of time and he avoids tech since it's 'too dynamic.'  He mentioned that a lot of people haven't been talking about one of his newest investments: Fannie Mae and Freddie Mac and he really likes these.  Peltz chimed in that he doesn't know anything about the company but thinks Fannie is his favorite of Ackman's investments.  While some investors like Bruce Berkowitz (Fairholme Fund) have played the preferred shares, Ackman has a large position in common stock.  He says it offers the most upside but also conceded that it has the most downside too.  Ackman also voiced concerns on China, citing leverage and lack of transparency.  He says that almost every company he owns today is some sort of 'platform company' and we've highlighted this concept via Ackman's presentation at the Sohn Investment Conference.


Jamie Dinan (York Capital):  He keeps a lower media profile so it's always good to get his thoughts.  He avoids leverage since he lost a lot on margin in 1987 which was a very valuable lesson for him.  His keys to success?  Go where the action is and respect risk parameters.  Dinan notes that if you're in a position and the rules change, that's when bad trades happen.  York has more than half its base in illiquid credit.  He likes Japan, noting that "The Bank of Japan is your friend" and valuations are good with possible corporate governance changes coming.  He compared Japan now to the US in the 1980s in an economic sense.  He noted they've invested $700 million in Indiana toll roads.  Dinan also said he likes Puerto Rico but not the GO bonds.  He prefers complex infrastructure plays.


Jeff Smith (Starboard Value):  He mentioned a new idea of his, Macy's (M).  He thinks you get the company 'for free' when you take out the EV of its real estate.  He values the real estate at around $21 billion and hopes to work with management as he thinks M is worth $125 per share.


Bill Miller (Legg Mason):  He continues to like airlines stocks, saying they're in a long-term uptrend.  He likes Delta (DAL).  Commenting on bonds, he said that there's a benign bond market.  He also loves Amazon.com (AMZN) which is his biggest position at 6%.  He also likes builders and they're a big part of his portfolio as well, as he thinks they'll earn around 20% a year.


Jeff Gundlach (DoubleLine Capital):  He doesn't think the Fed will raise rates in 2015.  He said he's fond of emerging market debt (dollar denominated) and some high yield bonds (a shorter-term view on the latter).  He thinks high yield bonds will be a 'debacle' in 3-4 years.  Regarding bond rates, he notes they're rising secularly and went on to say that this is a good thing which most people don't realize.  Bond portfolios want rates to rise since you can reinvest at higher rates.  Looking extremely long term, he thinks India is a great place to put cash for the next 50 years.  Lastly, he also mentioned that he's allergic to companies that don't make money (AMZN).  He mentioned he bought Annaly Capital (NLY) recently and is out of his Apple (AAPL) position.  You can hear more from Gundlach in his recent Wall Street Week interview.


Keith Meister (Corvex Capital): He pitched American Realty Capital Properties (ARCP), a name he's presented at previous conferences as well (he owns 8% of the company).  He thinks you're taking 'bond like' risk for 'equity like' returns with this one and that the stock will pop once they reinstate the dividend and sees 25-50% upside.  Our Hedge Fund Wisdom newsletter analyzed the company if you want to play catch up quickly.


Tom Sandell (Sandell Asset Management):  His best idea was Ethan Allen (ETH), a furniture retailer.  He notes the company has practically zero debt and could be an ideal private equity candidate for a takeover.


Paul Singer (Elliott Management):  He likened the situation in China to potentially worse than the subprime crisis.  He thinks that perception of securities there has been impaired and it's just 'wild.'  Authorities there are trying to sustain the market with all kinds of moves but confidence is damaged by some of these rules.  He said the 70% haircut that Argentina forced on bondholders was the most severe he's seen in a large economy.  Singer said his firm essentially manages risk by putting in a lot of effort, a hands-on approach (basically activism).

...

Check back for more updates later.

Sohn Investment Conference Notes 2015: Einhorn, Tepper, Ackman, Robbins & More

The 2015 Sohn Investment Conference just took place in New York where hedge fund managers pitched their latest stock ideas to benefit the Sohn Foundation and pediatric cancer research. 


Sohn Conference New York: 2015 Notes

- David Einhorn (Greenlight Capital): Short Pioneer Natural Resources (PXD).  Compared it to St. Joe (JOE).  Energy companies with negative development economics, negative on frackers in general.  US production boom: Bakken, Eagle Ford, Permian.  Buy the land, set up drills (expensive).  Huge cumulative CAPEX, more than oil brought out.  None of them generated cash flow, even when oil was high.  $20B cash burn by group last year.  Depletion is the "D" in EBITDAX.  It's not really growth, because once you get the oil out it's gone.  CAPEX has been 75% of revenue over last 5 years.  Not natural gas frackers, they are fine.  PXD:  Well located, well run, Permian assets mainly.  #2 pure play behind EOG.  $26B market cap, EV $27B, may earn $1.50 per share next year.  Spent $19B in CAPEX last few years - funded partially by capital raises.  Proved reserves have been flat or down despite huge CAPEX.  $36 rev/bbl, if you take out the $28 CAPEX, they lose $12/bbl.  Negative NPV if you include time cost of money.  If you had used $68 price of oil, reserves are only worth $9/share.  He says if you cut their costs, it's $22/share.  Value creation per $ spent is only 0.74.  You can view Einhorn's slideshow presentation on PXD here.  For even more from him, we recently posted up Greenlight Capital's Q1 letter as well.


- Barry Rosenstein (JANA Partners): Walgreens (WBA) and Qualcomm (QCOM).  WBA an example where activism worked.  12 layers of management between CEO and store managers vs. 5 at CVS.  Turnaround began with deal to buy Alliance Boots.  Then they got involved (cost cutting, tax inversion talks, but they didn't actually do the latter).  QCOM: Bloated costs, board with no owner orientation, family in positions, issuing a lot of stock.  He tries to downplay the breakup idea (tech analysts say it can't be done).  He says they need to return capital; doing a $15B repurchase, which is 13% of market cap (says they have 30 per share in cash).  He wants to cut/change management compensation, reduce board size, evaluate corporate structure (break off the chipset business).  Smartphone market is large and growing, IP model approved by China (although many OEMs still not paying royalties).  For more from this manager, we recently posted Rosenstein's appearance on Wall Street Week.


- Keith Meister (Corvex Capital): Long Yum Brands (YUM).  1/3 in China, outside of that it's almost all franchise, inside it's owned.  KFC, Taco Bell, Pizza Hut restaurants.  Says China problems are being fixed.  Top 5 holder of the stock.  Says franchise mix leads to more leverage, better multiples.  Simply put it's a bet on recovery in China (previous food issues at KFC).  SSS getting better, but still negative.  51% of those surveyed in China said KFC was their favorite place to eat.  Today 0.97 of $2.09 in earnings is China.  If they go back to '12 rev/unit, it would be over $3 EPS from China alone in 2017, that would be about $6 EPS in 207, with stock at $60, paying only about 10x now.  China business is very different - should spin it off.  Have it enter a franchise business deal with the main "FranchiseCo."  Says it unlocks $16/share of value.  ChinaCo becomes "more Chinese" which helps in China.  Valuation: 50-90% upside.  $130-16 PT.  Franchise co worth $88 in 2017, ChinaCo, $41-72 depending on how well it recovers from the food scandals.  Dan Loeb's Third Point also laid out the YUM investment thesis its Q1 letter.


- Larry Robbins (Glenview Capital): Long Abbvie (ABBV) & Brookdale Senior Living (BKD).  Money is cheap now.  BB junk bond 10-12 year debt for less than 4% after tax.  Own over-capitalized businesses and have them borrow money.  ABBV:  Old school pharma to new.  Spending 16% of revenue on R&D.  Structural acquirers and owner-activists pressure them on both sides.  Why ABBV?  1. Growth through 2020, 2. Numerous areas of upside optionality, 3. Excess cash they could use for acquisitions.  Says Humira grows through 2017, acknowledges the debate about patents expiration.  Biosimilars are not exact copies.  6 key upside optionalities: Pipeline is underappreciated, making biosimilars is 1000x harder than generics (state by state regulation, difficult process, etc), Humira patent protection possible, could change formulation of Humira to extend economics, look at Evercore ISI work, paying 30% repatriation tax plus dividend taxes in US "don't give it to us, keep it and do something productive with it", says they could buy 30% of shares with leverage, adding $15 to share price, also could be more M&A "they could be the pill swallowed, or be the Pacman."  Almost a double from here.  BKD: Bet on the aging population.  By far the largest and can sell ancillary services in same facilities.  Also real estate options.  You can also read Robbins' thesis on other stocks in Glenview's recent letter.


- Lee Cooperman (Omega Advisors): 8 stock picks (ACT, AER, C, DOW, GOOGL, GM, PCLN, GULTU).  Generally bullish, 7-9% return on market, appropriately valued, negative view of fixed income.  35% of stocks in SPX yield more than bonds.  Inflation is not bad for stocks - it raises their nominal revenue.  Bear markets occur for one of four reasons: oncoming recession, overvaluation, geopolitical event occurs, hostile Fed.  Nothing today indicates oncoming recession.  He says he doesn't understand the consternation about the Fed hiking rates.  On average, the stock market raised 30 months after the first hike, the shortest was 10 months.  On average, a year later, market is up 9.5% the year after a rate hike.


- Mala Gaonkar (Lone Pine Capital): Long Microsoft (MSFT).  Value hidden in legacy tech.  1.5B installed office users globally, only 250M actually pay for it.  New stronger management (Satya Nadella).  Built the cloud platform Azure. Works with 3rd party software, no more "saving Windows first."  Solid mid-to-high single digit revenue growth.  Most controversial aspect of this pitch.  Fear is consumer Windows will die, but it is only 5% of revenue.  Enterprise software is 17%, and more more sticky.  Mainframes still a $5bn annual business and they are using MSFT software.  "Price elastic market" very stick in ADBE, Autodesk as well.  Cloud is 10% now, growing faster than the rest of the business.  Office 365 more than doubles users.  Reduces piracy.  Operating cost cuts.  Been no restructuring since dawn of PC age.  Spend $1bn marketing consumer Windows.  Cloud shift cuts costs - no commissions to pay resellers.  Capital return, has way too much cash.  Raised share buybacks, but should be much higher.  Could earn 3.89 next year, fro 3.04 this year.


- Jeff Gundlach (DoubleLine Capital): Puerto Rican Muni Bonds.  They have priced in a lot of problems.  Triple tax free yield of 11% for 8s2030 at about 78 of face.  Says they may go lower first. "You're supposed to buy them at 78."  Also talked about negative interest rates and said to borrow infinite amounts at that level.  Fed talk is just noise.  2 year Treasury bottomed 4 years ago - you can see it on the chart.  Same with 10 year - 2012 was the low.  Very bearish on junk bonds, says no one alive in the room has lived through a secular rise in high yield bond yields.  Junk bonds do NOT do well when the Fed starts hiking rates.  A couple of years of runway.  For more from Gundlach, watch his appearance on Wall Street Week.


- David Tepper (Appaloosa Management): Thoughts on markets.  Also said junk bonds are not cheap.  "Something has to give."  "Either stocks have to go up a hell of a lot, or treasuries will go down a hell of a lot."  Could 22.78 P/E vs average now 17x on stocks.  Implies 30% move if treasuries don't move.  Monetization of debt in China.  "Don't fight the Fed; don't fight 4 feds."  (US, ECB, Japan, China).  Implies Hong Kong stocks are cheap, 10x P/E.  "Maybe the big banks aren't that bad if you look at them."  Don't short options that lengthen (they become more valuable).  This is why it's risky to short China.  What happens when China does first cut?  Stocks start going up.  Reinflation of their economy.  Says terrible environment for bonds.  "This monetary policy has worked for 5 years."  Now all 4 central banks are going one way.  "Good luck" with shorting.


- Bill Ackman (Pershing Square): Long Jarden (JAH), Platform Specialty Products (PAH), and Valeant Pharmaceuticals (VRX).  JAH: 45x return in 14 years, constantly undervalued over the years.  Always valued on next year's EPS.  PAH: A shell they funded.  NOMHF: Nomad, another shell/SPAC.  Flat at cash value for a year, then bought Iglo and the stock went up 80%.  Why is the market mis-valuing these companies?  He calls them "Platform companies" not just on multiples based on comaprables.  Others as examples: Danaher, Liberty Media, AB InBev, Transdigm.  Key is to find the right management teams that do good acquisitions.  VRX: Paid $196/share, 20m shares, 20% of his capital.  Tax-advantaged structure.  Units have autonomy.  Drawback is there is a lot of competition in acquisitions.  Gives the example of the Bausch & Lomb acquisition.  Value of business is correlated with ability to buy companies and integrate them, take synergies.  PT $332, from $223.  Based on organic growth and small deals.  Compares it to a Berkshire Hathaway in the making.  For more from Ackman, check out Pershing Square's presentation from its European investor meeting.


- Ian Bremmer (Eurasia Group):  Geopolitical analyst.  Oil production in the US has reduced our willingness to engage in fights, especially in the Middle East.  "Weaponization of Finance" to use finance to influence behavior.  US may have realized that they spent so much in Iraq and the country still fell apart.  "We will see $100 oil no time soon."  "Likely to see an Iranian deal, which will be another 1.2m barrels a day."  Putin is in a corner.  More Russian cyber attacks against the US.  China - the rise is important.  They are not confronting the US militarily.  Economically China does want to challenge US hegemony.  "Best money the Americans ever spent was the 4% of GDP on the Marshall Plan.  It paid off for decades."  The only country in the world with a cohesive global strategy is not us, it is China.  China does not want to occupy countries.  Some countries will be hedging, and ally with China economically.  Including Germany, South Korea, etc.  For the next 5-10 years, China is more stable than you think.  They will be the world's largest economy, but they will be totalitarian still, and will have a lot of world influence.


- Jay Walker (Founder of Priceline): Black Swan events more likely than ever.  A few people with a few million dollars could wipe out billions in market cap.  "Bioweapons plus drones plus social media."  Risk of economic collapse.



- Sohn Investment Contest Winner (Angelo Martorell, Wharton Student): Long IAC Interactive (IACI).  Owns March.com/Cupid/Tinder, Ask.com, About.com, Vimeo, HomeAdvisor.  $5.9bn EV.  Uses sum of the parts and says market not giving value for Tinder, because there is no revenue, profits.  IACI has all the best dating properties.  "Facebook of dating."  If Tinder was private it would be more than the market cap of entire IACI.  Says 1/4 of millenials won't marry.  "Network of effect."  Tinder premium will give unlimited right swipes, 2.5% of MAUs will pay for it.  $10/month.  Online dating makes it very easy to have an affair.  Tinder will crush Ashley Madison.  You can have dates in places you travel.  Cross-selling - some can go from Match to Tinder and vice versa.  Users spend 77 minutes/day on Tinder versus 40 minutes on Facebook.  Also it's fully integrated with FB.  Valuation?  Says you get Tinder for free with current stock price.



Next Wave Sohn New York 2015

- Snehal Amin (Windacre Partnership): Long PowerFinance


- Didric Cederholm (Lion Point): Ukrainian sovereign bond play (steepeners) & Ally Financial (ALLY)


- Alex Denner (Sarissa Capital): Long Ariad Pharmaceuticals (ARIA)


- Daniel Dreyfus (3G Capital): Long Phillips 66 (PSX)


- David Zorub (BlueMountain): Long Sunrise Communications

Corvex Management Adds To Signet Jewelers Stake

Keith Meister's activist hedge fund Corvex Management has filed an amended 13D with the SEC regarding its position in Signet Jewelers (SIG).  Per the filing, Corvex now owns 7.2% of SIG with over 5.74 million shares.

They've increased their position size by 235,000 shares.  They were buying sporadically in January, February and early March at prices between $117.40 and $121.68.

Corvex's filing says they commend Signet "for its new capital allocation policy and look forward to continuing to engage in constructive and collaborative conversations."

You can view additional portfolio activity from Corvex here.

Per Google Finance, Signet Jewelers is "a Bermuda-based specialty retail jeweler by sales in the United States and United Kingdom. The Company also has stores in the Republic of Ireland and Channel Islands. It is engaged in the retailing of jewelry, watches and associated services. The business is managed as two geographical operating divisions: the US division and the UK division."

Corvex Management Increases ARCP Stake, Writes Letter to Board

Keith Meister's hedge fund firm Corvex Management has filed an amended 13D with the SEC regarding their position in American Realty Capital (ARCP).  They now own 7.8% of the company with exposure to over 70.6 million shares.

This is an increase of over 5.9 million shares since Corvex first reported its ARCP stake in December.  They acquired call options and common stock in late December/early January and sold put options as well.

The activist filing also includes an open letter that Corvex has written to the board of ARCP and to candidates for Chairman and CEO.  You can read the full letter here.

Per Google Finance, American Realty Capital is "a real estate investment trust (REIT). The Company owns and acquires single-tenant, freestanding commercial real estate primarily subject to medium-term net leases with credit quality tenants." 

Corvex Management Takes American Realty Capital Stake

Keith Meister's activist hedge fund Corvex Management has filed a 13D with the SEC regarding American Realty Capital (ARCP).  Per the filing, Corvex now owns 7.1% of the company with over 64.7 million shares (with 56.77 million of those shares underlying call options).  This is a new position for the hedge fund.

The activist filing indicates that Corvex has met with company management and want to add members to the board.  The filing was required due to activity on December 18th.

We've highlighted additional recent portfolio activity from Corvex here.

Per Google Finance, American Realty Capital is "a real estate investment trust (REIT). The Company owns and acquires single-tenant, freestanding commercial real estate primarily subject to medium-term net leases with credit quality tenants."

Corvex Management & Soroban Capital Add To Williams Position

Keith Meister's hedge fund firm Corvex Management filed an amended 13D in conjunction with Eric Mandelblatt's Soroban Capital regarding their joint position in Williams Companies (WMB). 

Per the filing, the hedge funds now own 8.39% of the company with over 62.68 million shares (though if you add in the options, they'd own 9.11% with around 68 million shares).

This would indicate that the hedge funds have increased their exposure by around 21 million more shares since the end of the third quarter.  The filing was made due to activity on November 18th.

Per Google Finance, Williams is "an energy infrastructure company focused on connecting North America’s hydrocarbon resource plays to markets for natural gas, natural gas liquids (NGLs), and olefins. The Company’s operations span from the deepwater Gulf of Mexico to the Canadian oil sands. It operates in three segments: Williams Partners, Midstream Canada & Olefins and Other."

For more on Corvex in particular, we recently posted up Meister's presentation on Crown Castle International.

Corvex Capital's Presentation on Crown Castle (CCI)

At the Robin Hood Investors Conference the past few days, Keith Meister of Corvex Capital sat down with CNBC to talk about his positions.

He owns almost $1 billion worth of Crown Castle International (CCI), the wireless tower operator.  He says it's the best combination of real estate and telco.  He likes their fixed cashflow and that they benefit from the big

He says the problem with CCI is they need to payout cash to shareholders by ramping up a dividend and growing that dividend at 10% a year.

Meister also noted that he's a passive shareholder of Allergan (AGN) and likes being aligned with Bill Ackman's Pershing Square.  Simply put, he wants AGN to sell their company for the highest price possible.


Embedded below is the video of Meister's interview at Robin Hood:



As well as Meister's interview on Allergan:





Additionally, here's Corvex's presentations on CCI via embedded slideshows below:

Letter to CCI Shareholders:




CCI Presentation:




Robin Hood CCI Presentation:




You can download the .pdf's here.

Robin Hood Investors Conference 2014: Summary of Stock Picks

The 2014 Robin Hood Conference took place over the past two days in New York where hedge fund managers presented their latest investment ideas to benefit the Robin Hood Foundation which fights poverty.  Julia La Roche of Business Insider tweeted tidbits from the event and here's an aggregation of them all.


Stock Picks From Robin Hood Investors Conference 2014


David Einhorn (Greenlight Capital): long SunEdison (SUNE), Greek banks like Alpha and Piraeus (via warrants).  Short French debt.

David Tepper (Appaloosa Management): short the Euro.

Larry Robbins (Glenview Capital): long Community Health (CYH), Realogy (RLGY), VCA (WOOF), Fidelity National Financial (FNF)

Dan Loeb (Third Point): long Amgen (AMGN) and has talked to management

Paul Tudor Jones (Tudor Investment Corp): Thinks commodities will be a mess until 2020, likes US stocks.

Jim Chanos (Kynikos Associates): Short Petrobras

Scott Ferguson (Sachem Head): Long Comcast (CMCSA).  He previously worked at Ackman's Pershing Square.

Keith Meister (Corvex Capital): Long Crown Castle International (CCI), also long Allergan (AGN).

Zach Schreiber (PointState Capital): ex-Duquesne guy, used to work with Stan Druckenmiller.  Long Cheniere Energy (LNG).

Nehal Chopra (Tiger Ratan Capital): long Charter Communications (CHTR)

Fred Wilson (Union Square Ventures): Venture Capital, not equities but insinuated he'd be short Netflix (NFLX), Amazon (AMZN), and eBay (EBAY).

Tom Wagner (Knighthead Capital): long American Airlines (AAL)

Matthew Sidman (Three Bays Capital): long Churchill Downs (CHDN)

Ricky Sandler (Eminence Capital): long Telefonica Brasil (VIV) and eBay (EBAY)

Traci Lerner (Chesapeake Partners): long American Airlines (AAL), Gencorp (GY) and Eagle Materials (EXP)

Whitney Tilson (Kase Capital): long Sodastream (SODA) and Micron (MU).  Short Lumber Liquidators (LL) and Exact Sciences (EXAS)

Ivy Zelman (Zelman Associates): long homebuilders, Lennar (LEN), Pulte (PHM), Toll (TOL), as well as Fortune Home & Security (FBHS) and Mohawk (MHK).

Bill Eigen (JPMorgan): Short bonds to play volatility

Nathaniel August (Mangrove Partners): Short Worldwide Wrestling Entertainment (WWE), long Fortress Investment Group (FIG)

Oleg Nodelman (EcoR1 Capital): long Clovis (CLVS)

Amish Mehta (SQN Investors): long Blucora (BCOR)

Corvex Management Increases Fidelity National Financial Stake

Keith Meister's activist hedge fund Corvex Management has filed an amended 13D with the SEC regarding their position in Fidelity National Financial (FNF).  Per the filing, Corvex now owns 7.3% of the company with 20.24 million shares.

This is an increase of over 1.95 million shares since the end of the second quarter.  The filing was made due to activity on September 8th.  They bought 535,000 shares at $26.64 in late July and 1.4 million shares in early September at $27.60.

Per Yahoo Finance, Fidelity National Financial is "together with its subsidiaries, provides title insurance, technology, and transaction services to the real estate and mortgage industries in the United States."


Corvex's FNFV Group Stake

Corvex at the same time filed another 13D on FNFV Group common stock (FNFV).  Per that filing, they own 2.9% of the company with 2,694,572 shares. 

FNFV was spun-off from FNF.

It's also worth pointing out that Corvex had been selling these shares throughout July and then recently sold 2.5 million shares at $15.28 in early September.

Per Yahoo Finance, Fidelity National Financial Ventures "operates as an investment arm of Fidelity National Financial, Inc. and is based in United States."