What We're Reading ~ Analytical Links 2/12/14

The single best metric: EV/EBITDA [Crossing Wall Street]

Why margin debt matters [Seeking Alpha]

What I learned at the mall about investing [Institutional Investor]

Half of Americans can't raise $2k in 30 days [Time]

Get ready for a long proxy fight over Time Warner Cable [Dealbook]

John Maynard Keynes' own portfolio not too dismal [NYTimes]

Don't believe the tech bubble hype [Andreessen Horowitz]

US switching from credit card signatures to PINs, but banks need to get on board [Verge]

Investor group targets Ocwen's mortgage servicing practices [FT]

Microsoft's mobile muddle [Stratechery]

Two notable mutual fund trends [AAII]

Why ADT is appalling [Herb Greenberg]

How Mulberry got squashed in fashion's squeezed middle [The Guardian]

Coca Cola: glass less than half full [FT]

On an upturn in capital spending [FT]

What We're Reading ~ Analytical Links 5/1/13

The Art of Value Investing: How the World's Best Investors Beat the Market [Amazon]

The fine art of being wrong [The Big Picture]

Notes from the Ben Graham Centre's 2013 Value Investing Conference [Santangels]

A profile of Berkshire's Todd Combs & Ted Weschler [Omaha.com] 

Warren Buffett at the Coca-Cola annual meeting [Joe Kusnan]

In China, a persistent edge for big insiders [Barrons]

The competing incentives and pressures that influence sell-side analysts [CFA]

Stock analysts tell all [WSJ]

Netflix (NFLX) CEO Reed Hastings on the future of TV/cable [AllThingsD]

Pharmaceutical firms seeing bullish investor sentiment [Markit]

Travel sites merge, which some see as boon for consumers [NYTimes]

The behavior of individual investors [SSRN]

Does Apple (AAPL) show statistical evidence of an economic moat? [Greenbackd]

The tax advantages of being a landlord [Markewatch]

Sam Zell's tips for real estate newbies [TheRealDeal]

Goldman Sachs Very Important Short Positions For Hedge Funds: Q1 2012

Goldman Sachs is out with its Q1 2012 Hedge Fund Trend Monitor and we've already posted up Goldman's VIP list of most important stocks to top funds.  Now we're posting a new addition to their research: the very important short position list.

This tracks short exposure of hedge funds as an equal-weighted basket that "consists of 50 S&P 500 constituents with the highest total dollar value of short interest outstanding."  It can be accessed on Bloomberg via < GSTHVISP >.

Goldman emphasizes that this list is not based on 13F holdings (because hedge funds are not required to disclose shorts).  They also note that it's not a basket of stocks most held short.


Goldman Sachs Very Important Short Positions For Hedge Funds

Stock, value of short interest (in $ billions)

1. Johnson & Johnson (JNJ): $2.9
2. Exxon Mobil (XOM): 2.8
3. Intel (INTC): 2.6
4. International Business Machines (IBM): 2.4
5. Amazon.com (AMZN): 2.4
6. AT&T (T): 2.3
7. Chevron (CVX): 2.1
8. Verizon (VZ): 1.8
9. Duke Energy (DUK): 1.7
10. Walt Disney (DIS): 1.5
11. Abbott Laboratories (ABT): 1.4
12. Coca Cola (KO): 1.4
13. General Electric (GE): 1.4
14. Walmart Stores (WMT): 1.3
15. Caterpillar (CAT): 1.2
16. ConocoPhillips (COP): 1.2
17. Walgreen (WAG): 1.2
18. Time Warner (TWX): 1.1
19. Lockheed Martin (LMT): 1.1
20. Home Depot (HD): 1.1
21. Dell (DELL): 1.1
22. Bristol Myers Squibb (BMY): 1.1
23. Oracle (ORCL): 1.1
24. Schlumberger (SLB): 1.0
25. United Parcel Service (UPS): 1.0


Of the above. David Einhorn recently made comments about Amazon.com (AMZN) at the Ira Sohn conference.  While he seemed to be skeptical of the company during his talk, he did not say he was short.  He highlighted that the company has destroyed other businesses, taking market share, but criticized their weak profit growth.

Jim Chanos is short Dell (DELL) and he points to the decline of personal computing in favor of tablets and other mobile devices.  He's been correct in that regard as Dell recently reported declines in those segments in their latest earnings release.  But of course the bull case points to Dell's other business lines as they shift toward the enterprise. 


Here's the rest of Goldman's Very Important Short Positions List:

26. Amgen (AMGN): 1.0
27. AvalonBay (AVB): 1.0
28. Chipotle Mexican Grill (CMG): 1.0
29. Boston Properties (BXP): 1.0
30. Union Pacific (UNP): 0.9
31. Simon Property Group (SPG): 0.9
32. Procter & Gamble (PG): 0.9
33. Cerner (CERN): 0.9
34. Host Hotels & Resorts (HST): 0.8
35. Kohl's (KSS): 0.8
36. Waste Management (WM): 0.8
37. CenturyLink (CTL): 0.8
38. Carnival (CCL): 0.8
39. Philip Morris (PM): 0.8
40. American Express (AXP): 0.8
41. DuPont (DD): 0.8
42. McDonalds (MCD): 0.8
43. MetLife (MET): 0.8
44. Fastenal (FAST): 0.8
45. Merck (MRK): 0.7
46. Comcast (CMCSA): 0.7
47. Sysco (SYY): 0.7
48. Freeport McMoran (FCX): 0.7
49. Alcoa (AA): 0.7
50. Staples (SPLS): 0.7


Be sure to also check out Goldman Sachs VIP list of most important stocks to hedge funds for Q1 2012.

John Paulson Says Buy Stocks, Sell Bonds

At the end of last week, the market ripped higher presumably from hedge fund manager David Tepper's comments when he said he likes equities here. Now add to the mix another well known manager in John Paulson. His hedge fund Paulson & Co of course made billions from his bet against subprime as detailed in the book, The Greatest Trade Ever. Given his success, everyone now latches onto his every word, hoping for advice.

Paulson did divulge some of his latest views at a lecture for New York's University Club. Simply put, he said to buy stocks and sell bonds. His favorite stocks are blue-chips with dividends such as: Johnson and Johnson (JNJ) and Coca Cola (KO). Playing on his 'recovery' theme, he also continues to like Bank of America (BAC), Suntrust Banks (STI), and Regions Financial (RF). To see what he's been buying and selling, check out Paulson's portfolio in our newsletter: Hedge Fund Wisdom.

Equities

He says to simply replace low yielding bonds with higher yielding stocks. A 10 year Treasury yields around 2.6% and so stocks with earnings yields of 7-8% are much better options. While Paulson did not mention these names, a quick scan pulls up companies with even higher earnings yields such as Medtronic (MDT) at 9.43%, ConocoPhillips at 10.52%, and Microsoft at 8.53%.

Gold

We've examined John Paulson's gold fund in-depth in the past, and so it should come as no surprise that the hedge fund manager thinks the precious metal is headed higher. He says that gold (currently around $1,200) could hit $2,400 on monetary expansion alone and even $4,000 with significant inflation. His hedge funds offer a fund share class denominated in gold and Paulson himself has 80% of his assets in this class. Additionally, given his inflationist bent, Paulson thinks the US Dollar will fall and that yields on Treasuries will rise. He has been buying 5 and 7 year calls on the 30-year bond yield. We've seen numerous hedge funds put on this type of trade before.

Housing

Lastly, Paulson thinks this is the best time to buy a home in fifty years, exclaiming that, "If you don't own a home, buy one. If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home." Great, isn't that just the type of mentality that created the housing bubble in the first place? We realize he is using hyperbole to illustrate his point, but still. Given his prominence in the investing world these days, some people might actually take him literally. For more notes on Paulson's talk, head to Zero Hedge and to Forbes.

In terms of recent position movement from hedge fund Paulson & Co, we detailed their activist position in NovaGold Resources (NG) and sale of Centamin Egypt position.

Consensus Versus Variant Perception in the Markets: East Coast's Q2 Letter

We're pleased to present the second quarter 2010 commentary from East Coast Asset Management. The letter, penned by Chief Investment Officer Christopher Begg, touches on a number of intriguing and hotly debated topics, including inflation. Some of you will recall that we featured some past commentary from East Coast where they examined the deflation-reflation continuum.

East Coast is decisively in the inflationist camp. They believe that central banks armed with printing presses can only lead to one outcome. Their portfolio is positioned to mitigate the effects of any tail risk events such as hyperinflation, a bond bubble, a spike in interest rates, paper currency debasement, and a double dip recession. You'll recall that Baupost Group's Seth Klarman has also protected his portfolio from tail risk events as a form of cheap insurance.

Summarizing East Coast's stance, Begg writes, "The greatest opportunities to compound capital come from periods where dislocations are being driven more by 'what ifs' than the 'what is'. Fundamentals trump hypotheticals and facts weigh heavier than emotions."

Maybe the most intriguing aspect of their commentary though is the list of consensus views they've compiled. They've outlined 10 areas where there are currently consensus views in the market; areas where East Coast has strafed away from the crowd and into an opportunity with a perceived edge. They see these variant opportunities as a means to mitigate risk away from the consensus. This is a topic we've very briefly touched on in our piece where we examined the hedge fund herd mentality.

Below is East Coast Asset Management's list of 10 consensus views and their corresponding variant perception:

1. Consensus: Everyone is a macro-economist. Variant Perception: Fundamental/value investing and focusing on micro themes is the key.

2. Consensus: Binary extreme outcomes of inflation/deflation. Variant Perception: Individual investment merits based on expected return.

3. Consensus: Flood to fixed income as individual investors chase yield. Variant Perception: Bond bubble. Attractive equity total return expectations.

4. Consensus: Inflation protection via TIPS. Variant Perception: Owning businesses with pricing power.

5. Consensus: Gold - speculators are weak holders. Variant Perception: Own gold for mid-long term as paper currencies are debased. John Paulson started his gold fund for the exact same reason: as a bet against the US dollar.

6. Consensus: Overly bearish. Variant Perception: Bullish on fundamentals.

7. Consensus: Short-term time horizons. Variant Perception: Mid-to-Long term time horizons.

8. Consensus: Low rates will be the norm. Variant Perception: Interest rates will dramatically rise across the curve. (Legendary hedge fund manager Julian Robertson had previously placed a bet on sharply rising interest rates).

9. Consensus: Inferior companies can thrive. Variant Perception: High quality companies have a competitive advantage. East Coast specifically highlights Nestle (NSRGY), Waste Management (WM), Colgate (CL), Coca Cola (KO), Novartis (NVS), and Express Scripts (ESRX). We've seen numerous hedge funds become bullish on high quality companies as well. In particular, Andreas Halvorsen's hedge fund Viking Global favors ESRX. Additionally, we earlier today highlighted East Coast's bullish stance on Beckton Dickinson (BDX).

10. Consensus: Complexity. Variant Perception: Simplicity.

Begg examines each of the ten above listed views in-depth in his most recent letter and ends his commentary by giving us a view of their most recent portfolio construction. We highly recommend reading the entire East Coast second quarter letter embedded below:



You can download a .pdf copy here.

For more from East Coast Asset Management, be sure to check out their recent bullish presentation on Becton Dickinson (BDX) that we posted earlier today. Additionally, those intrigued by the inflation/deflation debate should head to their past piece on the deflation-reflation continuum. For more great investment commentary we posted up Perry Capital's latest letter yesterday as well.

Warren Buffett & Berkshire Hathaway's Latest Portfolio: 13F Filing (Q1 2010)

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund filings.)

Next up in our coverage is the Oracle of Omaha himself, Warren Buffett. From his original Buffett Partnerships to present day Berkshire Hathaway, Warren Buffett has invested his way to the third richest person in the world according to Forbes' billionaire list. He needs no introduction so let's dive right into it. Our recent coverage of Buffett's company includes some notes from Berkshire Hathaway's annual meeting as well as Berkshire's annual letter. And of course to learn to invest like one of the greatest out there, head to Warren Buffett's recommended reading list. The positions listed below were Berkshire Hathaway's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
n/a


Increased Positions
Republic Services (RSG): Increased position by 30.6%
Becton, Dickinson & Co (BDX): Increased by 16.3%
Iron Mountain (IRM): Increased by 11.35%


Reduced Positions
Kraft Foods (KFT): Reduced by 22.8%
Gannett (GCI): Reduced by 20.98%
Costco (COST): Reduced by 17.5%
M&T Bank (MTB): Reduced by 17.1%
Johnson & Johnson (JNJ): Reduced by 12%
Procter & Gamble (PG): Reduced by 9.6%
Conoco Phillips (COP): Reduced by 9.37%
Carmax (KMX): Reduced by 3.43%
Moody's (MCO): Reduced by 3% (we detailed these sales back when they occurred)


Positions With No Change
American Express (AXP)
Bank of America (BAC)
Coca Cola (KO)
Comcast (CMCSA)
Comdisco Holdings (CDCO)
Exxon Mobil (XOM)
General Electric (GE)
GlaxoSmithKline (GSK)
Home Depot (HD)
Ingersoll-Rand (IR)
Lowe's (LOW)
Nalco Holding (NLC)
Nestle (NSRGY)
Nike (NKE)
Sanofi Aventis (SNY)
Tiffany & Co (TIF)
Torchmark (TMK)
US Bancorp (USB)
USG (USG)
United Parcel Service (UPS)
WalMart (WMT)
Washington Post (WPO)
Wells Fargo (WFC)
Wesco (WSC)


Positions They Sold Out of Completely
SunTrust Bank (STI)
Travelers (TRV)
UnitedHealth (UNH)
Wellpoint (WLP)


Top 15 Holdings (by percentage of assets reported on the 13F filing)

1. Coca Cola (KO): 21.6%
   
2. Wells Fargo (WFC): 19.56%
   
3. American Express (AXP): 12.28%
4. Procter & Gamble (PG): 9.83%
5. Kraft Foods (KFT): 6.34%
6. Wesco Financial (WSC): 4.32%
7. Walmart (WMT): 4.26%
8. US Bancorp (USB): 3.51%
9. Conoco Phillips (COP): 3.43%
10. Johnson & Johnson (JNJ): 3.06%
11. Moody's (MCO): 1.80%
12. Washington Post (WPO): 1.51%
13. Nike (NKE): 1.10%
14. M&T Bank (MTB): 0.87%
15. Republic Services (RSG): 0.62%
    

It's somewhat rare to see Buffett's Berkshire completely sell out of a position, but this time around he sold multiple holdings in health plays Wellpoint (WLP) and UnitedHealth (UNH). His removal of WLP is intriguing because as you'll see from some of our soon-to-come 13F analyses, many hedge funds still own shares. Buffett also sold partial positions in Procter & Gamble (PG) and Kraft Foods (KFT). Berkshire Hathaway also added to positions in Republic Services (RSG), Becton Dickinson & Co (BDX), as well as Iron Mountain (IRM). RSG was their most sizable increase. Overall, quite a bevy of portfolio activity out of Berkshire Hathaway (at least more than we're used to seeing). As always, to become a great investor like the Oracle of Omaha himself, we point you to as Warren Buffett's recommended reading list. Lastly, those of you wondering about Berkshire Hathaway's future can head to Buffett's thoughts on succession planning.

Data used for this article comes from Alphaclone, our source for sorting through all the hedge fund portfolio movement and backtesting the performance (Market Folly readers can receive a special free 30 day trial). Assets reported on the 13F filing were $50.9 billion this quarter. Remember that these filings are not representative of the investment fund's entire base of AUM. This post is part of our hedge fund portfolio tracking series and we've already detailed the portfolio of Seth Klarman's Baupost Group. Be sure to check back daily for new hedge fund updates.

Warren Buffett's Portfolio: Fourth Quarter 13F Filing

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)

Warren Buffett needs no introduction. Seriously. If you don't know who he is, you shouldn't even be reading this.

Through his early Buffett partnerships to the modern days of Berkshire Hathaway (BRK.A), he is regarded as one of the most successful investors ever. While many would argue that Baupost Group's Seth Klarman could give Buffett a run for his money, Buffett has garnered quite a massive following due to his enormous returns over time. Needless to say, investors are always anxious to find out what he has bought or sold, and that's exactly what we're here to do today. To learn to invest like the legend himself, head to Warren Buffett's recommended reading list.

The positions listed below were Berkshire Hathaway's long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. All holdings are common stock unless otherwise denoted.


Brand New Positions
n/a


Increased Positions
Republic Services (RSG): Increased by 128.7%
Iron Mountain (IRM): Increased by 107.6%
Beckton Dickinson (BDX): Increased by 25%
Walmart (WMT): Increased by 3.2%
Wells Fargo (WFC): Increased by 2.2%


Reduced Positions
Exxon Mobil (XOM): Reduced by 67%
United Health Group (UNH): Reduced by 65.4%
WellPoint (WLP): Reduced by 60.4%
Gannett (GCI): Reduced by 36.1%
ConocoPhillips (COP): Reduced by 34.3%
Ingersoll Rand (IR): Reduced by 27.6%
Johnson & Johnson (JNJ): Reduced by 26.5%
SunTrust Banks (STI): Reduced by 22.1%
Moody's (MCO): Reduced by 18.9% ~ we've detailed all of his sales as they've happened
CarMax (KMX): Reduced by 11.1%
Procter & Gamble (PG): Reduced by 9.2%


Removed Positions (Sold out completely):
Union Pacific (UNP)
Norfolk Southern (NSC)
These were both sold due to conflict with Berkshire's impending acquisition of Burlington Northern.


Top 15 Holdings by percentage of assets reported on 13F filing

1. Coca Cola (KO): 19.7%
2. Wells Fargo (WFC): 14.9%
3. Burlington Northern Santa Fe (BNI): 13.1% ~ this won't show up in future filings
4. American Express (AXP): 10.6%
5. Procter & Gamble (PG): 9.2%
6. Kraft Foods (KFT): 6.5%
7. Walmart (WMT): 3.6%
8. Wesco Financial (WSC): 3.38%
9. ConocoPhillips (COP): 3.32%
10. Johnson & Johnson (JNJ): 3.02%
11. US Bancorp (USB): 2.68%
12. Moody's (MCO): 1.47%
13. Washington Post (WPO): 1.31%
14. Nike (NKE): 0.87%
15. M&T Bank (MTB): 0.78%
    

The name of the game for Warren Buffett was selling shares of other holdings in order to make way for their acquisition of Burlington Northern Santa Fe in its entirety. That massive purchase obviously will not show up in future filings and is Berkshire's largest purchase ever. Obviously when you're purchasing that large of an entity, you're not going to be buying much else. However, Buffett did also double down on his Iron Mountain and Repulic Services positions.

Buffett reduced 'health' holdings by selling over half of his UNH and WLP stakes. Additionally, he sold nearly 70% of his Exxon Mobil position. We've also covered Buffett's sales of MCO shares as they became somewhat frequent occurrences. It remains to be seen if those sales were more-so because Buffett felt the business was threatened or because he was trying to free up capital for his BNI acquisition. Buffett has maintained a large position in Kraft for a while now, but shares have been center stage as Bill Ackman's hedge fund Pershing Square recently acquired a large stake and the company recently sealed a deal to acquire Cadbury.

Keep in mind that there are also some positions that won't show up on the filing because they are non-equity stakes. Buffett acquired many of these during the heart of the crisis in 2008 and as such sealed these deals with ridiculously good terms (for him).

To hear some of Buffett's recent thoughts, we posted up his recent television interview. For analysis of Berkshire Hathaway (BRK.A / BRK.B), we noted that hedge fund T2 Partners deemed shares undervalued in their in-depth presentation. And lastly, make sure you check out Warren Buffett's recommended readings.

We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, and David Tepper's Appaloosa Management. Check back daily for our new updates.