SALT Conference Notes 2016: Griffin, Cooperman, Burbank, Chanos & More

The Skybridge Alternatives Conference, better known as the SALT Conference, is taking place in Las Vegas this week.  It's a multi-day affair with many speakers on a broad range of subjects.  We've condensed notes into primarily finance/investing thoughts from various hedge fund managers and investors below.


2016 SALT Conference Notes


Ken Griffin (Citadel):  Talked about how he built Citadel and the importance of culture at an organization.  'Avoid marrying a strategy' and instead focus on building a platform with the best people.  Business really taught him how to delegate and manage people.  On finding good talent: you've gotta be able to sell them on why they should leave and come to you.  You have to go out and find that talent instead of waiting for them to come to you.  The ones that 'knock on your door' aren't the best.  One interesting quote:  "Who is the number five manufacturer of personal computers?  Who cares?  We're in a more and more winner take all world."


Leon Cooperman (Omega Advisors):  He talked about a trend of investors moving from active to passive strategies and says that hedge fund performance can't really justify the fees these days, so fees need to come down.  He said that long-term (i.e. 'permanent') capital is doing good because they don't have to worry about lockups (citing Warren Buffett).  The other winner has been quant strategies.  Pitched the stock First Data (FDC) which recently IPO'd.  Says he's got around ~20% of his fund in structured credit at the moment.  Reiterated his belief that conditions for a recession are not present (a concept he's talked about for a while now).  Thinks the bubble is in fixed income.  Government bonds are a bad idea.  Likes Tetragon Financial, yields 7%, dividend coverage of 4x.  Buying a stock trading at half of book.


Kyle Bass (Hayman Capital):  Implied that investors need to lower their return expectations over the next few decades (5% global real return expectation).  Also agreed that fees for funds need to come down.  Says it's much harder to maintain investors than it is conviction.  Thinks we're in the early part of '07 in terms of credit/equity markets.  Says a hard landing in China is happening as we speak. Argues that China credit system is one of the biggest macro imbalances, something has to give sooner rather than later.  Hong Kong real estate is collapsing.


Roslyn Zhang (China Investment Corp):  Sovereign Wealth Fund.  Disappointed with hedge fund performance.  Compared Chinese retail investors to hedge fund herding.  Criticized those betting against the Chinese Yuan.  Argued that China's economy is still strong and that all of the building is due to the massive population; supply can be absorbed.


Sam Zell (Equity Group Investments):  Cost of regulation has gone up around 5x over the last decade.  Have been big investors in Brazil, Far East, Mexico. 


Ty Wallach (Paulson & Co):  Thinks specialty pharma stocks are oversold.  Specifically pointed out Valeant Pharmaceuticals (VRX) bonds.  Bought at 80cents on the dollar and says the co still has $10bn in equity value.  Could sell one of the many companies they've acquired if they need to cover debt payments.


Jeff Smith (Starboard Value): Activist investor.  Says settled with Yahoo (YHOO), put four new members on the board.  Notes the parts of the company are worth more than where its trading.  Core biz with $4bn in revenue, huge stake in Alibaba, Yahoo Japan, add it all up and it's more than the current market cap.  Said 'we're friendly but no one describes us as passive.'


Scott Ferguson (Sachem Head Capital):  Sold out of Zoetis (ZTS).  We noted how Pershing Square was also selling ZTS recently.  Ferguson was the one that brought the idea to Ackman to begin with (he used to work at Pershing).  Talked about how to change leadership and achieve things on behalf of investors: "Money's a great way to effectuate things" i.e. severance for getting rid of a CEO.  Says things are easier for activists these days and companies are more likely to engage. 


Clifton Robbins (Blue Harbour Group):  Activist investor.  Owns 10% of Investors Bancorp (ISBC), says it's trading at a discount to peers.  Also talked about Xilinx (XLNX), a net-cash semiconductor play; says they have some ideas as to how to utilize the balance sheet.


Michael Lewis (Author of Flash Boys and The Big Short):  Said he was surprised that both Moneyball and The Big Short were made into movies.  Said Christian Bale was dead-on with his interpretation of Michael Burry after just spending some hours with him.


Richard Chilton (Chilton Investments): Sherwin Williams (SHW): makes premium paint and coatings.  Says the company's purchase of Valspar was years in the making and they can repay the price with free cashflow in about 5 years.  Thinks there's a lot of synergies and margin overlap.  SHW does higher margins in paint/consumer and VAL does better margins in industrial coatings.  "You can't buy paint online."


John Lykouretzos (Hoplite Capital):  Takes a bit of an issue with the 'oligopoly' theme of airlines, saying it's still a competitive industry with margin pressure.  Bearish on the industry.  Main threats: excess capacity, union labor wage hikes, and of course higher oil prices.  Says that low cost carriers (LCC's) have basically destroyed the chance for legacy airlines to become a true oligopoly.  Thinks American Airlines (AAL) is the most compelling short play there.  Has some of the highest costs & exposure to rising oil.  High leverage.  Weakest FCF generation of the group.  Thinks that Southwest Airlines (LUV) can still add capacity even at higher oil prices (~$80 or so) and still generate high IRR.


John Burbank (Passport Capital):  Says China won't let outside companies 'win' especially Facebook.  "It's a hard place to win if you're not Chinese."  (While he didn't mention it, just look at Amazon's failed venture there as well).  Burbank owns Tencent (700.HK) with short Chinese Renminbi as partial hedge.  Thinks it isn't as much of a crowded trade as Facebook (FB) is.  His slide also said "Short FXI: Hedge out 'Old China' country-specific risk with China large cap ETF."


Jim Chanos (Kynikos Associates): Still short Cheniere Energy (LNG), calling it a 'pipe dream' and very expensive to peers.  Trades at 11-12x EV/EBITDA using "base case" 2021 EBITDA of $2.1bn.  Peers trading between 5-7x 2020 EBITDA.  Also commented on Alibaba (BABA) saying their accounting is dubious and that you don't really know what they're earning, calls it some of the most questionable he's ever seen. Chanos also recently talked about some of his short positions at the Sohn Conference.


For other recent hedge fund manager thoughts, head to our notes from Sohn Conference New York 2016.

Jim Chanos Still Short Valeant, Alibaba, Tesla, SolarCity

At the Sohn Conference in New York today, Kynikos Associates' founder Jim Chanos appeared on CNBC to talk about what he's seeing in the markets lately (stay tuned for our full Sohn Conference notes later on).   Here are some takeaways:


- Still short Alibaba Group (BABA) with his bearish China bet

- Notes that some hedge funds charging 2/20 that generate 8% return will only give their investors a 4-5% return - is that worth paying for?

-  Still short Valeant (VRX) after originally shorting in 2014; thinks it's still not cheap and argues people are using valuation metrics that aren't right.  Doesn't think the company is trading at 3x earnings like Bill Ackman suggested recently.  Chanos: "Valeant was genius at gaming the system. That game is over."

- Cheniere Energy (LNG): Says he agrees that the contracts are money good, but the company's cost estimates are too low.  "You're paying a ridiculous price for 2020 cashflows compared to any other energy play you can buy today."  Asks how profitable can the plants operate and at what capital cost?

- Short Elon Musk: betting against Tesla (TSLA) and SolarCity (SCTY) still.  Sees flood of executives leaving TSLA as a negative sign.  Since the company can't really make money selling a $100,000 car, how are they going to do so selling a $35000 car (upcoming Model 3)?  Feels TSLA will need to raise money eventually.  Thinks SCTY gets in financial trouble in 2016.

We'll post video of his appearance if/when it becomes available.

Lone Pine Capital Boosts Cheniere Energy Position

Steve Mandel's hedge fund firm Lone Pine Capital has filed a 13G with the SEC regarding its stake in Cheniere Energy (LNG). Per the filing, Lone Pine now owns 5.2% of the company with over 12.24 million shares.

This is up markedly from the 7.9 million shares they owned at the end of the second quarter.  The filing was made due to activity on September 18th.  LNG shares are down almost 30% since the end of Q2.

As we've highlighted recently, Cheniere Energy has attracted some big names on both the long and short sides.  Carl Icahn has been buying LNG shares recently and Seth Klarman's Baupost Group has also been an owner of shares for a bit.  On the other side of the trade, Jim Chanos is short LNG.

For more on Mandel's fund, we've detailed previous Lone Pine portfolio activity here.

Per Google Finance, Cheniere Energy is "an energy company engaged in Liquefied natural gas (LNG) businesses. The Company operates through two segments: LNG terminal business, and LNG and natural gas marketing business The Company owns and operates the Sabine Pass LNG terminal in Louisiana through its ownership interest in and management agreements with Cheniere Energy Partners, L.P. (Cheniere Partners), which is a publicly traded limited partnership. The Company owns 100% of the general partner interest in Cheniere Partners and 80.1% of Cheniere Energy Partners LP Holdings, LLC (Cheniere Holdings), which is a publicly traded limited liability company that owns a 55.9% limited partner interest in Cheniere Partners. The Company is engaged in the development of two LNG terminal projects: the Sabine Pass LNG terminal in western Cameron Parish, Louisiana, and the Corpus Christi LNG terminal near Corpus Christi, Texas." 

Carl Icahn Boosts Stakes in Cheniere Energy, Freeport McMoRan

Activist investor Carl Icahn has recently filed two amended 13D's with the SEC regarding his positions.


Boosts Cheniere Energy Stake

First, Icahn has disclosed a 9.59% stake in Cheniere Energy (LNG) with over 22.68 million shares.  This is an increase from the 19.35 million shares Icahn had exposure to when he first disclosed his position.

The new filing was made due to activity on September 14th, though he was also out buying on September 9th-11th at prices between $52.81 and $54.75.

Per Google Finance, Cheniere Energy is "an energy company engaged in Liquefied natural gas (LNG) businesses. The Company operates through two segments: LNG terminal business, and LNG and natural gas marketing business The Company owns and operates the Sabine Pass LNG terminal in Louisiana through its ownership interest in and management agreements with Cheniere Energy Partners, L.P. (Cheniere Partners), which is a publicly traded limited partnership. The Company owns 100% of the general partner interest in Cheniere Partners and 80.1% of Cheniere Energy Partners LP Holdings, LLC (Cheniere Holdings), which is a publicly traded limited liability company that owns a 55.9% limited partner interest in Cheniere Partners. The Company is engaged in the development of two LNG terminal projects: the Sabine Pass LNG terminal in western Cameron Parish, Louisiana, and the Corpus Christi LNG terminal near Corpus Christi, Texas."


Increases Freeport McMoRan Position

Second, Icahn has also just revealed an increased position in Freeport McMoRan (FCX).  Per the 13D, he now owns 8.8% of the company with 100 million shares (via exposure from forward contracts).  You can view all the fine print about his exposure here.

The filing was made due to activity on September 18th and is an increase from the 88 million shares he previously had exposure to.  Icahn initially revealed a new FCX stake in late August.

Per Google Finance, Freeport McMoRan is "a natural resource company with an industry portfolio of mineral assets, oil and natural gas resources, and a production profile. FCX has organized its operations into six primary divisions: North America copper mines, South America mining, Indonesia mining, Africa mining, Molybdenum mines, and United States oil and gas operations. The Company’s portfolio of assets includes the Grasberg minerals district in Indonesia, mining operations in North and South America, the Tenke Fungurume (Tenke) minerals district in the Democratic Republic of Congo (DRC) in Africa, and oil and natural gas assets in North America. The Company is also engaged in operating copper conversion facilities located in North America, and a refinery, three rod mills and a specialty copper products facility. The Company’s Atlantic Copper smelts and refines copper concentrates and markets refined copper and precious metals in slimes."

Jim Chanos Short Cheniere Energy, Caterpillar, Solar City & More: Interview

Noted short seller Jim Chanos, founder of Kynikos Associates recently appeared on CNBC to share his thoughts.

During the interview, he revealed a new short position: Cheniere Energy (LNG).  We've highlighted how Carl Icahn went long LNG recently.  There are also numerous other prominent hedge funds long.

Chanos, on the other hand, has been negative on the liquefied natural gas space over the past six months, thinking it's a "looming disaster" because it's tied into Asia and that LNG demand isn't growing anymore.

He went on to say, "LNG has been seen as a unique animal because it's going to be U.S. based, they're opening its Sabine Pass later this year.  With the stock at 30 times 2020 earnings, with the upside coming from a glutted market, we think the risk/reward in this, given where other LNG plays are in Australia and elsewhere, is just completely out of whack."

Chanos noted he's still short Caterpillar (CAT) but has covered his Joy Global (JOYG) short.  He argues CAT is trading at a rich multiple relative to its peers and that the company isn't letting on just how bad things are out there.

Chanos is also negative on pretty much everything in the PC chain.  He argues that "the value in the hardware chain gets competed away" as the products are commoditized.  He's short Hewlett Packard (HPQ) and some PC manufacturers in Asia.  He's hedged this by being long Apple (AAPL) with better growth and products.

He called Tesla (TSLA) "silly" as it trades on 2025 earnings that's become a momentum and concept stock. Regarding other Elon Musk companies, he thinks Solar City (SCTY) is the most problematic.

On China, Chanos continues to be concerned.  He says that "one of the worries we've always had was they were going to lose control of their currency ... that's why I think the markets took a real shudder in August."  That said, he argued that the US is the country "least affected by what's happening in China."

Lastly, Chanos also said cybersecurity is one of the few areas of growth.

Embedded below are videos from Chanos' interview:

Video 1:



Video 2:



Video 3:



Video 4:



Video 5:




For more from this short seller, be sure to also check out another recent Jim Chanos interview.

Carl Icahn Gets Board Representation at Cheniere Energy

In a statement today, Cheniere Energy (LNG) announced that two managing directors of Icahn Capital have joined the board of directors.

Jonathan Christodoro and Samuel Merksamer join the board, which now has eleven directors.  A few weeks ago, we highlighted that Icahn started a new position in LNG.

Cheniere Energy has been a popular stock among hedge funds, especially those covered on Market Folly.  At the end of the second quarter, top holders of LNG shares included Baupost Group, Viking Global, PointState Capital, Lone Pine Capital, Soroban Capital, Steadfast Capital, Senator Investment Group, Blue Ridge Capital, Anchorage Capital, Valinor Management and many more.

Carl Icahn Starts Cheniere Energy Stake; Trims Hologic Position

Carl Icahn has recently filed two 13D's with the SEC regarding recent portfolio activity.


Icahn Starts Cheniere Energy (LNG) Stake

First, Icahn has disclosed a new position in Cheniere Energy (LNG).  Per his 13D filing, Icahn now owns 8.18% of the company with over 19.35 million shares (including shares underlying forward contracts and call options).

The filing was made due to activity on July 27th and contains the standard activist boilerplate that he intends to speak with management and might seek board representation "if appropriate."

Icahn's not alone in his new bet.  Seth Klarman's Baupost Group has been an equity holder for a few quarters now.  Viking Global, Lone Pine Capital, Steadfast Capital, and others are also top holders (this is actually a bit of a hedge fund hotel).

We've also recently highlighted some of Icahn's other portfolio activity here.

Per Google Finance, Hologic is "an energy company engaged in Liquefied natural gas (LNG) businesses. The Company operates through two segments: LNG terminal business, and LNG and natural gas marketing business The Company owns and operates the Sabine Pass LNG terminal in Louisiana through its ownership interest in and management agreements with Cheniere Energy Partners, L.P. (Cheniere Partners), which is a publicly traded limited partnership. The Company owns 100% of the general partner interest in Cheniere Partners and 80.1% of Cheniere Energy Partners LP Holdings, LLC (Cheniere Holdings), which is a publicly traded limited liability company that owns a 55.9% limited partner interest in Cheniere Partners. The Company is engaged in the development of two LNG terminal projects: the Sabine Pass LNG terminal in western Cameron Parish, Louisiana, and the Corpus Christi LNG terminal near Corpus Christi, Texas.."


Also Trims Hologic (HOLX) Position

Second, Icahn filed a second 13D recently regarding his existing position in Hologic (HOLX).   He now owns 9.99% of the company with over 28.15 million shares.

The filing indicates he sold shares on August 4th at $40.47.  His stake now is slightly lower compared to the 34.15 million shares he owned back at the end of the first quarter.

After the sale, he tweeted, "Trimmed our position but remain a huge supporter of Steve MacMillan and the @Hologic ($HOLX) team."

Per Google Finance, Hologic is "a developer, manufacturer and supplier of diagnostics products, medical imaging systems and surgical products. The Company’s business units are focused on diagnostics, breast health, GYN surgical and skeletal health. The Company’s diagnostics products include Aptima family of assays, its ThinPrep system, the Rapid Fetal Fibronectin Test and its Procleix blood screening assays. The Aptima family of assays is used to detect the infectious microorganisms that cause the common sexually transmitted diseases, chlamydia and gonorrhea, certain high-risk strains of human papillomavirus (HPV), and Trichomonas vaginalis, the parasite that causes trichomoniasis. The Company’s GYN surgical products include its NovaSure Endometrial Ablation System and its MyoSure Hysteroscopic Tissue Removal System. The skeletal health products include dual-energy X-ray bone densitometry systems, an ultrasound-based osteoporosis assessment product, and its Fluoroscan mini C-arm imaging products."

You can also view Icahn's latest thoughts on the markets here.

Viking Global Boosts Cheniere Energy, Kansas City Southern Stakes

Andreas Halvorsen's hedge fund firm Viking Global has filed two 13G's with the SEC regarding some of their existing positions.


Viking Adds to Cheniere Energy Stake

First, Viking has revealed a 6.5% ownership stake in Cheniere Energy (LNG) with over 15.3 million shares.

This marks an increase of over 9.9 million shares in their position size since the end of the third quarter.  The filing was made due to portfolio activity on January 26th.

Per Google Finance, Cheniere Energy is "engaged in liquid natural gas LNG-related businesses. The Company owns and operates the Sabine Pass LNG terminal in Louisiana through its 59.5% ownership interest in and management agreements with Cheniere Energy Partners, L.P. The Company also also own and operate the Creole Trail Pipeline, which interconnects the Sabine Pass LNG terminal with natural gas markets in North America."


Increases Kansas City Southern Position

Second, Halvorsen's firm has also disclosed a 5% ownership stake in Kansas City Southern (KSU) with over 5.56 million shares.

They've boosted their position size by over 1.3 million shares since the end of the third quarter.  This activity was reported due to activity on January 27th.

Per Google Finance, Kansas City Southern is "a transportation holding company with domestic and international rail operations in North America that are strategically focused on the growing north/south freight corridor connecting key commercial and industrial markets in the central United States with industrial cities in Mexico."

You can view other recent portfolio activity from Viking here.

Dan Loeb's Third Point Discloses Porsche & Volkswagen Stakes: March Exposure Report

Dan Loeb's Third Point Offshore Fund finished March up 2.9% and is now up 9% for 2013.  Managing $11.7 billion, the fund has current net long equity exposure of 45.1%, down around 2% from February.


Top Positions

1. Yahoo! (YHOO)
2. Virgin Media (VMED)
3. Gold
4. American International Group (AIG)
5. Ally Financial (multiple securities held)

Third Point's top holdings remain unchanged from the month prior.  Their position in Virgin Media was a new addition to the portfolio in 2013.


Newly Disclosed Positions

In their March "top winners" and "top losers" columns, Third Point discloses a few positions we haven't seen before.  In their "top losers" column from last month, they show holdings in Volkswagen AG, Porsche Automobil Holding SE, and Bond Street Holdings.  Porsche is notable because as of 2012 year-end, it was the top holding at Children's Investment Fund (see TCI's Porsche thesis from a conference late last year).

Additionally, Third Point shows positions in Cheniere Energy (LNG) and DE Master Blenders in their top winners category.  The latter was spun-off from Sara Lee, a position Third Point previously owned (and most likely where those shares came from).

Embedded below is Third Point's March exposure report:




For more on this hedge fund, head to Third Point's Q4 letter.

Paulson & Co Discloses 14.6% Stake in Cheniere Energy (LNG) - 13D Filing

In a filing made with the SEC yesterday, hedge fund Paulson & Co has disclosed they now own a 14.6% stake in Cheniere Energy (LNG). They now own 7,400,000 shares. This is an increase from their previous 13F filing at the end of June, when they held 4,700,000 shares. Paulson & Co is famous for making a fortune by betting against sub-prime when this whole mess began to unfold. And, it appears as if Paulson is still up to his fortune-making ways. One of his funds has generated a 589% return, which could easily be up there amongst the largest returns by a single hedge fund in a year. Paulson's Advantage Plus fund has returned 19.44% year-to-date as of the end of August. This is the same fund that gained 158% the year prior and has grown to almost $9 billion. You can view more of their (and other hedge fund's) numbers in our most recent hedge fund performance update. Also, we recently saw that Paulson & Co was shorting UK banks.

Taken from Google Finance, Cheniere Energy (LNG) "through its subsidiaries, is engaged primarily in the business of developing and constructing, and then owning and operating, a network of three onshore liquefied natural gas (LNG) receiving terminals and natural gas pipelines. The Company is developing a business to market LNG and natural gas primarily through its wholly owned subsidiary, Cheniere Marketing, Inc. (Cheniere Marketing). To a limited extent, Cheniere is also engaged in oil and natural gas exploration and development activities in the Gulf of Mexico. The Company has four business segments: LNG receiving terminal business, natural gas pipeline business, LNG and natural gas marketing business, and oil and gas exploration and development business."