What We're Reading ~ 9/4/19

Certain to Win: The strategy of John Boyd, applied to business [Chet Richards]

The commoditization of information [Geoff Yamane]

Position sizing: why conviction matters [Intrinsic Investing]

The problem with believing what we're told [WSJ]

How a Canadian firm has taken on Wall Street's private equity titans [Economist]

Research on the financial performance of collectibles [Alpha Architect]

Peloton is a phenomenon: can it last? [NYTimes]

A skeptical look at Peloton churn [Inquisitive Investor]

Peloton bikes are the real deal [The Margins]

How Amazon's shipping empire is challenging UPS & FedEx [WSJ]

Amazon's next-day delivery has brought chaos and carnage to streets [BuzzfeedNews]

The man behind the biggest beauty brands in the world [Coveteur]

Aston Martin tried to replicate Ferrari's IPO success but shares are down 75% [Fortune]

On the importance of broadcasting income to European football clubs [Swiss Ramble]

5 lessons from Microsoft's antitrust woes by people who lived it [NYTimes]

Julian Robertson Interview: FANG Stocks Not Frothy At All

Tiger Management founder Julian Robertson was recently interviewed by CNBC.  Here's a summary and the full video below:

- When asked about Paul Tudor Jones' recent comments about stocks heading higher into year-end, Robertson said that, "I think there's a very good chance of that happening (in the next year) and I'm positioned accordingly."

-  He thinks it's possible that interest rates go up so high so fast that the Fed would have to ease up a bit.  But doesn't think rates will go 'wildly' up

- Says the President has done a reasonably good job, but could do with a dose of humility

- Tax cuts have helped corporate earnings but also the earnings of the middle class tremendously

- Feels a slowdown is at least 6 months and 'hopefully' 2 years away

- Tech stocks: he doesn't think FANG stocks are frothy at all, especially relative to the rest of the market. This is one area where he feels he differs in opinion from a lot of market participants.  Adds Microsoft (MSFT) to that bunch as these stocks have growth rates similar to their multiples

-  He likes the management at many of these companies, Facebook etc

-  Air Canada at 3x next year's cashflow is not an expensive stock and is 'beautifully run'.  Also likes Ryanair in Europe.  Doesn't really have any airline favorites in the US right now

-  Loves the banks, thinks they're very reasonably priced in relation to earnings.  Huge cashflow yields next year and thereafter.  Thinks they're in terrific shape, likes JPMorgan (JPM) and Bank of America (BAC)

-  Would tell grandchildren to own FB, BAC, JPM, probably Citigroup (C), which is 'reasonably priced'

Embedded below is the video of Julian Robertson's CNBC interview:

.

ValueAct Capital Reduces Microsoft Stake

Jeff Ubben's activist investment firm ValueAct Capital has filed a Form 4 with the SEC regarding its stake in Microsoft (MSFT). 

Per the filing, ValueAct sold 7 million shares in total across August 4th, 7th, and 8th.  ValueAct sold at prices of $72.50 and $72.61.

The firm has also been selling down other positions in recent months as well.

Per Google Finance, Microsoft is "develops, licenses, and supports a range of software products, services and devices. The Company's segments include Productivity and Business Processes, Intelligent Cloud and More Personal Computing. The Company's products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; video games, and training and certification of computer system integrators and developers. It also designs, manufactures, and sells devices, including personal computers (PCs), tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories, that integrate with its cloud-based offerings. It offers an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content, and it provides solution support and consulting services."

Warren Buffett & Bill Gates' Talk at Columbia University 2017

Berkshire Hathaway's Warren Buffett and Microsoft's Bill Gates recently gave a talk at Columbia University.  They chatted about a wide range of topics and did a Q&A session as well.

Embedded below is the video of Warren Buffett & Bill Gates' talk at Columbia:



If you missed it, we also highlighted Buffett & Gates interview with Charlie Rose.  And we've also posted up notes about the new documentary Becoming Warren Buffett.

Top 10 Stocks That Matter Most To Hedge Funds Per Goldman Sachs (Q4 2016)

Goldman Sachs' quarterly hedge fund trend monitor outlines what stocks matter most to hedge funds.  Here's the list as the fourth quarter 2016:


Top 10 Stocks That Matter Most To Hedge Funds: Q4 2016

- Alphabet (GOOGL / GOOG)

- Facebook (FB)

- Amazon.com (AMZN)

- Bank of America (BAC)

- Charter Communications (CHTR)

- Apple (AAPL)

- Microsoft (MSFT)

- Yahoo (YHOO)

- Time Warner (TWX)

- NXP Semiconductor (NXPI)


As you can see, it's quite tech-heavy.   The major exception is Bank of America (BAC), which was a consensus buy in Q4 among hedge funds we track in our newsletter.

For more on what stocks hedge funds have been buying & selling, check out the brand new issue of our premium newsletter that reveals the portfolios of 25 top funds.

ValueAct Capital Trims Microsoft Position, Adds To Alliance Data Systems

Jeff Ubben's activist investment firm ValueAct Capital has filed two separate Form 4's with the SEC regarding their recent activity.

ValueAct Reduces Microsoft Stake

First, Ubben's firm has reduced its position in Microsoft (MSFT).  Per the filing, ValueAct sold 11 million shares between February 1st through 3rd at prices of $63.72, $63.12, and $63.33.

After these transactions, they're left owning over 27.62 million MSFT shares. This was their top holding at the end of the third quarter

Per Google Finance, Microsoft "develops, licenses, and supports a range of software products, services and devices. The Company's segments include Productivity and Business Processes, Intelligent Cloud and More Personal Computing. The Company's products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; video games, and training and certification of computer system integrators and developers. It also designs, manufactures, and sells devices, including personal computers (PCs), tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories, that integrate with its cloud-based offerings. It offers an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content, and it provides solution support and consulting services."


Ubben's Firm Adds To Alliance Data Systems

Second, ValueAct has also filed a Form 4 with the SEC regarding their Alliance Data Systems (ADS) stake.  Per this filing, they bought 57,400 shares on January 26th at varying prices (the bulk at $217.57 and $219.18).

After these buys, they now own over 5.87 million shares of ADS. 

Per Google Finance, Alliance Data Systems is "a provider of data-driven marketing and loyalty solutions serving consumer-based businesses in a range of industries. The Company offers a portfolio of integrated outsourced marketing solutions, including customer loyalty programs, database marketing services, end-to-end marketing services, analytics and creative services, direct marketing services, and private label and co-brand retail credit card programs. The Company operates through three segments: LoyaltyOne, which provides coalition and short-term loyalty programs through the Company's Canadian AIR MILES Reward Program and BrandLoyalty; Epsilon, which provides end-to-end, integrated marketing solutions, and Card Services, which provides risk management solutions, account origination, funding, transaction processing, customer care, collections and marketing services for the Company's private label and co-brand retail credit card programs."

Warren Buffett's Interview With Charlie Rose: "Bought $12 Billion of Common Stocks Since Election"

Charlie Rose recently sat down with both Warren Buffett of Berkshire Hathaway as well as Bill Gates of Microsoft. 

They started off talking about the giving pledge and philanthropy and they've been surprised at the overwhelming participation. 

On business, Buffett noted that it's imperative that he be able to know and understand the business and to stay within that sphere of competence.  Of his two younger managers (Ted Weschler and Todd Combs), he notes, "I have two people who themselves have different circles of competence."  They weren't chosen because of that, but it's nice to have a huge circle he says.

He says it's harder to find acquisitions mainly because of the size of Berkshire these days.  On how he finds them, he might get a call, he might be thinking about certain areas.  Occasionally, he decides to act.

One key takeaway from the interview was that Buffett said,"We've bought $12 billion net of common stocks since the election.  (Ted and Todd) have probably bought some too." 

When asked by Rose about his purchase of airline stocks last year, Buffett said it was largely his decision to do so.

The conversation then shifted to allocation of time and Gates poignantly noted that, "You control your time.  Sitting and thinking might be a much higher priority.  It's not a proxy of seriousness that you fill every minute of your schedule."

Buffett added, "I can't buy time" and Rose noted it's the most precious resource.

Buffett thinks a 4% growth rate that the Trump Administration is targeting is pretty high and in actuality, a 2% rate would be fantastic and could potentially be possible.

Embedded below is the video of Charlie Rose's interview with Warren Buffett:

What We're Reading ~ 1/25/17

US investors favored passive funds over active by a record margin in 2016 [Morningstar]

The best investment writings of 2016 [Meb Faber]

On 3G Capital and the Kraft Heinz merger [Fortune]

A chat with Daniel Kahneman [Collaborative Fund]

Lunch with Bill Gates [FT]

What is your edge? [Base Hit Investing]

On expected risk [A Wealth of Common Sense]



Simon Property Group fights to reinvent the shopping mall [Fortune]

Facebook: Inside Instagram's reinvention [Recode]

Amazon expands into ocean freight [WSJ]

A pitch on Bolloré [Greenwood Investors]

Trump team compiles infrastructure priority list [McClatchy]

New FCC chief wants to destroy net neutrality [CNBC]

The great A.I. awakening [NYTimes]

Summary of some of the latest tech products featured at CES [Learning By Shipping]

Americans use debit cards twice as much as credit [Marketwatch]

China's biggest messaging app is on a collision course with Apple [TechInAsia]

How Social Cash made WeChat the app for everything [Fast Company]

When the Chinese come out to shop [OliverWyman]

How Netflix lost big to Amazon in India [Backchannel]

The best and worst airlines of 2016 [WSJ]

Carlos Slim's profit margins are right where Mexico wants them [Bloomberg]

Reasons to buy bonds in 2017 [Peter Lazaroff]

Julian Robertson Likes Microsoft, Air Canada, Celgene

Hedge fund legend Julian Robertson of Tiger Management sat down with CNBC to talk about markets recently and what stocks he's fond of these days.

He really likes Microsoft (MSFT) and thinks its cloud exposure, new management has "brought a revival of Bill Gates' initial strategy."

Robertson also likes Air Canada and says they're doing all the right things, cheap at 3.5x earnings.  Thinks it's well-run at a very cheap price.

Looking at stocks selling at depressed levels, he pointed to biotech and particularly Celgene (CELG).  He noted the fear that Hillary Clinton would put some of these companies out of business.  Robertson says "a lot of them have a lot of promise" and he prefers ones that have sold off a lot.  He was a big holder of Gilead (GILD) but said he's basically 'given up' because the company hasn't put its massive cash pile to work.

Turning to media, he said that, "I have always regrets about selling anything of Reed Hastings."  He regrets not being in Netflix (NFLX) but says "it's not the world's cheapest stock" so he says they 'removed' themselves. 

Turning to currencies, the hedge fund manager thinks the Peso is undervalued as it has largely been a 'Trump trade' recently.

On the hedge fund industry, he said "(The shakeout) is caused by increased competition from more hedge funds."

For young people in finance, he said he'd tell them to go to an industry that's lacking people.

For more from this hedge fund manager, we also posted another recent interview with Julian Robertson as well.

ValueAct Takes Trinity Industries Stake, Trims Microsoft

Jeff Ubben's activist firm ValueAct Capital has filed two disclosures with the SEC today.


ValueAct Shows New Trinity Industries Stake

First, the investment firm has filed a 13D with the SEC regarding shares of Trinity Industries (TRN).  Per the filing, ValueAct now owns 6.8% of the company with over 10.39 million shares.

The filing shows ValueAct was out buying July at prices between $18.69 and $21.50.  Also, in June they entered into Equity Forward Transactions with Societe Generale.

The 13D also notes that ValueAct intends to have conversations with members of the company's management and board of directors to enhance shareholder value.

Per Google Finance, Trinity Industries is "a diversified industrial company that owns a range of businesses providing products and services to the energy, transportation, chemical and construction sectors. The Company's products and services include railcars and railcar parts; parts and steel components; the leasing, management and maintenance of railcars; highway products; aggregates; inland barges; structural wind towers; steel utility structures; storage and distribution containers, and trench shields and shoring products. The Company's segments include the Rail Group, Railcar Leasing and Management Services Group, Construction Products Group, Energy Equipment Group, Inland Barge Group and All Other Groups. Its Rail Group is a manufacturer of freight and tank railcars in North America used for transporting a range of liquids, gases and dry cargo, through Trinity Rail Group. The Company's Railcar Leasing and Management Services Group is a provider of rail industry services in North America."


Ubben's Firm Trims Microsoft Stake

Second, in a Form 4 filed with the SEC, ValueAct has sold shares of Microsoft (MSFT).  Per the filing, ValueAct sold 18 million shares in total on July 27th and 28th at prices of $56.38 and $55.95.

After these sales, they still own over 38.62 million shares.

Per Google Finance, Microsoft is "is engaged in developing, licensing and supporting a range of software products and services. The Company also designs and sells hardware, and delivers online advertising to the customers. The Company operates in five segments: Devices and Consumer (D&C) Licensing, D&C Hardware, D&C Other, Commercial Licensing, and Commercial Other. The Company’s products include operating systems for computing devices, servers, phones, and other intelligent devices; server applications for distributed computing environments; productivity applications; business solution applications; desktop and server management tools; software development tools; video games; and online advertising. It also offers cloud-based solutions that provide customers with software, services and content over the Internet by way of shared computing resources located in centralized data centers. It provides consulting and product and solution support services."

For more from this investor, we've also highlighted another position they've been buying recently.

Mason Morfit on ValueAct's Approach and Microsoft

Mason Morfit of activist investment firm ValueAct Capital sat down with Larry Larsen at Microsoft's Channel 9 to talk about his background, ValueAct's approach, and his thoughts on Microsoft (MSFT). 

Morfit notes that ValueAct was founded with capital from the family of the founders of The Gap.  And ValueAct wanted to think like an owner and own stocks for a long-time and develop relationships with the management and board to help the company grow.

MSFT is ValueAct's top holding and was worth over $3.4 billion at the end of 2014.  ValueAct takes an active approach with most of their investments and Morfit sits on the company's board.  Morfit says ValueAct likes to invest in some of the world's best businesses and MSFT fits that category.

"Our perspective was that lost in this negativity around what was going on in PC's and the disruptions that were coming from mobile and cloud, is that Microsoft was much more than just a Windows or PC's company." 

"I've been really happy with the progress the company's made" since ValueAct originally acquired stock in 2013.

Morfit says he's paying most attention to Office 365 (especially commercial) and subscription numbers, as well as the businesses in the servers and tools group. 

Additionally, he talked about the management transition and the company's openness to accept criticism and to openly discuss ideas and to face facts whether they're good or bad.

Microsoft was also recently pitched as a long investment by Lone Pine Capital at the Sohn Conference this week too.

Embedded below is the video of Morfit's interview:



For more on this fund, you can scroll through our past posts on ValueAct Capital here.

What We're Reading ~ Analytical Links 12/17/14

Good interview with Amazon's Jeff Bezos [BusinessInsider]

122 things everyone should know about investing and the economy [Morgan Housel]

On castles and moats [Sova Group]

Global market sentiment survey 2015 [CFA Institute]

How the rising dollar could trigger the next global financial crisis [WSJ]

Berkshire director offers rare peek into Buffett's boardroom [BizJournals]

On the importance of "knowing the why" re: stock price fluctuations [Micro Fundy]

On how to have fun investing [Value and Opportunity]

Homebuilder sentiment diverges from reality [WSJ]

Inside Facebook's plan to wire the world [Time]

The hole in Google's mobile strategy [The Information]

Why Windows 10 is so important to Microsoft's future [TheStreet]

A look at Tropicana Entertainment [Clark Street Value]

More signs that software is eating investment management [Abnormal Returns]

Throwing money at start-ups in frenzy to find the next Uber [Dealbook]

8 secrets of success [TED]

London Value Investor Conference Notes 2014: Morfit, Hawkins, Yacktman & More

Today we're pleased to present notes from the London Value Investor Conference 2014 that just took place benefiting School Aid to improve the quality of education in Africa.  Enjoy! 


Mason Morfit – ValueAct

Mason Morfit is a partner with activist manager ValueAct Capital.  ValueAct has held 75 core investments since inception in 2000.  Roughly half of these core investments (37) have resulted in a board seat. Unusually in the activist world, 36 of the 37 board positions have come via invitation rather than a proxy contest.  Mason Morfit has recently resigned his seat on the board at Valeant Pharmaceuticals.  Valeant was the highest returning investment in ValueAct’s history. 

Morfit is now focusing his energy on Microsoft where he took up a board seat earlier this year. The networks that ValueAct has built up over the years by sitting on boards has been a major contributor to their success.  Morfit said that gaining the Microsoft board seat while owning a relatively small amount of the company’s equity was the culmination of this work.  He mentioned that their contacts with people at Seagate and AT&T were particularly important in landing the seat. Interestingly, Morfit talked about ValueAct’s investment in Adobe which they started in 2011. Morfit seemed to suggest that there were similarities between the Adobe and Microsoft cases.  ValueAct has had success at Adobe partly due to the introduction of annual subscription charges for its leading software, Photoshop.  Is it possible that the subscription model could be pursued at Microsoft with, for example, Microsoft Office?

Executive compensation is a very important lever for ValueAct. Morfit said that their research shows that executive pay is not well connected to company performance. One of the key strategies they pursue is to put pressure on companies to directly tie CEO pay to shareholder returns. ValueAct are happy for CEO’s to receive high levels of compensation for high shareholder returns but they should only receive small sums for average and poor shareholder returns. ValueAct prefer CEO’s to own a significant amount of the company’s stock and in the Valeant case they succeeded in getting CEO, Michael Pearson, to borrow money to buy Valeant shares.

Another interesting fact that came out of Morfit’s presentation was that whilst he thinks the activist space is getting very crowed at present they have only bumped into another activist once and that was recently with Carl Icahn at Ebay.  ValueAct subsequently sold their stock quickly and moved on.

Morfit said that the UK offers a very good environment for activists to operate in as there are no regulations against large investors talking to one another. In the past, ValueAct has been involved with Misys and Invensys in the UK.  He admitted that they find mainland Europe a harder nut to crack but that he expects them to do more work there during the next ten years.

For more from ValueAct, we've previously posted Morfit's lectures on activist investing.


Mason Hawkins – Southeastern Asset Management 

Mason Hawkins said that if you want to outperform you must invest in companies with good leadership.  Finding high quality partners is even more important now that there is less value in the market.  He finds it relatively easy to identify investments at a good price but picking great business leaders is harder. Getting the people right is the hardest part.  He recommended William Thorndike’s book the “The Outsiders” as an excellent guide to how to identify successful CEOs. 

He pointed out that Southeastern has sometimes misjudged managements and in those cases they are prepared to get involved to put things right.  Southeastern has taken an activist stance many times over the years, filing twenty four 13Ds.  In the last year alone it has been involved in activist campaigns with four companies in the US: Level 3, ACS Group, Texas Instruments and Chesapeake Energy. In the previous year they were involved in gruelling battles with Dell and Olympus in Japan. 


Donald Yacktman – Yacktman Asset Management 

Perhaps the biggest piece of news from Don Yacktman was that during the Q&A he said they had recently been out buying Samsung Electronics.  He said the stock is currently very cheap. Yacktman talked about valuing stocks as bonds, a subject he has covered before. He sees value as a function of future cash flows. His funds like to invest in predictable businesses as this allow them to more accurately project cash flows into the future.  They like high returns on tangible assets at a reasonable price. Another interesting snippet from Yacktman was that they always vote against stock options as remuneration for management. 


David Samra – Artisan Partners 

Samra said that it is hard to find good ideas at the moment and that his best idea and largest holding was cash. Long Compass Group (LON:CPG). The company has a dominant position in the contract food and support services market. Great management, good growth, potential margin upside. They bought in 2009 at 11x earnings. Compass now trades at 19x earnings.

Long Samsung Electronics.  Samra said that he thought that Samsung was cheap compared to US companies like Apple.  Samsung is trading on a PE of 6.6 with a strong balance sheet and lots of cash. He likes the management team and is not worried that the company is family controlled.

Long Aker Solutions (OSL:AKVER). An oil services company which is going through restructuring. Sells for 0.6 of 2013 revenues and 11.6x 2013 operating income. The company is protected by entry barriers.

Long Chubb Corporation (NYQ:CB). A property and casualty insurer with low leverage, disciplined underwriting and a good track record over time.  It trades at 1.5 book value and 2013 10.7x PE.  It should trade at x2 book value. 


Aled Smith – M&G Investments 

Long: Ingredion (NYSE:INGR) Ex-quant, Aled Smith argued that the secret sauce for stock picking is not to be found in numbers and spreadsheets but in the qualitative aspects of today’s complex businesses.   He pitched Ingredion, formerly Corn Products International, a global manufacturer and supplier of starch and sweetener ingredients to food and beverage producers. Smith particularly rates the CEO, Ilene Gordon who he argues has increased innovation, cut waste, reduced injuries and introduced a continuous improvement culture. Ingredion is moving away from sugar to higher value added products.  Smith also likes the oligopolistic qualities of the business.  M&G own 1m shares which they purchased in March this year. 


Tim Hartch – Brown Brothers Harriman 

Tim Hartch focuses on high quality and resilient businesses with a durable competitive advantage. He requires a margin of safety in the region of 75% of intrinsic value.

Long: Zoetis (NYSE:ZTS) Zoetis was spun out of Pfizer in early 2013. Hartch purchased shares in Q1 2014 between $28-30. He values the company in the low $40s.  Zoetis is the world’s leading animal health company. They sell products to poultry farmers, ranchers, vets and cat and dog owners.  Sales relating to livestock account for 65% of the business whilst the animal companion market accounts for 35%. The pet and livestock market is growing driven by global population growth and growing global wealth. Unlike human health care, governments are not exerting downward pressure on costs. The customer base is loyal. Zoetis has the largest R&D budget in animal health. The company is diversified with over 300 different medicines, vaccines and services and is not dependent on a few big drugs. 

Long: Svenska Handlesbanken (Sweden).  This is a Swedish based bank that provides services for private and corporate customers.  The bank has been run conservatively and had a good financial crisis. Hartch likes the simplicity of the way they do business.  They make money from traditional banking. Local managers operate what they refer to as the 2church tower model “ where  local managers get to know their local clients.  Most Swedish towns have a church with a tower and the idea is the bank only serves the local community that can be seen by climbing to the top of the tower. Despite the traditional approach, Svenska Handlesbanken has the highest return on capital amongst banks in Sweden. Unusually, the bank does not pay bonuses but instead staff are rewarded via promotion. Capital ratios are good. The bank has entered the UK market over the last 12 years, opening 25-30 branches per year and now has 170 branches in total. Many customers in the UK are dissatisfied with the performance of British banks and Hartch thinks that the UK could become Svenska Handlesbanken’s most profitable market.


Andrew Cormie – Eastspring Investments 

Andrew Cormie argued that Asia Pacific region (excluding Japan) is currently cheap at 1.6x price/book.  He noted that historically when Asian markets have been priced this way returns have been positive over a one, three and five year time horizon.  Long: Bank of China (BoC) and Noble Group (Singapore) 


Philip Best & Marc Saint John Webb – Argos Investment Managers 

Best and Webb are deep value, Graham and Dodd style managers that specialise in buying things that most fund managers would not touch. Since inception in Dec 2007 they have returned 331% compared to the Euromoney European Smaller Companies index return of 192%  They like small, illiquid stocks, family owed stocks, orphan stocks, failed IPOs, fallen angels (once high flying growth companies that have fallen to earth and become hated).  They are not necessarily afraid of value traps and actively look for situations that make other investors fearful. Long: Donegal  Investment Group (Ireland); Camellia (LON:CAM); Les Nouveaux Constructeurs (France); Biesse (Italy); Hochdorf (Switzerland). 


Jonathan Mills – Metropolis Capital 

Jonathan Mills said that he agrees with Warren Buffett that it is better to buy a great business at a reasonable price but in the current market he is finding it a challenge to identify wide moat businesses with a margin of safety. Mills' answer to the problem is to consider a narrow moat business if it is what he calls “owner occupied”.

An owner occupied company is one where the founder has a significant ownership stake. Mills said that public markets do not distinguish between companies that are owner occupied and those that are not.  Yet a study by Bain & Co has shown that between 2002 and 2012 companies with founder traits outperformed the S&P 500 by three times. Mills says that founders tend to have long time horizons, be good capital allocators, are customer focused, restless innovators and keep costs down.

Long: Admiral Group (LON:ADM).  Admiral floated in 2004 and the founders Henry Engelhardt and David Stevens are still there. Since the IPO it has paid out dividends of over £1.4bn (current dividend yield 7%).  Admiral uses a capital light model and therefore should not be valued on book.  It is trading at 2013 13x PE – at the lower end of range for Admiral historically. 


Andrew Hollingworth – HollAnd Advisors 

Long: Buckle( NAS:BKE). Buckle is a retailer of casual apparel, footwear, and accessories. Return on Net Tangible Assets, last ten years avg 47%. Sales per share growth last 10 years 10.2% compounded. Management shareholding approx. 40%. Around 90% of net income has been returned to shareholders in the last 4 years. All growth has been organic (no acquisitions). 2013 13.4x PE. EV/EBIT 7.8x.  Eleven analysts cover the stock but there are no buy ratings at the moment. 


Charles Heenan – Kennox Strategic Value 

Long: Fujikon Industrial Holdings (Hong Kong).  Founded in 1983.  Heenan likes to see a long-term track record. Fujikon is primarily a manufacturer of headphones and headsets. Historic yield of 10%.  Strong balance sheet, 50% cash holding and no debt. In terms of historic PE values Fujikon has a 5 year average PE 11x and 10 yr average of 9x.  2014 10.13x PE. 


This concludes the notes from the London Value Investor Conference 2014.  If you missed it, we've also posted up notes from the Sohn Conference, that took place recently as well as the Next Wave Sohn Conference.

ValueAct Capital Acquires More Microsoft Shares

Jeff Ubben's hedge fund firm ValueAct Capital has filed a Form 4 with the SEC regarding their stake in Microsoft (MSFT).  Per the filing, ValueAct has acquired over 2.9 million shares on May 8th and 9th at prices ranging from $39.49 to $39.59.

This comes in addition to the 66.8 million shares ValueAct already owns.

Recently, we highlighted that ValueAct's Mason Morfit stepped down from Valeant Pharmaceuticals' board and the hedge fund will also likely be reducing their stake.

Morfit is now on Microsoft's board as they look to push the company in the right direction after new CEO Satya Nadella has replaced Steve Ballmer.

Per Google Finance, Microsoft is "engaged in developing, licensing and supporting a range of software products and services. The Company operates in five segments: Windows & Windows Live Division (Windows Division), Server and Tools, Online Services Division (OSD), Microsoft Business Division (MBD), and Entertainment and Devices Division (EDD). The Company’s products include operating systems for personal computers (PCs), servers, phones, and other intelligent devices; server applications for distributed computing environments; productivity applications; business solution applications; desktop and server management tools; software development tools; video games, and online advertising."

Jeff Ubben on Valeant Pharmaceuticals and Microsoft: Interview

ValueAct Capital's Jeff Ubben appeared on CNBC today to talk about some of his positions.  The activist investor talked about his stakes in Microsoft (MSFT) as well as his long-term holding in Valeant Pharmaceuticals (VRX), which is in the news today in a big way.

Late yesterday, we flagged that Pershing Square had acquired an Allergan stake and was working with Valeant to propose a merger.

Ubben highlights how ValueAct's Mason Morfit joined VRX's board in 2007 and so this has been a long-term play for them as they have huge confidence in CEO Mike Pearson.  Ubben says, "Allergan and Valeant are a perfect match."

He then talked about Microsoft (MSFT) and Ubben thinks new CEO Satya Nadella's interests are aligned with theirs.

Embedded below are the videos of Jeff Ubben's interview with David Faber:

Video 1 on VRX


Video 2 on MSFT


You can view some of ValueAct's recent portfolio activity here.

What We're Reading ~ Analytical Links 3/12/14

On UnionPay, China and smuggling money in Macau [Thomson Reuters]

Google's Eric Schmidt on the future of internet freedom [NYTimes]

IPOs: when stability creates instability [Pragmatic Capitalism]

Fannie Mae/Freddie Mac would be eliminated in Senate Bill [BusinessWeek]

The 'easy money' myth [Reformed Broker]

Media industry lists things that worry them about TWC/Comcast merger [WSJ]

Are malls over? [The New Yorker]

The future of TV is coming into focus and looks pretty great [Quartz]

Barely keeping up in TV's new golden age [NYTimes]

Mexico seeks telco and TV competition [Advanced Television]

Big batteries threaten big power stations and utilities' profits [Economist]

Kate Spade (KATE) faces uphill fight to be next Ralph Lauren [Bloomberg]

Smartphone payment system to be unveiled in UK [FT]

The gaming console market is in crisis [TechCrunch]

Google looking to keep its search engine relevant in age of apps [WSJ]

The future of wearable technology [SlideShare]

Alibaba to buy control of ChinaVision [Reuters]

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 10/23/13

Margin debt hits new high [WSJ]

A dozen things learned from Bill Ruane about investing [25iq]

Look to helicopter Ben for clues to Yellen's Fed [FT]

The biggest emerging market in the world: the US [FT]

Do investment consultants pick future winners? [CBS News]

Sales are colossal, shares are soaring. All Amazon is missing is a profit [NYTimes]

Painful prescription: looking at Express Scripts [CNN Money]

In 5 years, Microsoft will be the most valuable company [BusinessInsider] 

Not already invested in Twitter? Might want to stay on the sidelines [AnObjectiveView]

Why Warren Buffett passed on the Washington Post [Fortune]

Interview with now-Nobel laureate Robert Shiller [WashingtonPost]

Emerging market investors sour on Mexico stocks [WSJ]

On hot chocolate demand and cocoa prices rising [FT]

Death of the American mall and rebirth of public space [The International]

Investing as a hobby [AbnormalReturns]

Buying shares in star athletes [NYTimes]

What We're Reading ~ Analytical Links 9/25/13

Notes from the Bloomberg Markets 50 summit [Reformed Broker]

Investing around Obamacare [The Big Picture]

The Buffett formula: how to get smarter [Farnam Street]

Charlie Munger: lessons from an investing giant [WSJ]

Thoughts on Blackberry endgame and Microsoft as a value trap [Aswath Damodaran]

Iron ore seen sliding as new supplies hit [FT]

The benefits of negative feedback [Harvard Business Review]

Mexico's 'Aztec tiger' economy struggles to earn its stripes [FT]

Alibaba said to move toward IPO in the US [Dealbook]

Seeking answers from Green Mountain Coffee [Dealbook]

Apple's Chiefs discuss strategy, market share & new iPhones [BusinessWeek]

7 reasons why Africa's time is now [Harvard Business Review]

Once voracious Zell puts less on real estate plate [WSJ]

The 7 deadly sins of investing [WSJ]

40 maps that explain the world [Washington Post]

Lessons from the Dell deal [Dealbook]

Free SEC filings online master class [Business Journalism]

Wharton offers free online courses copying 1st year MBA study [Bloomberg]

What We're Reading ~ Analytical Links 9/4/13

The Manual of Ideas: The Proven Framework for Finding the Best Value Investments [Amazon]

Risk is not a four-letter word [Herb Greenberg]

How the Verizon-Vodafone deal was sealed over gym talk & a breakfast [Globe & Mail]

Vodafone (VOD) spreadsheet post-deal [MicroFundy]

Is discounted cashflow the best way to value a company? [Google Plus]

Profile of billionaire Jorge Lemann [BusinessWeek]

MSFT: Ballmer out, ValueAct in - get ready for the next shoe to drop [All Things D]

Microsoft / Nokia: the deal that makes no sense [Stratechery]

Why is chicken more expensive? Ask McDonald's [BusinessWeek]

The biggest risk Zillow (Z) faces isn't what you think it is [LittleBear]

How 'Teslanaires' made fortunes on Tesla stock [Sun-Sentinel]

CNBC ratings hit 20-year nadir [NYPost]