Steve Kuhn's Presentation on Japan at Invest For Kids Chicago

We're posting up notes from Invest For Kids Chicago 2014.  Next up is Steve Kuhn of Pine River Capital who talked about Japan.


Steve Kuhn's Invest For Kids Chicago Presentation

•    Talk about Japan.
•    Heard a comment – “a land alpha goes to die”.
•    Traded it for 3 yrs on a night desk trading Japanese convertible bonds until 4am at Citadel.
•    #3 economy in the world.
•    Japan is interesting as Japanese stocks are still cheap relative to bonds.
•    Japanese corporate governance: the sun is rising. It is improving and the trend is your friend.
•    “Boring is beautiful”.
•    Pension funds are increasing their equity allocations, especially GPIF, which is material.
•    Long cheap, low volume, higher quality companies with strong track records. Short expensive, high volume, high beta companies with poor track record in return on capital and shareholder friendliness.
•    Their long portfolio trades for 12.2x PE, 8.1x EBITDA, 5% FCF yield, 11% ROE and has returned capital. Short portfolio trades for 23x PE, 11.4x EBITDA and lower returns on capital.
•    Looking to fix corporate governance such as a stewardship code, cross shareholding reduction and adding external directors.
•    GPIF looking to boost share allocation to about ~25%.
•    Japan companies have increased their share repurchases which is up 49% YoY. Dividends also increasing.
•    Cash holdings are still at near record highs – a positive for share repurchases and dividends.
•    62% of companies now have outside directors, up from 32% in FY04. Still in last place when compared to other major economies.
•    Takeover defenses peaked in FY08 and are steadily declining.
•    Easy way just to buy the JPNK index.


Be sure to check out the rest of the hedge fund presentations from Invest For Kids Chicago here.

Invest For Kids Chicago Notes 2013: Lasry, Eisman, Peltz, Cooperman & More

The fifth annual Invest For Kids Chicago conference just took place and MarketFolly has notes from the event which featured tons of prominent hedge fund managers presenting investment ideas to benefit charities.


Notes From Invest For Kids Chicago 2013

- Marc Lasry (Avenue Capital): Long JC Penney & Connacher Debt

- Lee Cooperman (Omega Advisors): 4 long ideas

- Steve Eisman (Emrys Partners): Long Ocwen Financial & Altisource Portfolio Solutions

- Nelson Peltz (Trian Fund): Presentaiton on Mondelez

- Dinakar Singh (TPG-Axon): 2 investment ideas

- Sam Zell (Equity Group Investments): Real estate thoughts

- Jeff Gundlach (DoubleLine): His presentation

- Mark Kingdon (Kingdon Capital): Thesis on Boeing & Aegerion Pharma

- Steve Kuhn (Pine River Capital): Pitch on American Capital

- Rick Rieder (BlackRock): His presentation

- Stephen White (Castle Union): Pitch on Avid Technology

- Peter Zaldivar (Kabouter Management): Long Hotel Shilla

Steve Kuhn's American Capital Presentation at Invest For Kids Chicago

Next up in our notes from Invest For Kids Chicago 2013 is Steve Kuhn of Pine River Capital.  He pitched American Capital (ACAS).


Steve Kuhn's Presentation At Invest For Kids Chicago

•    American Capital (ACAS): a Fabulous Fish out of Water
•    BDC with three business lines
o    Debt & Equity in US companies
o    Debt & Equity in European companies
o    Asset management arm
•    Tax treatment similar to REITs yet pay out all earnings in dividends
•    Sector is slightly at a premium to book value
•    Dividend value of 9.8%
•    ACAS is trading at 0.73x but doesn’t have a dividend
•    In 2008 they had a giant NOL carryforward
•    But using NOL was a better strategy than paying out divided so they converted to a C-Corp and are using the NOLs
•    Repurchased 27% of stock in the last 2 years which added over $1.50 per share to book value since June 2011
•    Average price to book of repurchase is 0.66x
•    Going to buy back 15% of equity now
•    On the “naughty list “ of diluters such as Citi and BofA is 0.7x
•    Book value growth has been at a CAGR of 38%
•    Book value of the asset management business is $3 per share
•    AUM of 14 billion
•    3 CLO deals this year – plan for additional products and business lines
•    Company values business at $1 billion yet it makes $120 million per year (super conservative valuation – could be worth $500 million more)
•    By 2016 Book value could be a s high at $26 per share 
•    ACAS has 3 years of tax shield of three more years then probably reinstates a dividend
•    Think portfolio value could increase as well and could underpin a $28 per share valuation
•    Management has 250 million reasons (options) to make this happen – would increase to a value of $105 million
•    Book value of $19.28 and trading at $14.20 


Check out the rest of the hedge fund presentations from Invest For Kids Chicago here.