Interview With Glenview Capital's Larry Robbins: Capitalize For Kids Investor Series

The Capitalize For Kids Conference has recently started an Investor Series of interviews.  Their first issue (Volume 1) features conversations with Larry Robbins of Glenview Capital, Pierre Lavellée of CPPIB as well as the team at Cambridge Associates.  The full document is available here, but we've pulled some select quotes from Robbins:


On how he invests:

"I think one of the challenges that many people have is that, in their pursuit of highly diversified investment strategies, they end up investing their own capital – or capital that they are the fiduciary for – on things that, due to time constraints, they have no contact with. Or of which they don’t have a capacity to develop a deep understanding. The theory, when we started Glenview – and that perpetuates today – is to invest in businesses that we believe we can adequately describe in a matter of minutes. Businesses where we can look at past and present fundamentals and try to predict future fundamentals – including future earnings growth, cash flow growth, shareholder returns, and where we can invest capital at valuations – absolute valuations – that we find reasonable. And the final thing is that, all along the way, we wanted to think and act like owners – which the business has allowed us to do."


On incentives in the hedge fund industry:

"I believe that the reason that hedge funds work over time is because the owner/operator hedge fund has a tremendous and complete alignment of interest between the fund manager and the client – because the fund manager is the largest non-diversified client. And because of that, I am not only well-motivated to drive returns over time, but I’m also extremely well motivated to manage risk. Unfortunately, most people gauge risk based upon the mark-to-market stock price movements or security price movements of the day, whereas in reality those risks are more appropriately measured through a cycle – based upon the certainty of outcomes and the hit rate in which one invests long and short with success. I think that alignment of interest is exactly fair and appropriate, and is the motivating factor by which hedge funds have delivered risk-adjusted returns and alpha over time."


On the unfortunate truth of the business:

"The unfortunate truth of our business is we’re trying to do something that’s very hard, and very unnatural. We were created in order to take advantage of market anomalies, and yet we are also expected to prevent market anomalies from negatively impacting capital balances. I’m not complaining about that dichotomy. We’re not crying about it, but we do recognize that there’s a natural tension between the times that opportunity sets are created and the times that the opportunity sets are harvested. And it is likely, over decades, that occasionally opportunity starts to get created on your watch while you’re holding that security. In order to encourage opportunistic investor behavior, I think you’re accurate in saying that we will go to great lengths to encourage opportunistic investor behavior – because we want to make sure that the clients know that we will do anything we can to support their objectives."


Update on Glenview's Thermo Fisher (TMO) stake:

"Thermo Fisher is an example of a company which is well run and well-managed – from top to bottom. So much of the popular press talks about hedge funds engaging underperforming companies, or entrenched managements, or dysfunctional boards. And yet, if you look at Thermo Fisher Scientific which is the aggregation of four different companies: Thermo Electron, Fisher Scientific, and Life Technologies – itself two different companies, it’s an example of a board and management operating on all cylinders. Number one, their business continues to exhibit the defensive growth characteristics that attracted us to want to invest in the life sciences industry. In the fourth quarter of 2015, they posted their strongest organic revenue growth quarter in five years, posting seven percent organic revenue growth. For a firm like ours, whose average portfolio earnings multiple is 12 times this year’s and 10 times next year’s earnings, it’s hard to find businesses that grow organically more than seven percent, so certainly we’re gratified that the business does that. Thermo has allocated capital extremely well. They repurchased shares and made meaningful acquisitions – the most significant of which in the last several years was their acquisition of Life Technologies, which was also a Glenview holding. At the time we pitched Thermo to your conference [October 2014], our thesis was that Thermo’s organic revenue growth would accelerate not only because Life Technologies was a financially accretive tuck in that offered significant cost savings, but because the platform that Life Technologies owned would actually accelerate organic revenue growth. That certainly has come to pass in 2015, and is reflected in increased optimism with respect to organic revenue growth in 2016 and beyond. Finally, Thermo is an example of what we would call the ‘wash-rinse-repeat trade’. There is much discussion in the market of companies that either employ financial engineering or have a too great reliance on leverage in order to drive financial returns. And yet Thermo, as an investment grade company, has developed enormous credibility with the credit markets and with the rating agencies, as well as with its shareholders, by identifying attractive acquisition candidates and financing them mostly with debt securities – but then using their prodigious free cash flow and the underlying EBITDA growth of the combined company in order to have the balance sheet self-repair over an 18 to 24 month period. As we sit here today, Thermo has de-levered to below three times debt to EBITDA, which puts them in a position in 2016 to again be a significant capital deployer. To date, they have bought back $500 million of stock and have announced the accretive acquisition of Affymetrix. We believe that the company has additional firepower to augment their strong organic top-line growth – and a strong margin expansion with additional accretive repurchases or M&A that'll further shareholder returns."


To read the rest of Robbins' in-depth interview, definitely check out the Capitalize For Kids Investor Series here.

Larry Robbins' Presentation at Capitalize For Kids Sohn Canada

We're posting up notes from the Capitalize For Kids Sohn Canada conference that just took place.  Next up is Larry Robbins of Glenview Capital who pitched a few stock ideas.


Larry Robbins' Sohn Canada Presentation

Looks for companies with excess cash on the balance sheet (cost of cash capital is low), debt capacity (companies with tangible assets and good credit history to leverage up), incremental debt capacity (under levered relative to industry and can leverage up without jeopardizing current credit rating) and finally defensive growth which protects the investor if company takes on leverage.

Pitched LONG on Thermo Fisher Scientific (TMO), Danaher Corporation (DHR), Endo International PLC (ENDP), and Actavis (ACT), which all fall under the criteria mentioned above.

Be sure to check out the rest of the presentations from Capitalize For Kids Sohn Canada here.

Lee Cooperman's Value Investing Congress Presentation: Are Equities Still the Best House in the Neighborhood?

We're posting up notes from the 2014 Value Investing Congress in New York. Next up is Lee Cooperman of Omega Advisors who presented: Are equities still the best house in the financial asset neighborhood?


Lee Cooperman's Value Investing Congress Presentation

• Market is fully / fairly valued. There is time and price left in us equity bull market and a respectable  S&P return expected in 12-18 months. Repeated the caveat that a geopolitical event could upend this prediction

• “Bear markets are born in despair, grow on skepticism, mature on optimism, die on euphoria.” ‘08/’09 was deep pessimism, have seen skepticism lately but we are near the end of that  now. Sees few signs of euphoria

• Nearly all us fixed income securities w/ exception of structured credit are uninteresting and   unattractive. This includes treasuries, investment grade corporates, HY bonds and soverign debt

• Equity markets in Europe and Japan should deliver respectable returns over coming year, could   outperform us as they are further behind in business cycle. Japanese valuations are attractive   because they have a comparable dividend yield but sell at 13.6x P/E vs. 16.8x P/E in US

• Dollar should be a strong currency over coming year

• Looking at average cycles:
o Bear market of ‘09 was 2x the average bear market, down -57% vs. -26% average. Also lasted 17 months vs. 13 month average
o Recession duration also prolonged and deeper than average. The average recession is characterized by -2% GDP and lasts 10 months.  In the '09 recession, GDP declined -4.3% and lasted 18 months
o Average recovery lasts 60 months and we are on slight overtime at 63 months today. 
o Market peaks about 7 months prior to economic peak. Thinks we don't have recession in 2015 so doesn't see a market peak today
o Cooperman thinks this recovery has the potential to exceed the average because so many companies were operating below potential

• Reason for caution:
o Seeing a lot of capitulation from the permabears, now hearing 3,000 S&P predictions from holdouts.  People waking up and getting bullish now are making a mistake
o Getting a little nervous that so many people who couldn’t see the positive outlook a few years ago now see such good opportunity
o Reiterated geopolitical risk multiple times
o Very concerned about income disparity in the economy. 75mm youth around the world are unemployed.  In the '40s an average factory worker made 1/30th of a CEO, now 1/900th
o Next crisis will be in public sector fundings. US government has $17tn debt with an average maturity < 4 years.  Meanwhile corporates have high liquidity and the banking sector is so highly regulated these days that a crisis probably won't come from them
o Another risk: recession/deflation in Eurozone or US
o Stocks also aren't really cheap – showed Buffett’s favorite stock valuation chart

• Regarding rising rates:  o If Fed doesn't raise rates, we have a problem in the stock market. If cash belongs at 0% and govt belongs at 4%, you shouldn't be making 15% in the stock market.  Rising rates should be indicative of an improving economy
o 1958 was the year of yield reversal when equities started yielding less in dividend yield compared to treasuries.  Now over 25% of S&P 500 non-financials yield more than 10yr note
o Relative to alternatives, equities still better. Fixed incomes just not attractive


Longs:  

• GARP: Actavis (ACT), Citigroup (C), Thermo Fisher (TMO)
• Income growth: Atlas (ATLS), Gaming & Leisure Properties (GLPI), KKR (KKR), Nordic American Offshore (NAO) 
• Asset restructuring: QEP Resources (QEP), Supervalu (SVU)
• High risk/high return: Altisource Portfolio Solutions (ASPS), Louis XIII (577 Hk), Monitise (MONLLN), Sandridge Energy (SD).

Cooperman's pick of ASPS was analyzed in the May issue of our Hedge Fund Wisdom newsletter if you want to play catch up on the name quickly.



Be sure to check out the rest of the Value Investing Congress presentations here.

Lee Cooperman's Favorite Stock Picks at Delivering Alpha Conference

At CNBC and Institutional Investor's Delivering Alpha conference today, Omega Advisors' Lee Cooperman shared his favorite stock picks.

He likes Actavis (ACT), a tax inversion play, Citigroup (C), a good buy he says because the economy is healing with loan demand and one that could narrow the discount to book value over time, as well as Gaming and Leisure Properties (GLPI) and Nordic American Offshore (NAO).

Other plays he likes include: QEP Resources (QEP), Supervalu (SVU), Louis XIII (577 HK), and Monitise (MONI.LN), the mobile payments play he's pitched before.

Lastly, he also mentioned Thermo Fisher Scientific (TMO), KKR (KKR) and Sandridge Energy (SD).

Cooperman also noted that the last time the Fed raised rates was in 2006 and around 25% of fund managers weren't really around to experience that.

He also joked that the last time he was bearish was during his Bar Mitzvah.

One quote that stood out from him was that, "if you buy something that's out of favor, things seem to happen to make you right."


Lee Cooperman will be presenting new investment ideas at the upcoming Value Investing Congress in a few months and readers can receive a discount to the event by registering here and using discount code: MARKETFOLLY

Larry Robbins' 6 Best Ideas at Delivering Alpha Conference

At CNBC and Institutional Investor's Delivering Alpha conference today, Glenview Capital's Larry Robbins highlighted his six best ideas.

His stock picks were: Thermo Fisher Scientific (TMO) which has been his largest holding, Monsanto (MON) which he previously pitched here, as well as HCA (HCA), Hertz (HTZ), National Oilwell Varco (NOV) and Flextronics (FLEX), a position he added to in May.

He likes that all of these can raise money on the cheap and then buyback shares.  So basically, his favorite investment idea is a theme of companies levering up.

Also, today we highlighted that Robbins has been buying Carter's (CRI) shares recently too.

Omega Advisors' Thesis on Sprint Nextel (S): Q2 Letter

Lee Cooperman's hedge fund firm Omega Advisors is out with their Q2 letter and in it they detail their thoughts on Sprint Nextel (S), their largest position at the end of the second quarter:


Omega's Thesis on Sprint Nextel

They knew that a lot of their position would be tendered to Softbank, but they still thought shares in the 'New Sprint' were attractive so they bought shares even after the quarter.

Omega writes, "We continue to like Sprint for three reasons. First, we continue to see the same meaningful margin expansion  opportunity that attracted us to the company for our initial investment, with the added benefit that the Softbank  merger should accelerate the pace of margin expansion and likely results in a higher terminal margin. Second,  during the course of the bidding process we had the opportunity to engage with Softbank CEO Masayoshi Son.  His track record speaks for itself. We found Mr. Son to be engaging and forthright, and believe that the  opportunity to be his partner as he creates value for Softbank through Sprint is highly attractive. Third, with  the acquisition of Clearwire, Sprint possesses unique spectrum assets which completely change the economics  of the business. Old Sprint operated on 35 Mhz of spectrum versus AT&T and Verizon at approximately 110  Mhz. Spectrum is the raw material for wireless, and a spectrum deficit resulted in structurally lower margins and lower returns on capital. However, Sprint has now shut the Nextel network and will repurpose approximately 14 Mhz of low frequency spectrum for the Sprint network.  Additionally, Clearwire is able to  operate on a single bandwidth in excess of 130 Mhz on average, including approximately 160 Mhz in the top  100 markets where capacity constraints are most likely to emerge. By virtue of having a significantly fatter  pipe than its competitors, Sprint should achieve both better network performance and much higher returns on  incremental capital going forward. It is true that the capital expenditures will be large over the next 24 months  but with dramatically higher returns on incremental capital, we think Sprint will emerge as a share gainer with  an attractive financial profile."

They feel that if their thesis is wrong, it's due to the US wireless industry itself not being able to support 4 major carriers.  In such a case where T-Mobile and Sprint can't produce solid returns, then the likelihood of a merger between the 3rd and 4th largest players wouldn't be frowned upon (which provides downside protection).


Cooperman Likes Thermo Fisher Too

It's also worth highlighting that Omega also really likes Thermo Fisher Scientific (TMO) as they see end markets likely to accelerate.  They see mid-to-high teens EPS growth for the company due to a combination of margin expansion, accretion from the Life Technologies (LIFE) deal, and deleveraging.

Shares of TMO have seen a lot of interest from other major hedge funds as well.  As we pointed out from Viking Global's Q2 letter, they started a stake in TMO in Q2.  And then Larry Robbins' Glenview Capital also holds TMO as its largest position.


For more on Lee Cooperman's firm, head to Omega's thesis on Covidien & Sirius XM Radio.

Viking Global's Thesis on Valero (VLO): Q2 Letter

Andreas Halvorsen's hedge fund firm Viking Global is out with their Q2 letter and in it they talk about their thesis on refiner Valero (VLO):


Viking's Thesis on Valero

"Valero is the largest independent oil refiner in the U.S. with over 50% of its capacity located around the Gulf of Mexico.  Over the past several years, Gulf-based refiners have been at a cost disadvantage because they had to buy expensive crude imports while their mid-continent competitors could source cheaper inputs domestically from shale oil developments.  We believe this cost advantage is shifting towards the Gulf as new pipelines carrying cheap domestic crude are completed, giving Valero the greatest benefit due to its strong presence there.  In a further boost to the company over the next couple of years, we think its access to discounted Canadian heavy crude also will improve.  These positive developments have been amplified by sound capital allocation by the management team, such as investing in crude transport logistics to gain access to cheaper inputs, acquiring two new hydrocrackers to improve production yields, spinning off a non-core retail operation, and allocating available cash to stock buybacks.  We find the current valuation attractive given the significant earnings potential once these factors start contributing to the bottom line."


Other Notable Q2 Moves

Viking also added or re-entered positions in Capital One (COF), Valeant Pharmaceuticals (VRX), and Thermo Fisher (TMO) during Q2.  All are were sizable top-10 positions at the end of the quarter, with COF being the largest as their #2 holding.

Lastly, it's worth highlighting that Viking is exploring the impacts of a potential slowdown in the Chinese economy.  While such effects have led to lower metals prices, a weak Australian dollar and luxury goods companies weakening, Viking is looking for consequences beyond those listed above.  In particular, they're focused on exploring potential unwinding of the leverage in the banking system.

For more on this fund, we've detailed some of Viking Global's recent portfolio activity here.  Additionally, we posted up a rare interview with Andreas Halvorsen.

Larry Robbins & Jacob Gottlieb on Healthcare Plays: Delivering Alpha Conference

At the Delivering Alpha Conference, Larry Robbins of Glenview Capital, Jacob Gottlieb of Visium, and Kris Jenner of Rock Springs Capital sat down to talk the Affordable Care Act and Obamacare.


Larry Robbins, Glenview Capital

Robbins notes that Thermo Fisher Scientific (TMO) is their largest position.  He says it's independent of the Affordable Care Act as it's 75% consumables.  The growth there is driven by capital allocation.  The space will benefit from sequestration ending in 2014.

He also likes Walgreen's (WAG).

Robbins expects an increase in pharmaceutical consumerization after Obamacare starts.  Robbins also noted he still likes McKesson (MCK) ~ we've highlighted in the past how it's been one of his largest holdings for some time.

Glenview's founder notes that healthcare used to trade at a 10% premium to the market, but their portfolio trades at a 25% discount so he loves if companies buy back stock or make acquisitions.  He sees hospitals likely to continue consolidation, which means the for-profit players gain share.

With the Affordable Care Act and more people getting insured, you'll see growth on growth (especially in hospitals) but on the other hand, there will be losers down the chain as they're over-earning now and will get squeezed.

In the space, big pharma have a lot of cash but not a lot of innovation.  Small companies are exactly the opposite, so consolidation will continue there.

If you missed it, Robbins recently made a very rare media appearance and talked about HMA, THC and what he thinks about this market.


Jacob Gottlieb, Visium Asset Management

Jacob Gottlieb of Visium voiced his concern over taxes on healthcare as it could be counterproductive to making more affordable and better quality care.  As far as what his picks go, he likes healthcare IT providers and well-run hospitals.


Kris Jenner, Rock Springs Capital

Kris said there will be winners and losers in all of this.  The opportunities in healthcare are robust and based in innovation.  That innovation will be more-so in business models than new drugs.  He said he likes Vertex Pharmaceuticals (VRTX) and Gilead Sciences (GILD).

Thanks to @EquityNYC for live tweets on this panel.


For more from the Delivering Alpha Conference, head to:

- John Paulson on gold, real estate & merger arbitrage

- Nelson Peltz on PepsiCo & Mondelez 

- Best Ideas Panel with Mark Kingdon, Chris Hohn, Jim Chanos & Lee Cooperman

- Carl Icahn on activism

What We're Reading ~ Analytical Links 4/17/13

A new site aggregating conference call transcripts [ConferenceCallTranscripts.org]

Intel (INTC): Anatomy of a tech value trap [Reformed Broker]

Why equity long/short investing is not dead [HFIntelligence]

Sticking to a plan in the face of emotional volatility [Abnormal Returns]

Rare interview with Liberty Media's (LMCA) John Malone [CNBC]

Jeremy Grantham on how to play resource scarcity [Advisor.ca]

Aereo has TV networks circling the wagons [NYTimes]

The death of value investing [Business Insider]

Thermo Fisher (TMO) nears deal for Life Technologies (LIFE) [Reuters]

On Dish Network's (DISH) bid for Sprint Nextel (S) [Bloomberg]

Interview with Markel's (MKL) Tom Gayner [GuruFocus]

Diabetes in Mexico: eating themselves to death [The Economist]

Top 5 websites capturing larger share of real estate traffic [Inman]

As big investors emerge, Bitcoin gets ready for close-up [Dealbook]

Ricky Sandler's Hedge Fund Eminence Capital Boosts Bet On Financials: 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.)

Next up is Ricky Sandler's hedge fund Eminence Capital. Prior to Eminence, Sandler started his career as a research analyst for Mark Asset Management and then went on to start Fusion Partners at the age of 25 with Wayne Cooperman. As their investment styles started to differ, Sandler went on to start his new hedge fund. Sandler employs a 'quality value' approach to running his portfolio, spending equal time on both the long and short sides of his portfolio. In the past, he has said they employ gross leverage and are typically around 120% long and 70% short. Sandler attended the University of Wisconsin and holds a CFA designation. You can find a more in-depth look at Sandler and his investment process at the bottom of the article.

The positions listed below were Eminence'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
Becton Dickinson (BDX)
Accenture (ACN)
Carnival (CCL)
Baxter (BAX)
Northrop Grumman (NOC)
Fidelity National Information (FIS)
Henry Schein (HSIC)
Burger King (BKC)
Autodesk (ADSK)
Burlington Northern Santa Fe (BNI)
Talecris (TLCR)
Raytheon (RTN)
Walgreen (WAG)
Chipotle (CMG)


Increased Positions
Hasbro (HAS): Increased position by 1,342%
Goldman Sachs (GS): Increased by 349%
Lowes (LOW): Increased by 161.3%
Equifax (EFX): Increased by 107.4%
US Bancorp (USB): Increased by 105.6%
Qualcomm (QCOM): Increased by 98.5%
JPMorgan Chase (JPM): Increased by 96.9%
Thermo Fisher Scientific (TMO): Increased by 59.2%
Lockheed Martin (LMT): Increased by 57.4%
Ebay (EBAY): Increased by 38.7%
Abbott Laboratories (ABT): Increased by 29%
Walmart (WMT): Increased by 27.9%
Fiserv (FISV): Increased by 26.3%
Mastercard (MA): Increased by 19.4%
Apple (AAPL): Increased by 16.8%


Reduced Positions
Cognizant Technology (CTSH): Reduced position by 61.8%
Cisco Systems (CSCO): Reduced by 28%
Google (GOOG): Reduced by 24.6%


Removed Positions (Sold out completely):
Monsanto (MON)
Cintas (CTAS)
Abercrombie & Fitch (ANF)
Morgan Stanley (MS)


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

1. Oracle (ORCL): 5.63%
2. Abbott Laboratories (ABT): 4.92%
3. Apple (AAPL): 4.24%
4. Lockheed Martin (LMT): 4.21%
5. Thermo Fisher Scientific (TMO): 3.46%
6. Walmart (WMT): 3.33%
7. US Bancorp (USB): 3.15%
8. Fiserv (FISV): 3.15%
9. JPMorgan Chase (JPM): 3.11%
10. Goldman Sachs (GS): 2.95%
11. Equifax (EFX): 2.74%
12. Becton Dickinson (BDX): 2.72%
13. Qualcomm (QCOM): 2.71%
14. ccenture (ACN): 2.70%
15. Carnival (CCL): 2.61%
    

Ricky Sandler's hedge fund increased their long US equity exposure in dramatic fashion in the fourth quarter as assets reported via 13F filing were $5.2 billion, way up from the previous $3.1 billion. And obviously you can see that with all the increased and new positions listed above. Some of their more notable additions were massive increases in their positions in financials via US Bancorp, JPMorgan Chase, and Goldman Sachs. Just earlier this morning we saw that hedge fund Valinor Management added heavily to their GS stake, and Sandler's Eminence has as well.

In addition to financials, Eminence added to Hasbro, Qualcomm, Thermo Fisher Scientific, and Lockheed Martin. While their portfolio shows hints of the most popular hedge fund holdings with AAPL, WMT, & QCOM, they also have some interesting picks mixed in as well. We haven't seen many funds with positions in Equifax, Oracle or Lockheed Martin, but Sandler's hedge fund owns all three.

They also added a bevy of stocks as brand new positions and their new stakes in BDX, ACN, CCL and BAX are all pretty sizable as well, all in the top ten holdings. In terms of positions they sold completely out of, we see yet another hedge fund has dumped Monsanto. Overall, Eminence increased financials and healthcare exposure and reduced technology exposure.

Data used for this article comes from Alphaclone, our source for backtesting strategies and sorting through all the hedge fund portfolio maneuvers with ease. Assets reported on the 13F filing were $5.2 billion this quarter compared to $3.1 billion last quarter, a whopping 66% increase. Remember that these filings are not representative of the hedge fund's entire base of AUM.

For more on Ricky Sandler and Eminence's investing style, we've attached this old copy of Value Investor Insight:




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, David Tepper's Appaloosa Management, Warren Buffett's portfolio, John Paulson's hedge fund Paulson & Co, Lee Ainslie's Maverick Capital, Dan Loeb's Third Point, Eddie Lampert's RBS Partners, David Ott's Viking Global, and Chris Shumway's hedge fund Shumway Capital Partners, Chase Coleman's Tiger Global, Philip Falcone's Harbinger Capital Partners, Roberto Mignone's Bridger Management, Thomas Steyer's Farallon Capital, John Burbank's Passport Capital, Brett Barakett's Tremblant Capital, George Soros' hedge fund Soros Fund Management, and Philippe Laffont's Coatue Management Charles Anderson's Fox Point Capital, Bill Ackman's Pershing Square Capital Management, Jonathan Auerbach's Hound Partners, Lee Hobson's Highside Capital, David Stemerman's Conatus Capital, Matt Iorio's White Elm Capital, and David Gallo's Valinor Management. Check back daily for our new updates.

Thermo Fisher (TMO): Critical Juncture

As you can see from the chart above, Thermo Fisher Scientific (TMO) has been forming a beauty of a triangle over the past few months. Triangles of this size usually imply consolidation before a big breakout/breakdown. And, this one certainly looks like it will breakout to the upside, given the number of times it has tested overhead resistance at around $59. But, at the same time, it very well could breakdown below its triangle given the shoddy market conditions we've been seeing. I'm in this name and have been for a while. This is not a trade for me, its an investment. TMO and MIL make up my "life sciences" basket in my portfolio. And, an added bonus is that numerous very smart hedge funds have been accumulating positions in TMO over the past few quarters. (Most notably, Blue Ridge Capital, as detailed here).

So, even though I'm personally not trading this name but rather investing in it, I'm definitely keeping my eye on the overhead $59 resistance and the trendline that is established on the bottom side. If we break below this trendline and make a lower low, I will most likely exit this name and look for a better entry point to get long this as an investment again. This is why technicals are so important and can be a great weapon to add to your investment arsenal. Even though I think TMO is a great name to own, this chart is implying a big move soon, most likely to the upside. I believe this is the case because the formation has been building for months and accumulation/distribution is showing slow and steady accumulation over the months. So, keep an eye on it, and get in it for a trade or an investment, whichever you prefer. Momentum traders would like to play this name on a move upwards of $59 on some solid volume. Whereas others might like to play it right now on todays bounce off the 50 day moving average.

All I know is that TMO is making higher lows and has consolidated beautifully over the months. Look for a move with conviction in either direction. Just let the break of the triangle dictate whether to get long or short. I know I'll be monitoring my position intently due to the nature of this market and the nature of this big formation.