Viking Global Discloses US Steel (X) Position

Andreas Halvorsen's hedge fund firm Viking Global has filed a 13G with the SEC regarding shares of US Steel (X).  Per the filing, Viking now owns 5.5% of the company with over 9.66 million shares. 

This is a newly disclosed equity position for the firm and the filing was made due to portfolio activity on February 27th.  This is now around a $425 million position, making it a top-20 US holding in their portfolio. 

Per Google Finance, US Steel is "an integrated steel producer. The Company is engaged in producing flat-rolled and tubular products with production operations in North America and Europe. The Company operates through three segments: Flat-Rolled Products (Flat-Rolled), U. S. Steel Europe (USSE) and Tubular Products (Tubular). The Flat-Rolled segment includes the operating results of its integrated steel plants and equity investees in the United States involved in the production of slabs, rounds, strip mill plates, sheets and tin mill products, as well as all iron ore and coke production facilities in the United States. The USSE segment includes the operating results of U. S. Steel Kosice (USSK) and its integrated steel plant and coke production facilities in Slovakia. The Tubular segment includes the operating results of its tubular production facilities, primarily in the United States and equity investees in the United States and Brazil."

Greenlight Capital's Q4 Letter: New Positions in Micron, BP, & Anadarko Petroleum

David Einhorn's hedge fund Greenlight Capital returned 19.1% net in 2013.  Greenlight's fourth quarter letter to investors unveils their thesis on new positions in Micron Technology (MU), BP (BP), and Anadarko Petroleum (APC).

Greenlight likes Micron because the industry has started to act a bit more rationally and MU will buyback shares instead of building new factories.

Their BP stake is a play on increasingly shareholder friendly capital allocation policies as well and they think the company is worth $70 per share (it trades around $49 now).  

Additionally, their letter talks about some positions they've closed recently like Airbus Group (formerly EADS), and ThyssenKrupp.

At the end of 2013, Greenlight's largest positions in alphabetical order were: Apple (AAPL), General Motors (GM), Marvell Technology (MRVL), Micron (MU), and Vodafone (VOD).

Thanks to ValueWalk who posted up Greenlight's Q4 letter and you can view it below:




For more on Einhorn, we just yesterday revealed some more of Greenlight's recent portfolio activity.

And for more year-end hedge fund letters, head to Third Point's Q4 letter here.

What We're Reading ~ Analytical Links 7/10/13

On saving investors from themselves [WSJ]

Smart and stupid arguments for active management [Reformed Broker]

Incorporating right-brain thinking into your investment process [Investing 501]

How gold lost its luster [The Big Picture]

A dozen things I've learned about the psychology of investing [25iq]

Steel: an inferno of unprofitability [The Economist]

On dealing with a rising interest rate environment [WSJ]

30-year mortgage rates surge to highest level in 2 years [Zillow]

The Dow Jones Index between 1789 and today [Go Infront]

MJN, ABT, NSRGY: China investigates foreign makers of baby formula [WSJ]

DVA: dialysis pay would drop $970 million under CMS proposed rule [BNA]

DIS: An interview with head of ESPN John Skipper [HollywoodReporter]

Talk of mergers stirs cable TV's big players [NYTimes]

Labor market spider chart [Federal Reserve Bank of Atlanta]

The best investment advice you'll never get [San Francisco Magazine]

Merchant banks make a comeback [WSJ]

The scam Wall Street learned from the mafia [Rolling Stone]

A report on Corrections Corp of America (CXW) [Scribd]

Introducing the Winklevoss Bitcoin trust [FT Alphaville]

David Einhorn: Short Iron Ore (Great Investors Best Ideas Conference)

We're posting up notes from the Great Investors' Best Ideas Investment Symposium in Dallas and next up is David Einhorn of Greenlight Capital.  Einhorn made a presentation entitled 'If you give a miner a dollar..." and said to short dirt.  And by dirt, what he means is to short iron ore.

While Einhorn said that everyone "should have gold miners in their portfolio," it became clear he was less sanguine about other types of miners.


Iron Ore Supply/Demand

Einhorn started his presentation with the supply/demand dynamics of iron ore, noting that the infrastructure to get ore out of the ground is not cheap.  He pointed out that it's cheaper for China to import ore from Australia than to dig it out of their own ground.  Einhorn put up a chart showing iron ore prices from 1981-2011, peaking in the most recent year.

He went on to say that, if you give miners dollars, they dig holes.  Higher prices attracted new supply and new players.  It takes years to bring new supply online and he points out that there's a massive amount of supply about to hit the market.

He points out the Chinese investment binge as the driver of demand and notes that "something that's unsustainable persists... until it doesn't."

Einhorn then shifted to steel and noted that 2010 was the last year where steel saw double-digit demand growth.  Supply now exceeds demand and they're in the midst of expansion.  Big projects from 2010/2011 are coming online and the cost of stopping development is too high.
 
Einhorn argues that you can't contain the near-term situation since it's so expensive to halt projects.  He feels that ore prices will head below 100/ton and could get as low as 80/ton.  He even said that by 2014 it could go as low as the 60's.  He opined that the iron ore situation could soon reflect the same situations that took place in polysilicon and LEDs.


Losers Singled Out By Einhorn

While Einhorn did not explicitly come out and say he was short any of these names, he put up a list of companies that will lose in this scenario:

Iron Ore Miners (huge projects that will come online into declining markets): Vale (VALE), BHP Billiton (BHP), Rio Tinto (RIO), Fortescue (FMG), Cliffs (CLF)

Equipment Makers (already have seen growth into infrastructure build): Caterpillar (CAT), Joy Global (JOY)

Integrated Steel Companies: US Steel (X), Arcelor Mittal (MT).


Einhorn pointed out that X and MT have had an advantage because they own their ore supplies while their competition purchases ore in the markets.  However, he says this competitive advantage erodes as the price of ore falls.  The price of steel is also falling.  These integrated steel companies are also facing competition from irrational Chinese steel mills that are willing to operate at a loss.

Last week we also highlighted that Tiger Management's Julian Robertson said to avoid steel stocks as well.

Einhorn argues that the equities of the above companies reflect resumption of Chinese demand but that seems dubious.  He feels like companies are investing a lot at the top.  For more from this hedgie, also check out Einhorn's presentation on 3 ideas from the Value Investing Congress.


For the rest of the GIBI presentations, head to notes from the Great Investors' Best Ideas conference.

Julian Robertson on What Stocks He Likes Now: Interview

Tiger Management founder Julian Robertson made his rare television appearance for the year on CNBC yesterday and talked about how now is a time to put money to work in the market.

He thinks the economy and overseas worries are having a big effect on investors.  So many investors are frightened about Asia and Europe that they've almost "lost their way" without realizing that many great companies are trading at great prices.

He feels that this market is good for hedge funds because their namesake allows them to hedge against uncertainty and these potential risks.  However, he worries that some managers have hedged too much and they won't benefit unless there's a big fallout in the world economy.


What Stocks Robertson Likes

Robertson cited Apple (AAPL) as great company trading at a great value, something he says rarely happens.  He said, "Apple is now probably somewhere around 14-15 times next year's earnings, it's very, very reasonable for the kind of growth you can get."

Facebook (FB) was another stock Robertson mentioned as he likes the social media exposure and admires Mark Zuckerberg.  However, he does not "really know enough about the stock" to own a position.  He cited "younger people" that he's in partnership with as having owned Facebook early on back when it was private.  We'd assume he's referring to Chase Coleman's Tiger Global.

Robertson says he's looking for great companies and he's invested in a European airway company: Ryanair (RYAAY) as they're the low-cost provider.  He also likes Rolls Royce (LON:RR or RYCEY on the pink sheets) because many people see it as a luxury automobile when in reality it is a great supplier to the aerospace and other industries.  Steve Mandel's Lone Pine Capital has been an owner of Rolls Royce.

In terms of financials, Robertson cited Capital One (COF) and Ocwen Financial (OCN).  The latter, he says,  is a mortgage servicing company that he thinks has a lot going for them.

Robertson argues that steel companies AK Steel (AKS), US Steel (X), etc are overvalued and we'd need to see the economy really takeoff to warrant those multiples.


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



For more on this legendary investor, head to Julian Robertson's thoughts on the hedge fund industry past & present as well as his past extensive interview with Columbia Business School.

David Einhorn's Ira Sohn Presentation on Martin Marietta Materials, Apple & More

We're posting up notes from the Ira Sohn Conference.  Greenlight Capital's David Einhorn gave a presentation on a ton of different stocks.

He screamed through 100 slides and provided very little detail, more of a way to touch on several ideas, so people can do their own work.


Short Martin Marietta Materials (MLM): priced at 35 p/e. One time fiscal stimulus has goosed earnings. Multiple too high.

Short France: exposure to Italy and Spain. Default or return to Franc not out of the question. Spain, retailers.


On China: "Big trouble in little China" Big knowledge gap, and cultural gap. Shows all the RTO frauds, no specific names to short. Overbuilding outside of main cities in China, projects don't pay off the debt service. Now USD not coming in anymore, so the gig is up. Banks are in trouble. Chinese elites are taking money out of the country.

On Japan: bad demographics. Sales of adult diapers outsold those for babies this year. Shorting the yen.  Long DeNA, Gree: Japan's two largest social network companies are in the cellar. Games under regulatory scrutiny. Better than FB.

Long Apple (AAPL): Hedge funds actually have less than 2% of assets. Says Trillion Dollar market caps aren't prohibited. Other bear case is hardware company, it's not, it's a software company. iOS platform sticky, "captured the customer" Also long Microsoft (MSFT), Marvell Technologies (MRVL).

Perpetual Preferred Stocks: Advocates use of perpetual preferred stocks. 4-6% dividend, taxed at preferential tax rates. Some special form of preferred. "Some will object that there is no precedent for this idea. That is because this is a new idea."

Thoughts on Tons of Other Stocks:  Short Zara/Inditex. Long DIA. Long Norway. Long Cairn Energy, small cap E&P. has cash in USD. Negative words on Amazon.com (AMZN): Revenue growth, no op profits; criticized company's weak profit growth... didn't say he was shorting? "Is Jeff Bezos Batman?" Impact on other retailers is clear. Hint at other shorts. Short Dicks Sporting Goods (DKS)? He says co is in big trouble with Amazon's big push into the category. Trades at 20x, could be left in the dust. Short US Steel (X). Likes Norway's GJF.



David Einhorn will also be presenting investment ideas at the Value Investing Congress in NYC in October.  Market Folly readers can receive a discount to the event by clicking here and using discount code: N12MF3


P.S. - Don't miss other presentations from John Paulson, Bill Ackman, Larry Robbins & more: notes from Ira Sohn Conference 2012.

John Burbank's Passport Capital Hedges With ETFs, Options: 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 John Burbank's hedge fund firm Passport Capital. Burbank founded the San Francisco hedge fund in 2000 and they use sector specific and macroeconomic analysis to select their investments. Once they have identified potential themes, they'll drill down to find specific companies that can benefit.

Burbank has over a decade of experience in markets having previously worked as a consultant and as a director of research at ValueVest Management. His educational background includes an undergraduate degree from Duke University and an MBA from Stanford University. Passport previously had a track record of gaining 27% annually, but like many other funds had a rough 2008.

Previously, we've detailed a lot of investment resources out of Passport including:

- Passport's rationale for owning physical gold
- Passport's recent Agriculture Fund investor letter
- The hedge fund's case for agriculture

The positions listed below were Passport'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
iShares S&P 500 (SPY) Puts
iShares Emerging Markets (EEM) Puts
CF Industries (CF) Calls
US Steel (X) Calls
Dr Pepper Snapple (DPS) Calls
Barrick Gold (ABX)
CVS Caremark (CVS)
Materials (XLB) Puts
Terex (TEX) Calls
Barrick Gold (ABX) Calls
UnitedHealth (UNH)
Illumina (ILMN)
Ultrashort Crude Oil (SCO)
News Corp (NWSA)
Boston Scientific (BSX)
Small Cap Bear 3x (TZA)

All the rest of their new positions were each less than 0.5% of reported assets: Ensco (ESV), Tesoro (TSO) Puts, Knight Capital (NITE), Rowan (RDC), Nuvasive (NUVA), CF Industries (CF), Medtronic (MDT), Dollar Tree (DLTR), Knight Capital Group (NITE) Calls, Mosaic (MOS) Calls, National Oilwell Varco (NOV), & Omnivision (OVTI)


Increased Positions
Proshares Ultrashort Real Estate (SRS): Increased by 23,451% (was previously a tiny position)
Perfect World (PWRD): Increased by 971%
iShares S&P 100 (OEF) Puts: Increased by 356%
Onyx Pharma (ONXX) Calls: Increased by 100%
Janus Capital (JNS) Puts: Increased by 100%
US Steel (X): Increased by 78.9%
Discover Financial (DFS) Puts: Increased by 20%
Dr Pepper Snapple (DPS): Increased by 17%


Reduced Positions
Wendys Arbys (WEN): Reduced by 47.4%
Mckesson (MCK): Reduced by 5.23%
Teva Pharma (TEVA): Reduced by 2.3%


Removed Positions (Sold out completely):
Materials (XLB) Puts
PNC Financial (PNC) Puts
Wells Fargo (WFC) Puts
Covidien (COV)
Cephalon (CEPH)
Pfizer (PFE)
Las Vegas Sands (LVS) Calls
Golar LNG (GLNG)
Onyx Pharma (ONXX)
Myriad Genetics (MYGN)
Gilead Sciences (GILD)
Wright Medical (WMGI)
Amag Pharma (AMAG)

The rest of their sold positions were each less than 0.5% of their reported assets: Stryker (SYK), Starent Networks (STAR), Activision Blizzard (ATVI), Momenta (MNTA), Petrohawk (HK), Beazer Homes (BZH), Aeropostale (ARO), Hovnanian (HOV), Sanderson Farms (SAFM), BRF Brasil Foods (PDA), Pride (PDE), Impax Lab (IPXL), Weatherford International (WFT), EHouse (EJ), CKE Restaurants (CKR), & Ship Finc (SFL)


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

1. SPDR S&P 500 (SPY) Puts: 15.79%
   
2. iShares S&P 100 (OEF) Puts: 14.4%
3. iShares Emerging Markets (EEM) Puts: 12.23%
   
4. CF Industries (CF) Calls: 8.21%
   
5. US Steel (X) Calls: 5.77%
   
6. Dr Pepper Snapple (DPS): 4.58%
   
7. Onyx Pharma (ONXX) Calls: 2.64%
   
8. US Steel (X): 2.64%
   
9. Dr Pepper Snapple (DPS) Calls: 2.55%
   
10. Barrick Gold (ABX): 1.85%
    
11. Perfect World (PWRD): 1.62%
    
12. Mckesson (MCK): 1.46%
    
13. AK Steel (AKS): 1.29%
    
14. Wendys Arbys (WEN): 1.16%
    
15. CVS Caremark (CVS): 1.15%
    

It appears that John Burbank's hedge fund Passport Capital utilizes exchange traded funds (ETFs) and options for hedging purposes as their top three holdings are all put positions on indexes. This falls directly in line with Goldman Sachs' recent research where they found hedge funds mainly use ETFs as a hedging tool. Additionally, you'll note that they use options to express a lot of their position views as well. Their largest actual equity position is in Dr. Pepper Snapple (DPS) and they additionally own calls on the name as well.

Assets reported on the 13F filing were $2.2 billion this quarter compared to $1.2 billion last quarter, over a 70% increase in exposure which is nothing to sneeze at. (Remember that these filings are not representative of the hedge fund's entire base of AUM). So, the vast majority of their portfolio activity was via completely selling out of some names and starting brand new positions in equities and options.

Passport is definitely focused on the global growth and natural resources themes with positions in steel companies, agriculture plays, and gold plays. Keep in mind that Passport also has many commodities positions that won't show up on the 13F filing, including a large physical gold position. (They've previously outlined their rationale for owning physical gold). Overall, we track Passport to see which sectors they are flocking to and what kind of exposure they have.

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, and Thomas Steyer's Farallon Capital. Check back daily for our new updates.

Goldman Sachs Conviction Buy & Sell Updates

Late last week, Goldman Sachs made some changes to their coveted Conviction Buy and Sell lists. They were very active in the steel sector, adding Steel Dynamics (STLD) to the conviction buy list and then putting US Steel (X) on their conviction sell list. Lastly, Goldman also removed Alcatel Lucent (ALU) from the conviction buy list, but still rates the company as a normal 'buy.'

Goldman has been very busy the last few weeks adding and subtracting names from their lists as the volatility picks up and the market landscape changes. We have detailed more of Goldman's moves here and more additions to their conviction buy list here.