The 2015 Sohn Investment Conference just took place in New York where hedge fund managers pitched their latest stock ideas to benefit the Sohn Foundation and pediatric cancer research.
Sohn Conference New York: 2015 Notes
- David Einhorn (Greenlight Capital): Short Pioneer Natural Resources (PXD). Compared it to St. Joe (JOE). Energy companies with negative development economics, negative on frackers in general. US production boom: Bakken, Eagle Ford, Permian. Buy the land, set up drills (expensive). Huge cumulative CAPEX, more than oil brought out. None of them generated cash flow, even when oil was high. $20B cash burn by group last year. Depletion is the "D" in EBITDAX. It's not really growth, because once you get the oil out it's gone. CAPEX has been 75% of revenue over last 5 years. Not natural gas frackers, they are fine. PXD: Well located, well run, Permian assets mainly. #2 pure play behind EOG. $26B market cap, EV $27B, may earn $1.50 per share next year. Spent $19B in CAPEX last few years - funded partially by capital raises. Proved reserves have been flat or down despite huge CAPEX. $36 rev/bbl, if you take out the $28 CAPEX, they lose $12/bbl. Negative NPV if you include time cost of money. If you had used $68 price of oil, reserves are only worth $9/share. He says if you cut their costs, it's $22/share. Value creation per $ spent is only 0.74. You can view Einhorn's slideshow presentation on PXD here. For even more from him, we recently posted up Greenlight Capital's Q1 letter as well.
- Barry Rosenstein (JANA Partners): Walgreens (WBA) and Qualcomm (QCOM). WBA an example where activism worked. 12 layers of management between CEO and store managers vs. 5 at CVS. Turnaround began with deal to buy Alliance Boots. Then they got involved (cost cutting, tax inversion talks, but they didn't actually do the latter). QCOM: Bloated costs, board with no owner orientation, family in positions, issuing a lot of stock. He tries to downplay the breakup idea (tech analysts say it can't be done). He says they need to return capital; doing a $15B repurchase, which is 13% of market cap (says they have 30 per share in cash). He wants to cut/change management compensation, reduce board size, evaluate corporate structure (break off the chipset business). Smartphone market is large and growing, IP model approved by China (although many OEMs still not paying royalties). For more from this manager, we recently posted Rosenstein's appearance on Wall Street Week.
- Keith Meister (Corvex Capital): Long Yum Brands (YUM). 1/3 in China, outside of that it's almost all franchise, inside it's owned. KFC, Taco Bell, Pizza Hut restaurants. Says China problems are being fixed. Top 5 holder of the stock. Says franchise mix leads to more leverage, better multiples. Simply put it's a bet on recovery in China (previous food issues at KFC). SSS getting better, but still negative. 51% of those surveyed in China said KFC was their favorite place to eat. Today 0.97 of $2.09 in earnings is China. If they go back to '12 rev/unit, it would be over $3 EPS from China alone in 2017, that would be about $6 EPS in 207, with stock at $60, paying only about 10x now. China business is very different - should spin it off. Have it enter a franchise business deal with the main "FranchiseCo." Says it unlocks $16/share of value. ChinaCo becomes "more Chinese" which helps in China. Valuation: 50-90% upside. $130-16 PT. Franchise co worth $88 in 2017, ChinaCo, $41-72 depending on how well it recovers from the food scandals. Dan Loeb's Third Point also laid out the YUM investment thesis its Q1 letter.
- Larry Robbins (Glenview Capital): Long Abbvie (ABBV) & Brookdale Senior Living (BKD). Money is cheap now. BB junk bond 10-12 year debt for less than 4% after tax. Own over-capitalized businesses and have them borrow money. ABBV: Old school pharma to new. Spending 16% of revenue on R&D. Structural acquirers and owner-activists pressure them on both sides. Why ABBV? 1. Growth through 2020, 2. Numerous areas of upside optionality, 3. Excess cash they could use for acquisitions. Says Humira grows through 2017, acknowledges the debate about patents expiration. Biosimilars are not exact copies. 6 key upside optionalities: Pipeline is underappreciated, making biosimilars is 1000x harder than generics (state by state regulation, difficult process, etc), Humira patent protection possible, could change formulation of Humira to extend economics, look at Evercore ISI work, paying 30% repatriation tax plus dividend taxes in US "don't give it to us, keep it and do something productive with it", says they could buy 30% of shares with leverage, adding $15 to share price, also could be more M&A "they could be the pill swallowed, or be the Pacman." Almost a double from here. BKD: Bet on the aging population. By far the largest and can sell ancillary services in same facilities. Also real estate options. You can also read Robbins' thesis on other stocks in Glenview's recent letter.
- Lee Cooperman (Omega Advisors): 8 stock picks (ACT, AER, C, DOW, GOOGL, GM, PCLN, GULTU). Generally bullish, 7-9% return on market, appropriately valued, negative view of fixed income. 35% of stocks in SPX yield more than bonds. Inflation is not bad for stocks - it raises their nominal revenue. Bear markets occur for one of four reasons: oncoming recession, overvaluation, geopolitical event occurs, hostile Fed. Nothing today indicates oncoming recession. He says he doesn't understand the consternation about the Fed hiking rates. On average, the stock market raised 30 months after the first hike, the shortest was 10 months. On average, a year later, market is up 9.5% the year after a rate hike.
- Mala Gaonkar (Lone Pine Capital): Long Microsoft (MSFT). Value hidden in legacy tech. 1.5B installed office users globally, only 250M actually pay for it. New stronger management (Satya Nadella). Built the cloud platform Azure. Works with 3rd party software, no more "saving Windows first." Solid mid-to-high single digit revenue growth. Most controversial aspect of this pitch. Fear is consumer Windows will die, but it is only 5% of revenue. Enterprise software is 17%, and more more sticky. Mainframes still a $5bn annual business and they are using MSFT software. "Price elastic market" very stick in ADBE, Autodesk as well. Cloud is 10% now, growing faster than the rest of the business. Office 365 more than doubles users. Reduces piracy. Operating cost cuts. Been no restructuring since dawn of PC age. Spend $1bn marketing consumer Windows. Cloud shift cuts costs - no commissions to pay resellers. Capital return, has way too much cash. Raised share buybacks, but should be much higher. Could earn 3.89 next year, fro 3.04 this year.
- Jeff Gundlach (DoubleLine Capital): Puerto Rican Muni Bonds. They have priced in a lot of problems. Triple tax free yield of 11% for 8s2030 at about 78 of face. Says they may go lower first. "You're supposed to buy them at 78." Also talked about negative interest rates and said to borrow infinite amounts at that level. Fed talk is just noise. 2 year Treasury bottomed 4 years ago - you can see it on the chart. Same with 10 year - 2012 was the low. Very bearish on junk bonds, says no one alive in the room has lived through a secular rise in high yield bond yields. Junk bonds do NOT do well when the Fed starts hiking rates. A couple of years of runway. For more from Gundlach, watch his appearance on Wall Street Week.
- David Tepper (Appaloosa Management): Thoughts on markets. Also said junk bonds are not cheap. "Something has to give." "Either stocks have to go up a hell of a lot, or treasuries will go down a hell of a lot." Could 22.78 P/E vs average now 17x on stocks. Implies 30% move if treasuries don't move. Monetization of debt in China. "Don't fight the Fed; don't fight 4 feds." (US, ECB, Japan, China). Implies Hong Kong stocks are cheap, 10x P/E. "Maybe the big banks aren't that bad if you look at them." Don't short options that lengthen (they become more valuable). This is why it's risky to short China. What happens when China does first cut? Stocks start going up. Reinflation of their economy. Says terrible environment for bonds. "This monetary policy has worked for 5 years." Now all 4 central banks are going one way. "Good luck" with shorting.
- Bill Ackman (Pershing Square): Long Jarden (JAH), Platform Specialty Products (PAH), and Valeant Pharmaceuticals (VRX). JAH: 45x return in 14 years, constantly undervalued over the years. Always valued on next year's EPS. PAH: A shell they funded. NOMHF: Nomad, another shell/SPAC. Flat at cash value for a year, then bought Iglo and the stock went up 80%. Why is the market mis-valuing these companies? He calls them "Platform companies" not just on multiples based on comaprables. Others as examples: Danaher, Liberty Media, AB InBev, Transdigm. Key is to find the right management teams that do good acquisitions. VRX: Paid $196/share, 20m shares, 20% of his capital. Tax-advantaged structure. Units have autonomy. Drawback is there is a lot of competition in acquisitions. Gives the example of the Bausch & Lomb acquisition. Value of business is correlated with ability to buy companies and integrate them, take synergies. PT $332, from $223. Based on organic growth and small deals. Compares it to a Berkshire Hathaway in the making. For more from Ackman, check out Pershing Square's presentation from its European investor meeting.
- Ian Bremmer (Eurasia Group): Geopolitical analyst. Oil production in the US has reduced our willingness to engage in fights, especially in the Middle East. "Weaponization of Finance" to use finance to influence behavior. US may have realized that they spent so much in Iraq and the country still fell apart. "We will see $100 oil no time soon." "Likely to see an Iranian deal, which will be another 1.2m barrels a day." Putin is in a corner. More Russian cyber attacks against the US. China - the rise is important. They are not confronting the US militarily. Economically China does want to challenge US hegemony. "Best money the Americans ever spent was the 4% of GDP on the Marshall Plan. It paid off for decades." The only country in the world with a cohesive global strategy is not us, it is China. China does not want to occupy countries. Some countries will be hedging, and ally with China economically. Including Germany, South Korea, etc. For the next 5-10 years, China is more stable than you think. They will be the world's largest economy, but they will be totalitarian still, and will have a lot of world influence.
- Jay Walker (Founder of Priceline): Black Swan events more likely than ever. A few people with a few million dollars could wipe out billions in market cap. "Bioweapons plus drones plus social media." Risk of economic collapse.
- Sohn Investment Contest Winner (Angelo Martorell, Wharton Student): Long IAC Interactive (IACI). Owns March.com/Cupid/Tinder, Ask.com, About.com, Vimeo, HomeAdvisor. $5.9bn EV. Uses sum of the parts and says market not giving value for Tinder, because there is no revenue, profits. IACI has all the best dating properties. "Facebook of dating." If Tinder was private it would be more than the market cap of entire IACI. Says 1/4 of millenials won't marry. "Network of effect." Tinder premium will give unlimited right swipes, 2.5% of MAUs will pay for it. $10/month. Online dating makes it very easy to have an affair. Tinder will crush Ashley Madison. You can have dates in places you travel. Cross-selling - some can go from Match to Tinder and vice versa. Users spend 77 minutes/day on Tinder versus 40 minutes on Facebook. Also it's fully integrated with FB. Valuation? Says you get Tinder for free with current stock price.
Next Wave Sohn New York 2015
- Snehal Amin (Windacre Partnership): Long PowerFinance
- Didric Cederholm (Lion Point): Ukrainian sovereign bond play (steepeners) & Ally Financial (ALLY)
- Alex Denner (Sarissa Capital): Long Ariad Pharmaceuticals (ARIA)
- Daniel Dreyfus (3G Capital): Long Phillips 66 (PSX)
- David Zorub (BlueMountain): Long Sunrise Communications
Monday, May 4, 2015
Sohn Investment Conference Notes 2015: Einhorn, Tepper, Ackman, Robbins & More
Monday, April 20, 2015
JANA Partners Goes Activist on Qualcomm
Barry Rosenstein's hedge fund firm JANA Partners has gone activist on Qualcomm (QCOM). They're looking for the company to spin off its chip unit from the patent licensing division and for the company to accelerate share repurchases.
Rosenstein was recently interviewed by David Faber at CNBC and said that, "What we think they ought to do is a transparent review of the client businesses, and determine whether or not it makes sense to do either a partial or full split. So we are not definitely saying that they should split it up."
JANA now owns around $2 billion worth of Qualcomm shares
Embedded below is the video of Rosenstein's interview with CNBC:
For more from this hedge fund, we've highlighted other recent portfolio activity from JANA.
Friday, November 1, 2013
Sohn London Conference Notes 2013: Hohn, Armitage, Tangen, Gaonkar & More
The 2013 Sohn London Conference just took place and MarketFolly has notes below. The event featured hedge fund managers presenting their latest investment ideas benefiting paediatric cancer and childhood disease research.
Sohn London Conference Notes 2013
Chris Hohn – The Children’s Investment Fund
Following
on from last week’s disclosure that TCI had bought a large part of the
UK’s privatised post office, Royal Mail, in the secondary market, Hohn
pitched two more privatisation ideas. He said that governments are the
worst manager and that there are huge efficiency savings to be made in
the aftermath of a privatisation.
Idea 1: Aurizon (Australia)
- Aurizon, formerly QR National, is a publically listed rail company in
Australia. According to Hohn, Aurizon’s CEO, Lance Hockridge is a
winner. Recent returns have been about 10% per year with 6% volume
growth per year. The cost cutting potential is huge. Large scale
redundancies are already underway. Aurizon was privatised with no
debt, which Hohn said was ridiculous. Hohn implied that he has been
pressing the company to re-lever and that he had had some success.
Aurizon can have a double digit dividend within a couple of years. The
company is a play on the Austrailian commodities market and the
Chinese and Indian economic growth.
Idea 2: Long EADS
- Hohn noted that the company has had a bad record with investors – no
one has made money for 30 years. Sometimes it pays to study the
history of a company. He believes that the EADS will double and then
triple profits in the coming years. Airbus is now competing well with
Boeing. There is no chance of new competitors breaking into the market
as safety concerns keep new entrants out. Pricing is increasing. Costs
are falling as suppliers are squeezed for the first time. EADS is
committed to 3.75bn euro of stock buybacks over the next 18 months. EADS
10x multiple can close the gap on Boeing’s 15 x multiple.
John Armitage - Egerton Capital
Idea 1: Long Nordea (Sweden)
- Armitage said that Nordea is a simple, low risk stockpick which he
referred to as a ‘teddy bear stock’ because it allowed him to sleep
well at night. Nordea is the leading Scandinavian bank – being #1 or #2
in most Nordic countries. Nordea performed well in the financial crisis.
The bank does not look for dynamic growth in earnings and that is its
strength. Boring is good in the banking sector. Nordea will grow
moderately in the future. Its market has oligopolistic qualities. Loan
loss rates will drop for a prolonged period of time. Nordic banks are
much better capitalised than their European or US counterparts. The
dividend is likely rise over time.
Idea 2: Long Ocwen (OCN)
- Armitage said that whilst his first pick had been simple and
straightforward, Ocwen was a far more complex and complicated situation.
Ocwen is a mortgage servicing business which sits at the core of the
difficulties that the US housing sector has faced since the financial
crisis. In the US, mortgages are packaged and turned into bonds. Many of
the loans made over the last decade or so are delinquent and have needed
to be modified or foreclosed. Big banks have been overwhelmed and are
often too unfocused to carry out the mortgage servicing task that Ocwen
specialises in. Ocwen has a good technology platform which he referred
to as a dialogue engine. It profiles a borrower’s ability to pay back
mortgages. Making the appropriate loan modifications is a key driver of
success or failure. Ocwen’s founders own 22% of the business. There will
be growth in income from the existing portfolio of loans. They are
producing $1.1bn of FCF. Some of that money will be used for stock
buybacks which have recently been agreed. Ocwen are well placed to make
acquisitions. Armitage believes that Ocwen will be able to deploy their
existing expertise and technology to diversify into new markets such as
car loans and subprime. Note that Steve Eisman also pitched OCN at the Invest For Kids Chicago conference this week as well.
Nicolai Tangen – AKO Capital
Idea: Long Experian
- Experian is the largest credit bureau in the world. It has a strong
balance sheet and strong organic growth at 7%. They have lifted margin
growth by 700 basis points in the last 6 years. Tangen believes margins
will continue to increase in the future. Experian is selling credit data
in more and more countries and the great thing about credit data is
that you can often sell the same data several times. Demand for credit
data has risen since the financial crisis as regulators have forced
banks and other financial institutions to become more discerning about
who they lend to. The rise of the internet and E-commerce is also
creating demand for credit data. Experian has a significant moat as
there are no other global players, just regional competitors. There are
three players in the US but only 2 players in other countries. Experian
is a safe play in as much as it has counter-cyclical qualities. Its
gearing is falling rapidly as the cash keeps coming in.
Mala Gaonkar, Lone Pine Capital
Mala Gaonkar is a co-portfolio manager at Lone Pine, a role she has held since 1998.
Idea: Long Qualcomm (NAS: QCOM)
- 3G & 4G wireless data and voice standards create two thirds of
the business. The other one-third is from chips. Expect more unit growth
in the smart phone market than most people assume. It will double in
the next three years. Generally speaking, we will replace our
smartphones more quickly than many analysts assume. The active broadband
market is not yet mature. Royalty rates are resilient. QCOM has far
more patents than their competitors. They will be able to diversify into
new mobile devices in the future.
Julian Sinclair – Talisman Global Asset Management
Idea 1: Long Tata Motors - Sinclair valued Jaguar and Land Rover at around $17bn, the same as Tata’s market cap. Jaguar and Land Rover make up about 80% of Tata’s net worth so you get the other 20% for free. Jaguar and Land Rover are quintessential British brands. They are now competing well with the big German luxury brands in terms of quality and reliability. Tata is producing more reliable cars than it used to and that has been backed up by recent JD Power surveys. Tata is trading at 6x earnings. Sales are expected to expand by 20% during the next five years. There is potential for the share price to double Tata can even attain the double digit margins that Porsche has achieved. Tata is growing top line and bottom line simultaneously. Tata is also has potential as an emerging market recovery play.
Idea 2: Shared Appreciation Mortgages (SAMs) SAMs are a form of mortgage backed security created in the late 1990s by banks like Barclays and Royal Bank of Scotland in the UK. Sinclair sees SAMs as the last great post-crisis credit trade. If house prices go up by 2-3% they will pay out 11% and if prices go up by more they will pay out even more. SAMs have a defensive quality too. If house prices were to fall by 5% SAMs would still pay out a similar return to Gilts (UK government bonds).
Eashwar Krishnan – Tybourne Capital Management
Eashwar Krisnan spent 12 years as a Managing Director and Senior Analyst at Lone Pine. In 2007, he moved to Hong Kong to set up and manage Lone Pine’s operation in Asia. He set up his own fund Tybourne Capital in 2012. Tybourne focuses mostly on equities in the consumer, financial and TMT sectors in Asia.
Advertising in India is 20x cheaper than in the US. Over time the gap will narrow. TV dominates advertising spending in Asia. There is a favourable environment for investing in commercial TV businesses in Asia at the moment. Indonesians watch an average of 5 hours Television per day. He likes companies run by owner operators with skin in the game. Advertising growth rates can grow at double digits for many years.
Idea 1. Long Media Nusantara Citra MNC (Indonesia). Nusantara has 42% of audience share; it’s the industry price leader.
Idea 2. Long Surya Citra Media (Indonesia). Surya has 22% of primetime TV. It develops and owns content, which produces high returns on capital.
Idea 3. Long Zee Entertainment Enterprises (India) - Zee is the #2 provider after Star owned by Fox (Tybourne hold Fox stock too). Zee will be a beneficiary of digitalisation. Two-thirds of TV viewers in India receive an analogue signal at present.
Idea 4. Sun Investments (India). Sun is the #1 player in Southern India.
Ross Turner – Pelham Capital
Ross Turner was an equity partner with Lansdowne Partners and set up Pelham Capital in 2007.
Idea: Long DCC Plc - DCC was listed in Ireland but has transferred its main listing in the UK. It is a distributions services company with a large energy division – oil and LPG. This part of the business is straightforward involving the pickup of the product from terminals and distribution to the customer. In oil distribution in the UK, they are the only distributor with a national network giving them a dominant market position. DCC have developed their market position through bolt on acquisitions. The LPG market is more consolidated but they have greater pricing power there. Europe only makes up 15% of DCC’s income, but they are beginning to make in-roads via the same strategy of bolt on acquisitions. DCC is a stable business with a strong competitive position. Turner believes the valuation is still attractive as no one takes into account the continued impact of the acquisitions. He sees 15% earnings growth per year going forward.
Mas Siddiqui – Naya Management
Before founding Naya in July 2012, Mas Siddiqui was a partner at TCI Fund where he was responsible for global investments in credit and equities. Previously he was Managing Director at Canyon Partners.
Idea 1: Long Salvatore Ferragamo (Italy) - Salvatore Ferragamo creates, develops and produces clothes and shoes for men and women and fragrances and eyewear. Despite being based in Italy, only 25% of its sales are in Europe. Sales in emerging markets are larger and this should continue as the EM consumer becomes better off. They are growing top line growth and they have scope to increase their prices. Salvatore is an ‘undermanaged company’ with plenty of room for improvement. Labour costs are 50% higher than its peers and they could reduce them. He did not say whether he had been pressuring the company for change but it seems quite possible given his background at TCI and his take on the company. The company has a clean balance sheet and is considering a large return of cash via a special dividend, which Siddiqui indicated is being sought by family owners who hold a 60% of the stock.
Idea 2. Short Essilor International - Essilor is an ophthalmic optics company based in France. It is a world leader in the manufacturing of lenses for glasses. Using FCF and organic growth, Siddiqui believes the company is wildly overvalued. Naya’s research shows that brands do not have much impact in the lenses market. New digital production techniques will cut costs and lead to deflation in the sector. Competition from Zeiss and Hoya will intensify.
Bruno Rocha – Dynamo Capital
Rocha started by using data from Dimson, Marsh and Staunton’s data set (see the Credit Swiss Yearbooks) to argue that there is no relationship between GDP and equity returns. In fact he said that the data suggested that slow growing countries produce better equity returns that fast growing counties. Rocha said that what goes for countries is true too for business sectors where growth in earnings is different from growth in earnings per share. Slow growing countries and companies can create better returns for investors than fast growing countries and companies.
Idea: Long Anheuser Busch Inbev (BUD) - In the beer business, Rocha showed that contrary to popular wisdom, Inbev was more profitable in wine drinking France than in beer drinking Germany. Rocha noted that there are only four big beer companies left in the western world. Inbev has economies of scale allowing it to benefit from the mature, consolidated markets.
Andrew Weiss – Weiss Asset Management
Intriguingly,
when Andrew Weiss was introduced it was suggested that his presentation
at Sohn London was the first time he had ever spoken to a large
investment audience as he normally prefers to address academic
gatherings. Weiss then pitched one of his own funds as his investment idea.
Idea: Long Weiss Korea (LON: WKOF)
- Weiss Korea invests in the listed preferred shares of companies
incorporated in South Korea. Andrew Weiss said that there are four
things going for the investor in South Korea. Firstly stocks are cheap.
Secondly, there is potential for future economic growth as the
demographics are good; the workforce is well educated; the road, rail
and internet infrastructure is sound; there is low debt to GDP and good
natural resources. Thirdly there are catalysts to change including
changes to the regulatory environment in favour of shareholders.
Fourthly, there are exceptional access products like preferred shares.
In Korea preferred shares are similar to ordinary shares but without the
voting rights. Preferred stock tends to trade at a large discount to
ordinary shares in Korea.
For more hedge fund conference coverage, check out notes from other recent events:
- Invest For Kids Chicago notes: Lasry, Eisman, Cooperman & more
- Great Investors Best Ideas notes: Price, Akre, Pickens & more
- Excellence in Investing San Francisco notes: Burbank, Billick, McGuire & more
- Value Investing Congress notes: Ubben, Smith, Yacktman, Roepers & more
Tuesday, October 15, 2013
Lee Cooperman on 3 Stages of a Bull Market: Interview
Omega Advisors' Lee Cooperman spoke with CNBC this morning. He thinks markets are fairly valued and he thinks a 15-16x multiple is about right. He doesn't think it's a bargain anymore.
Cooperman on the 3 Stages of a Bull Market
Phase 1: "Wow we survived." As the market bottoms and pessimism slowly starts to fade.
Phase 2: "Reflecting that which is perspective." 4-5 years of rising economic activity.
Phase 3: "Exuberance phase, the silliness phase where people forget about the mistakes." He doesn't think we're quite there yet, but there are pockets of silly valuation like Potbelly (PBPB) and Telsa (TSLA).
His Stock Picks Now
"What we're looking for is to find more growth at a lower valuation." He said he's looking at 'red chips' instead of 'blue chip' stocks and specifically touched on Sprint Nextel (S). He also likes Motorola Solutions (MSI), Swatch Group (UHR), Sandridge Energy (SD), and Qualcomm (QCOM).
Embedded below are the videos of Cooperman's interview:
Video 1 on bull market stages
Video 2 on Sprint (S)
Video 3
Video 4 on Qualcomm (QCOM)
For more hedge fund thoughts, we also posted up David Tepper's interview from today.
Tuesday, September 17, 2013
Carl Chen & Tom Lu's Presentation on China Wireless Technologies & MediaTek: Value Investing Congress
We're posting up notes from the 2013 Value Investing Congress in New York. Next up are Carl Chen and Tom Lu of Temple Honor Asia (Taiwan). Their presentation was entitled "The World According to GARP Taiwan: Growth at a Reasonable Price." They pitched 2 ideas.
Carl Chen & Tom Lu's Value Investing Congress Presentation
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Be sure to check out the other presentations from the New York VIC here.
Wednesday, July 17, 2013
Delivering Alpha Best Ideas Panel: Mark Kingdon, Chris Hohn, Jim Chanos, Lee Cooperman
The Delivering Alpha Conference today featured a 'best ideas' panel that featured some hedge fund titans including Jim Chanos (Kynikos Associates), Chris Hohn (Children's Investment Fund), Mark Kingdon (Kingdon Capital), and Lee Cooperman (Omega Advisors). Here's a brief summary of their picks:
Mark Kingdon, Kingdon Capital
Long Japanese automakers: Long Toyota (TM), Long Fuji Heavy (7270.TO) Long Mazda (7261.JP)
He says these companies obviously benefit from Abenomics in Japan. Toyota he likes as an innovative leader with focus on hybrid technology. Fuji Heavy (Subaru) is moving from low margin to high margin products. He says Mazda might have the most upside of the names.
Chris Cooper-Hohn, Children's Investment Fund
Long Porsche (PAH3.DE) - It's basically a holding company owning 150 million shares of Volkswagen. If the two merge eventually, the stock doubles. We've highlighted Hohn's thesis on Porsche before.
Long EADS (EAD.FR) - A liquid large cap with a new focus on making money. Could double over 2 years.
Long Aurizon Holdings (AZJ.AU)- Australian railroad, a total turnaround story as the company has transitioned from government-owned to a company more aimed at profit. He thinks it could double over next 3 years
Lee Cooperman, Omega Advisors
Long Qualcomm (QCOM) - points to a large amount of cash on the balance sheet and a lot of pessimism on the name.
Long Sandridge (SD) - could be a double.
Long Express Scripts (ESRX) - company is growing and buying back stock. We've also posted up another Cooperman interview recently where he talked about other stocks he likes.
Jim Chanos, Kynikos Associates
Short
Caterpillar (CAT) - a bet on China's property development slowdown and
he says the company is just exposed to the wrong products at the wrong
part of the cycle. Here's Chanos' pitch on CAT here.
Short
Hewlett Packard (HPQ) - he also reiterated his call against the PC,
saying it's dying a slow death. This has been a longstanding short and we've posted up Chanos' thesis on HPQ as he called it a value trap last year.
For more from the Delivering Alpha Conference, head to:
- John Paulson on gold, real estate & merger arbitrage
- Nelson Peltz on PepsiCo & Mondelez
- Larry Robbins & Jacob Gottlieb on healthcare plays
- Carl Icahn on activism
Wednesday, June 19, 2013
Lee Cooperman Says Market Fairly Valued, Talks Stocks He's Been Buying (Interview)
Lee Cooperman of hedge fund firm Omega Advisors made an appearance on CNBC today to talk about what he's been buying and what his portfolio looks like.
Cooperman thinks the market is fairly valued right now and that the "Fed will have to remain friendly." He thinks the rest of the year will be determined by which valuation camp wins out.
He thinks a radical change in Fed policy or a recession would cause a drop in the market, but he's not terribly worried about either of those scenarios.
At the same time, he points out how many investors have de-risked drastically and are underinvested. He says, "what the wise man does in the beginning, the fool does in the end."
Stocks Cooperman Likes
Cooperman mentioned Thomas H Lee Credit (TCRD), a mezzanine lender that yields over 9% and he thinks the dividend goes higher.
We recently posted up excerpts from Omega's Q1 letter if you missed it where he talks about some of his other stock picks.
He likes to buy MLP's when they're trading below net asset value and especially if he can get a decent yield. He thinks Linn Energy (LINE) has assets worth "in the area of 40."
Cooperman has also sued Tetragon Financial and he believes management should be barred from the industry due to 6 years of bad governance in his opinion and possibly unlawful acts. He still thinks the stock is undervalued (he owns 14 million shares of it and he started buying in 2009 back during the financial crisis). In sum, he feels it's solely a management problem.
The Omega Advisors man also talked about Sprint (S), saying he bought it at $2 and then again at $7 and likes that there were 2 interested parties in the company (Softbank and Dish Network), but it looks like. He said he'll tender 80% of his position, but if it trades at the right price, he'll get back into that chunk of his position.
Cooperman has owned Dish (DISH) for six years and he said it's a mature business and he thinks it'd be worth more with Sprint than without it. He likes management there.
The hedge fund manager noted that he's "very bottom-up" and some things Omega has been buying recently include Express Scripts (ESRX), Halliburton (HAL), Transocean (RIG), Qualcomm (QCOM), Motorola Solutions (MSI). Sandridge (SD), and Chimera (CIM).
Embedded below is the video of Cooperman's 18-minute interview:
For more on this manager, check out Lee Cooperman's thesis on Covidien (COV) and Sirius XM Radio (SIRI).
Wednesday, March 6, 2013
Lee Cooperman Says Market is Fairly Valued, Talks Some of His Positions
Lee Cooperman, founder of hedge fund Omega Advisors sat down with CNBC this morning to share his thoughts on the market.
Is the Market Fairly Valued?
"Bernanke's told us everyday since 2009 that he wants higher inflation, more economic growth, lower unemployment, he wants to create high stock prices to create wealth, to create consumption ... you have to ask yourself as a money manager: has he gotten the market to a zone of overvaluation?"
Cooperman thinks the market is now fairly valued and he thinks every bull market ends at overvaluation. He concluded that, "So the market's still ok, but it's not a bargain anymore."
On Stocks With Yield
He says he has around 90 holdings and touched on how investors are looking for yield, so he highlighted some of his positions that fit this mold:
- KKR Financial (KFN): 7.4% yield, growing 5% a year
- Chimera (CIM): accounting issues that he thinks will be resolved this year
- Atlas Pipeline (APL): 7% yield, growing
- Linn Energy (LINE): good yield and growing
- Transcoean (RIG): 4.2% yield and notes Carl Icahn's presence in the name as well
He made an interesting comment on yield as well, saying: "Almost half the S&P 500 right now yield more than bonds."
Growth Stocks He Likes
Cooperman also rattled off some of the stocks he likes that fit under the growth category: Express Scripts (ESRX), Google (GOOG), and Qualcomm (QCOM).
On Short Selling
Cooperman was asked about Herbalife (HLF) and short selling in general. He does not have a position in the company but made these comments about shorting: "It's not a wise thing to publicize your short position, and I would not publicize being short 20% of a company."
He also went on to say: "I have no problem with short selling, I think short selling adds some discipline to the market.
Embedded below are the videos of Cooperman's interview:
Video 1
Video 2
Video 3
We've published the rest of Omega's portfolio in the new issue of our Hedge Fund Wisdom newsletter.
Wednesday, July 18, 2012
Delivering Alpha Best Ideas Panel: Cooperman, Chanos, Feldstein & More
CNBC and Institutional Investor's Delivering Alpha Conference is going on today and we wanted to aggregate the highlights. The "best ideas" panel included Omega Advisors' Leon Cooperman, Kynikos Associates' Jim Chanos, BlueMountain Capital's Andrew Feldstein, Queen Anne's Gate Capital's Kathleen Kelley, and BlackRock's Robert Kapito.
From the conference, we've also posted up the global opportunities panel as well as the chasing yield panel.
Leon Cooperman (Omega Advisors): He pitched going long US stocks and called them the best house in the financial neighborhood, a tune he has been singing for well over a year. However, he did make an excellent point that the maximum "pain trade" is going higher as tons of people are sitting on large sums of cash earning nothing.
As for specific names he likes: Capital One (COF), Express Scripts (ESRX), Halliburton (HAL), Gannett (GCI), Kinder Morgan (KMI), MetLife (MET), Qualcomm (QCOM), Watson Pharma (WPI) and Western Union (WU). He also likes AIA Group (1299.HK) traded in Hong Kong.
The Omega Advisors founder also continued to bash bonds, saying "buying US bonds right now is like walking in front of a steam roller and picking up dimes. It's just not a good policy."
As far as the election goes, he thinks that if Romney wins, the market will spike by 150 points, but if Obama wins, it drifts lower. For more from the Omega man, we just posted up Leon Cooperman on 14 attributes that make a good portfolio manager.
Jim Chanos (Kynikos Associates): The noted short-seller was out again negative on tech companies. He mainly pitched the bear case on Hewlett Packard (HPQ), calling it a value trap. We just recently highlighted Chanos' presentation on global value traps where HPQ was highlighted among other names.
He says that "when you lose the paradigm shift, you spend an awful lot of money defending what you have." He compared HPQ to Eastman Kodak as the company is in declining businesses.
Chanos also touched on how instead of giving cash back to shareholders,
companies will make value-destroying acquisitions. He cited HPQ's buy
of Autonomy last year. The Kynikos man argues that HPQ has overspent on acquisitions and they're hiding research & development expenditures through them.
He's also negative on Dell (DELL) saying that the company finances its subprime customers (financing their revenue growth). For more on Chanos we just recently posted up his thoughts on the psychology of short selling.
Andrew Feldstein (BlueMountain Capital): He likes less liquid credit, angling for 8-12% returns over a 3-7 year time horizon. He says you have to be patient as this opportunity is available due to everyone's obsession with liquidity (i.e. don't put your money here if you don't have an appropriate time horizon). He mentioned bonds such as Prospect Medical if you can buy and hold. Feldstein also mentioned he's less excited about legacy distressed assets in Europe.
Kathleen Kelley (Queen Anne's Gate Capital): Formerly of Tudor and Kingdon, she pitched two ideas: short the British pound (against long US dollar) as well as short platinum, targeting 20-30% moves to the downside. She wants to be long the USD against the sterling because the USD can be a commodity currency.
She also likes shorting platinum as there's an oversupply due to slowing Euro auto sales. At the Ira Sohn conference two months ago, Ospraie's Dwight Anderson pitched going short platinum as well (in addition to going long palladium).
Robert Kapito (BlackRock): He's going for the "income hog" approach by focusing on equity dividend funds, dividend stocks like AT&T (T), Verizon (VZ), Merck (MRK), Johnson & Johnson (JNJ), high yield bond funds (or individual issues from Sprint, Ally) and municipal bonds such as the San Francisco Airport, New Jersey Tolls. He thinks that default worry surrounding munis is "overrated."
Sources: Notes sent by readers, II's blog, @iimag, @ldelevingne, @footnoted, @aarontask
For more from Delivering Alpha, head to the global opportunities panel (featuring Richard Perry) as well as the hunt for yield panel (featuring Marc Lasry)
Thursday, May 24, 2012
Goldman Sachs VIP List: Most Important Stocks To Hedge Funds: Q1 2012
Goldman Sachs is out with its Q1 2012 Hedge Fund Trend Monitor report. In it, they reveal the latest VIP list of 50 stocks that are most important to hedge funds. These are the positions that appear most frequently in the top 10 holdings of fundamental focused hedge funds.
This quarter, they've also released a new list of very important short positions to hedge funds which we've posted up as well.
Goldman's VIP list of the most important holdings is accessible on Bloomberg via < GSTHHVIP >. It has "outperformed the S&P 500 by 55 bp on a quarterly basis since 2001."
Goldman Sachs VIP List (Q1 2012)
Stock: Number of funds with stock as top 10 holding
1. Apple (AAPL): 106
2. Google (GOOG): 73
3. Express Scripts (ESRX): 56
4. Microsoft (MSFT): 46
5. Qualcomm (QCOM): 38
6. Citigroup (C): 31
7. General Motors (GM): 29
8. Priceline.com (PCLN): 29
9. JPMorgan Chase (JPM): 27
10. Liberty Media (LMCA): 26
11. Delphi Automotive (DLPH): 24
12. BP (BP): 23
13. Pfizer (PFE): 23
14. Tyco (TYC): 22
15. Visa (V): 21
16. Yahoo (YHOO): 21
17. LyondellBasell (LYB): 20
18. Anadarko Petroleum (APC): 19
19. Bank of America (BAC): 17
20. Ford Motor (F): 17
21. WellPoint (WLP): 17
22. American International Group (AIG): 16
23. Charter Communications (CHTR): 16
24. eBay (EBAY): 16
25. Rock-Tenn (RKT): 16
It's no surprise that Apple (AAPL) is the most widely owned top position amongst fundamental hedge funds. But despite that, Greenlight Capital's David Einhorn argued hedge funds actually have less than 2% of assets in his Ira Sohn conference presentation. We've also posted Dan Loeb's thesis on AAPL as he was a big buyer of shares.
Both Tyco and Priceline were featured in the equity analysis section of our Q4 2011 Hedge Fund Wisdom newsletter due to heavy ownership by top funds. TYC is an event-driven play while PCLN is a huge growth and international play.
Here's the rest of Goldman's VIP list:
26. Seagate Technology (STX): 16
27. Berkshire Hathaway (BRK.B): 15
28. Cisco Systems (CSCO): 15
29. Equinix (EQIX): 15
30. Hertz Global (HTZ): 15
31. Liberty Interactive (LINTA): 15
32. Pioneer Natural Resources (PXD): 15
33. Visteon (VC): 15
34. Valeant Pharmaceuticals (VRX): 15
35. Wells Fargo (WFC): 15
36. Baidu (BIDU): 14
37. Dollar Thrifty (DTG): 14
38. Hess (HES): 14
39. Mastercard (MA): 14
40. News Corp (NWSA): 14
41. Williams Companies (WMB): 14
42. Barrick Gold (ABX): 13
43. CIT Group (CIT): 13
44. Capital One (COF): 13
45. Calpine (CPN): 13
46. Devon Energy (DVN): 13
47. EMC (EMC): 13
48. Hewlett Packard (HPQ): 13
49. Illumina (ILMN): 13
50. Salesforce.com (CRM): 12
Of the above, we've previously highlighted why Passport Capital likes LINTA. And in the brand new issue of our Hedge Fund Wisdom newsletter, we've analyzed Equinix (EQIX), a big new position by Philippe Laffont's Coatue Management and John Thaler's JAT Capital.
Some of the stocks on the list are brand new additions as enough hedge funds boosted their positions in Q1: ABX, AIG, BRK.B, COF, CPN, CRM, DVN, EBAY, EMC, EQIX, F, HES, HTZ, ILMN, RKT, WLP.
Be sure to also check out Goldman's brand new list of hedge fund very important short positions.
Thursday, February 23, 2012
Leon Cooperman on Bonds, Stocks, and Apple vs. Research in Motion
Leon Cooperman of hedge fund firm Omega Advisors yesterday sat down with Bloomberg Television to talk about the markets, his portfolio, and what he likes/dislikes at this juncture.
On Treasuries:
Cooperman said that, "I have great confidence the Fed is ultimately going to get their way. The Fed is trying to elevate asset prices, help consumption, help the economy and in two-three years time, we will be worrying about inflation and interest rates will be materially higher. An instrument that I have absolutely no interest in - the most widely traded instrument in the world - is US government bonds. I don’t think people understand how risky a US government bond is at 2% return."
On Equities:
After bashing government bonds, Cooperman also examined the potential of investing in high yield bonds but dismissed them as fully priced. So he turned to equities and said that, "the S&P, which is 13 ½ earnings, yields a bit over 2%, 10% below the historical multiple at a time when interest rates are below historical and you can find lots of cheap stocks out there that will yield more than bonds today that are good companies that will grow over time."
This is largely in line with what the hedgie has been preaching for sometime now. We've highlighted in the past his trademark phrase that equities are the best house in the financial asset neighborhood.
On Apple (AAPL) versus Research in Motion (RIMM):
The Omega Advisors founder thinks Apple (AAPL) is worth north of $600. On Research in Motion (RIMM), he notes that, "It's funny, it was really like a mass hysteria. We put about a half of one percent of our assets into RIM late last year on a theory that they had a revenue base that was being mispriced by the market. Which was 20% of what we had in Apple, we've owned Apple now for a long time, and we continue to own a big position, so we had five times more Apple investment than RIM."
He says they sold RIMM due to stop loss discipline, but he admits that it's still intriguing. David Einhorn's hedge fund Greenlight Capital recently bought shares of RIMM, as highlighted in this free excerpt from our newsletter.
Cooperman also mentioned that he likes gold, Qualcomm (QCOM), JPMorgan (JPM), Bank of America (BAC), Altisource Portfolio Solutions (ASPS), Unitedhealthcare (UNH), WellPoint (WLP), Boston Scientific (BSX), Echostar (SATS), and Dish Network (DISH).
Embedded below is the video from Cooperman's interview with Bloomberg TV:
For more from this hedgie, you can view Cooperman's presentation on risks to the equity outlook.
Tuesday, October 18, 2011
Leon Cooperman's Value Investing Congress Presentation
At day two of the Value Investing Congress, Leon Cooperman of hedge fund Omega Advisors gave the case for going long Apple (AAPL) and E*Trade (ETFC) in a presentation entitled "The Investment Outlook & Some Attractive Values."
Be sure to check out all of our notes from the Value Investing Congress.
Leon Cooperman (Omega Advisors)
Embedded below is the full slideshow presentation from Cooperman:
"Like it or not, we've entered a world of risk-on risk-off macro world." Four conclusions that require four assumptions:
1. Assume US will avoid recession; remain slow growth at worst: Metrics suggest we are not on a recession track. Bank lending improving, consumer savings rate up to 4% from 1%, debt service ratio good. Not a “feel good” environment, with 9% unemployment, 10% only part-time. “I take very strong exception to the idea that 2011 is another 2008.” Corporate America most cash on balance sheets since 1955. Oil drop from 115 to 80.
2. Assume that Eurozone will effectively ring-fence Greek sovereign debt issues: “We expect sane policies to prevail, since there is no choice.” His view, based on 45 years of experience, is when the problem is so catastrophic, and expected to occur, it doesn’t occur. He thinks they’ll follow the US banking model, raise capital, shed noncore assets, delever.
3. Assumption that failed, Obama would come to the center: He says it’s not happening. Old expression: “When the President is in trouble, the market is in trouble.” He rants against Obama- says he only wants to tax the wealthy, debase the dollar, borrow from the world to create a welfare state.
4. Assume the Middle East settles down, oil prices stay reasonable: At 1100, the SPX had already discounted a mild recession that was not happening. He says stocks are compelling valuations here. Says market dropped 20%, a traditional recession market correction is 25%. Thinks the recent lows of 1100 are the downside for the cycle. Requires two of the top 4 assumptions.
Even if we did have a recession, SPX eps usually only drops 15-20%, so even if they did drop, he says 14 times trough earnings to be very compelling. He still expects SPX eps of $100 or more in 2012. Still in early stages of an economic recovery.
Valuation: Stocks are cheap relative to history, inflation, and interest rates. Last 50 years, SPX ave P/E was 15x. Now multiple is 11.6x, with only 2% interest rates vs. 6.6% average. Highest ERP in 20 years. Average bear market bottom the P/E was 12x, where we are now. Just had one of the worst 10 year return years in history, believes will mean revert. Corporate bonds are nowhere near where they were in 2008/9, down 70% in yield, yet SPX is 2 multiples lower than it was back then. He is starting to buy corporate bonds with 9% yields. 45% of the SPX stocks now pay higher yields than 10-year treasury bonds- same high level as 2009, we haven’t seen this in 50 years.
Avoid treasuries: Says 10-year bonds historically yield same as nominal GDP. Says if you believe we get 2% growth, plus 2-3% inflation, that’s 4-5% yield, and bonds will lose a lot of money. Still predicts low growth for next decade: 2-2.5% GDP, 2-2.5% inflation, 4-5% nominal GDP, stocks make 7-9%, treasuries negative return.
“You don’t have to have a strongly rising stock market to make a lot of money.” 1967 Dow was 1000, 10 years later, 1982, the Dow was 1000. Over time, there is ample opportunity to find things that are mispriced to the market. (They had EP yesterday as a 2% position before the buyout).
He’s 78% net long, says things look very cheap. With a little patience, can make a great deal of money.
Top Ten Long Ideas:
Apple (AAPL): Less than 10x multiple net of cash. Succession clear. Financial policies somewhat destructive, sitting on $80B in cash, but that may change.
Boston Scientific (BSX): 20% FCF yield
Qualcomm (QCOM): 16% grower trading for 12x
Sallie Mae (SLM)
ACE (ACE)
Transocean (RIG): Says deep water drilling cycle is turning. 6.5% yield, well covered dividend, day rate is improving. Says stock is discounting $5-10B, but will settle for $1-2B
Exxon Mobil (XOM)
KKR (KKR): Dividend paying stock, but get K1, getting 9% yield, and expects growth.
Energy XXI (EXXI)
E*Trade Financial (ETFC): Ken Griffin involved, TD Ameritrade (AMTD) could buy them. Mortgage losses over, even with no deal, management is on the right track.
For more from the Omega Advisors manager, head to Cooperman's thoughts from Delivering Alpha.
Don't miss the rest of the hedge fund manager presentations in our notes from the Value Investing Congress.
Wednesday, June 2, 2010
Hedge Fund Shumway Capital Partners Adds Large New Stakes in Kraft Foods, Comcast (13F Filing Q1 2010)
(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 filings.)
Next up is Chris Shumway's hedge fund Shumway Capital Partners. Prior to founding his firm, Shumway was previously one of Julian Robertson's right-hand men at legendary hedge fund Tiger Management. As such, he joins the other successful Tiger Cubs and is included in the Tiger Cub portfolio created with Alphaclone for hedge fund replication. Shumway Capital Partners focuses on intensive fundamental research to drive their long/short equity strategy. Back in 2009, Shumway was listed in Barron's top 100 hedge funds for 2009 with a rolling 3-year annualized return of 28%. However, 2010 has proven difficult for the firm as their Sakkonet Fund was down 10% in May after they had gained 4.3% through April. Shumway received his MBA from Harvard Business School and his undergraduate degree from the University of Virginia.
The positions listed below were their long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:
Brand New Positions
Kraft Foods (KFT)
Comcast (CMCSA)
Air Products & Chemicals (APD)
Bank of America (BAC)
General Dynamics (GD)
Bard (BCR)
Staples (SPLS)
Liberty Global (LBTYA)
CME Group (CME)
Comcast (CMCSK)
TD Ameritrade (AMTD)
Illumina (ILMN)
Lowe's (LOW)
Discovery Communications (DISCA)
Cablevision (CVC)
Hartford Financial (HIG)
Sigma Aldrich (SIAL)
Waters (WAT)
Annaly Capital Management (NLY)
Credit Suisse (CS)
Liberty Global (LBTYK)
Illinois Toolworks (ITW)
SBA Communications (SBAC) Notes
Increased Positions
Novo (NVO): Increased position size by 413.8%
Goldman Sachs (GS): Increased by 275.4%
Baidu (BIDU): Increased by 85.4%
Apple (AAPL): Increased by 62.4%
Cisco Systems (CSCO): Increased by 57.2%
Disney (DIS): Increased by 47.6%
PNC Financial (PNC): Increased by 32.2%
Ingersoll-Rand (IR): Increased by 28.5%
Pfizer (PFE): Increased by 21.1%
Reduced Positions
Wells Fargo (WFC): Reduced position by 74.7%
Omnicom Group (OMC): Reduced by 70.8%
Juniper Networks (JNPR): Reduced by 62.4%
Pepsico (PEP): Reduced by 61.4%
Las Vegas Sands (LVS): Reduced by 60.2%
Urban Outfitters (URBN): Reduced by 57.9%
St Jude Medical (STJ): Reduced by 54.8%
Ctrip (CTRP): Reduced by 53.7%
JPMorgan Chase (JPM): Reduced by 45.8%
Gap (GPS): Reduced by 41.9%
Mastercard (MA): Reduced by 36.4%
Johnson & Johnson (JNJ): Reduced by 24.7%
Quest Diagnostics (DGX): Reduced by 22.9%
Visa (V): Reduced by 22.6%
Salesforce.com (CRM): Reduced by 15.4%
Positions They Sold Out of Completely
Qualcomm (QCOM)
Qualcomm (QCOM) Calls
Select Sector Financials (XLF) Calls
EMC (EMC)
Freeport McMoran (FCX)
Brocade Communications (BRCD)
Colgate Palmolive (CL)
CVS Caremark (CVS)
Radioshack (RSH)
Memc Electronics (WFR)
Fifth Third (FITB)
Allstate (ALL)
AOL (AOL)
Monsanto (MON)
Research in Motion (RIMM)
NII Holdings (NIHD) Notes
Kinross Gold (KGC) Notes
BioMarin Pharmaceutical (BMRN) Notes
Top 15 Holdings (by percentage of assets reported on 13F filing)
1. Apple (AAPL): 9.5%
2. Disney (DIS): 5.8%
3. Cisco Systems (CSCO): 5.3%
4. Kraft Foods (KFT): 5.3%
5. Teva Pharmaceuticals (TEVA): 5.3%
6. Pfizer (PFE): 4.6%
7. Equinix (EQIX): 4.5%
8. Goldman Sachs (GS): 3.9%
9. Time Warner (TWX): 3.7%
10. Johnson & Johnson (JNJ): 3.5%
11. Comcast (CMCSA): 2.7%
12. Visa (V): 2.5%
13. Baidu (BIDU): 2.4%
14. Mastercard (MA): 2.2%
15. JPMorgan Chase (JPM): 2.1%
Shumway's biggest portfolio change was their new position in Kraft Foods (KFT) as it is now their fourth largest US equity long. Numerous other hedgies like KFT these days, including Bill Ackman who previously detailed his investment thesis on Kraft. Additionally, Shumway started quite a sizable stake in Comcast (via CMCSA and CMCSK). They were also out adding to some of their mainstay holdings such as Apple, Cisco Systems, Disney, and Pfizer.
We also wanted to point out that their Equinix (EQIX) position listed above is only their equity stake. Shumway also holds various notes and their aggregate exposure to EQIX actually makes it one of their largest positions (slightly smaller than the size of their CSCO stake). And if you hadn't already noticed, many stocks in their portfolio are those on Goldman Sachs' VIP list of stocks most important to hedge funds. Maybe that helps explain their poor performance in the month of May.
On the selling side of things, Shumway Capital Partners was also somewhat active. In the fourth quarter of 2009, we saw that Shumway was betting big on Wells Fargo (WFC). Well, that certainly changed quickly as they dumped almost 75% of their position in the first quarter of 2010. However, in the financial sector they added to their stakes in Goldman Sachs and PNC Financial. Additionally, they sold completely out of hedge fund favorite stocks Qualcomm, EMC, Research in Motion and Freeport McMoran. It was also interesting to see Shumway sell out of CVS Caremark as we've seen some other hedge fund managers bullish on CVS shares as of late.
Assets reported on Shumway's 13F filing were $7.9 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 14 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.
This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, Dan Loeb's Third Point, John Paulson's hedge fund Paulson & Co, Chase Coleman's Tiger Global, Roberto Mignone's Bridger Management, Phil Falcone's Harbinger Capital Partners, and David Stemerman's Conatus Capital. Be sure to check back daily for new hedge fund updates.
Tuesday, May 25, 2010
Chase Coleman's Tiger Global Shows Large Put Positions on Market Indexes: 13F Filing Q1 2010
(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 filings.)
Next up is Chase Coleman's hedge fund Tiger Global. Coleman is considered a 'Tiger Seed' because he previously plied his trade under mentor Julian Robertson at legendary fund Tiger Management. He then became one of the many managers Robertson seeded in an effort to recognize up and coming talent. Coleman is also one of the many managers selected to be in the Tiger Cub portfolio created with Alphaclone where you can piggyback the investment ideas of numerous top hedge fund managers (Market Folly readers can receive a free 30-day trial if interested).
The positions listed below were Tiger Global's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:
Brand New Positions
Powershares QQQ Trust (QQQQ) Puts
SPDR S&P 500 (SPY) Puts
Electronic Arts (ERTS)
Electronic Arts (ERTS) Calls
Apollo Group (APOL) Calls
Liberty Global (LBTYA) Calls
Nike (NKE)
Genpact (G)
Kraft (KFT)
Liberty Capital (LCAPA)
American Tower (AMT)
Commscope (CTV)
Live Nation (LYV)
Duoyuan (DGW)
Amazon (AMZN)
Lincare Holdings (LNCR)
Shanda Games (GAME)
Madison Square Garden (MSG) ~ spin-off as a result of their stake in Cablevision
Symetra Financial (SYA)
Berkshire Hathaway (BRK.A)
Increased Positions
Western Union (WU): Increased position size by 577%
Liberty Global (LBTYA): Increased by 204.6%
Hewlett Packard (HPQ): Increased by 200%
Apple (AAPL): Increased by 62.2%
Lockheed Martin (LMT): Increased by 45%
Google (GOOG): Increased by 35%
Apollo Group (APOL): Increased by 30%
Mercadolibre (MELI): Increased by 24.6%
Discovery Communications (DISCK): Increased by 23%
Reduced Positions
Yahoo (YHOO): Reduced position size by 79.8%
E*Trade Financial (ETFC): Reduced by 46.7%
Mastercard (MA): Reduced by 35%
Monsanto (MON): Reduced by 34.6%
Transdigm Group (TDG): Reduced by 34.1%
IAC Interactive (IACI): Reduced by 28%
Cablevision (CVC): Reduced by 25.7%
Positions They Sold Out of Completely
Qualcomm (QCOM)
McDonalds (MCD)
IMS Health (RX)
Teradata (TDC)
Ebix (EBIX)
Discovery (DISCA)
Gushan Environmental (GU)
Top 15 Holdings (by percentage of assets reported on 13F filing)
1. Powershares QQQ Trust (QQQQ) Puts: 9.0%
2. Apollo Group (APOL): 8.32%
3. DirecTV (DTV): 7.87%
4. Pepsico (PEP): 5.96%
5. Apollo Group (APOL) Calls: 5.39%
6. Google (GOOG): 4.47%
7. SPDR S&P 500 (SPY) Puts: 4.45%
8. Mercadolibre (MELI): 4.06%
9. Lockheed Martin (LMT): 3.51%
10. Electronic Arts (ERTS) Calls: 3.41%
11. Mastercard (MA): 3.34%
12. Priceline.com (PCLN): 2.93%
13. Apple (AAPL): 2.80%
14. Liberty Global (LBTYA): 2.75%
15. Visa (V): 2.42%
Alright, there's a lot to cover here. The most noteworthy thing to take away from Coleman's portfolio is the fact that in the first quarter he started massive put positions on the Nasdaq-100 (QQQQ) and S&P 500 (SPY). These could merely be hedges, or they could be a directional bet, we don't know. What we do know though, is that these are very sizable positions. These puts are likely already profitable positions for the fund as well (that is, unless for some reasons they purchased the puts at the lows in February, which seems unlikely).
Tiger Global was quite active in options markets in the first quarter as they also started a large new position in Apollo Group calls. This is a complement to their already large position in common stock of the company as well, making it by far one of their biggest company specific bets. Additionally, we point out their large stake in DirecTV (DTV) because in Tiger Global's fourth quarter letter, Coleman indicated that this was one of their highest conviction picks as they believe that DTV will increase leverage to buyback shares and then their cashflow will cover current debt.. Tiger has also built up a sizable long position in Electronic Arts (ERTS) via common shares and calls.
Regarding positions they decreased, Tiger sold nearly 80% of their Yahoo (YHOO) position and almost half of their E*Trade Financial (ETFC) position. While TIger Global added significantly to their Western Union (WU) stake, the position is still not very large in the context of their overall portfolio. Other positions they notably added to in the first quarter include Hewlett Packard and Liberty Global.
Assets reported on the 13F filing were $4.9 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.
This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, Dan Loeb's Third Point, and John Paulson's hedge fund Paulson & Co. Be sure to check back daily for new hedge fund updates.
Monday, May 24, 2010
Goldman Sachs' VIP List: Stocks That Matter Most to Hedge Funds
Each quarter, Goldman Sachs updates a list of stocks owned by an overwhelming majority of hedge funds. The aptly named VIP list details 'very important positions' to hedge funds that employ fundamental strategies (rather than trading oriented firms) and we like to cover it due to the obvious tie-ins with our hedge fund portfolio tracking series. Last quarter, we posted up the previous iteration of Goldman Sachs' VIP list and this time around there are a few notable changes to the basket of fifty stocks.
Goldman updates the list each quarter to reflect the most recent hedge fund holdings using the same 13F forms filed with the SEC that we use for our tracking here on Market Folly. Twelve new stocks appeared on the list, representing stocks hedge funds as a whole were buying in the first quarter 2010, including: CIT Group (CIT), Alcon (ACL), CF Industries (CF), Coca-Cola Enterprises (CCE), Kraft Foods (KFT), Xerox (XRX), Assured Guaranty (AGO), Baidu (BIDU), Equinix (EQIX), Gilead Sciences (GILD), Liberty Global (LBTYA), and News Corp (NWSA).
As we've already detailed in our selective hedge fund tracking, many funds have large stakes in CIT Group, such as David Einhorn's Greenlight Capital. Not to mention, many firms are bullish on shares of Kraft, like Bill Ackman's Pershing Square. The addition of Xerox is curious because we've slowly but surely started to see more hedgies adding shares to their portfolios but have yet to see anyone provide a thesis. It should come as no surprise that Baidu joins the list given the hoopla surrounding Google's exit from China, as Baidu has been the prime beneficiary there. And lastly, we make note of Equinix gracing the VIP list as we've seen numerous prominent hedge funds in and out of this name over the past few quarters.
Hedge fund returns are often dependent on only a few key stocks and a fund's top 10 holdings typically represent 60% of their assets. As such, it makes complete sense that the VIP list tracks stocks that most frequently appear in the top ten holdings of various fundamentally driven hedge funds. Goldman's VIP basket of 50 stocks has outperformed the S&P 500 by 67 basis points on a quarterly basis since 2001 with a Sharpe ratio of 0.24. Those of you with Bloomberg Terminal access can look it up via GSTHHVIP.
Here are the top 10 stocks from Goldman Sachs' VIP List ranked by the number of hedge funds that owned that specific stock as a top holding at the end of the first quarter:
1. Apple (AAPL): 72 hedge funds owned it as a top 10 holding
2. Bank of America (BAC): 46
3. Google (GOOG): 43
4. Microsoft (MSFT): 40
5. JPMorgan Chase (JPM): 39
6. Pfizer (PFE): 34
7. CIT Group (CIT): 31
8. Intel (INTC): 25
9. Qualcomm (QCOM): 25
10. Cisco Systems (CSCO): 22
And embedded below is the rest of the 50-stock basket that makes up Goldman Sachs' VIP List:
You can download a .pdf here.
Keep in mind that if you wish to replicate hedge fund portfolios via SEC filings like Goldman's VIP list, you can easily do so via Alphaclone (MarketFolly readers receive a free 30 day trial). It is by far the best replicator out there and we use it for all of our hedge fund tracking. And if you want to know what prominent hedge funds are up to specifically, head to our portfolio tracking series that is updated daily.
