Hedge Fund Viking Global Discloses New TripAdvisor (TRIP) Stake

Andreas Halvorsen's hedge fund firm Viking Global just now filed a 13G with the SEC regarding shares of TripAdvisor (TRIP).

Viking has disclosed a 6.0% ownership stake in TRIP with 7,200,112 shares due to portfolio activity on January 23rd. It seems that a sizable portion of their position is held in their Viking Global Equities III investment vehicle.

We've examined the bull and bear investment theses for Expedia (EXPE) and TripAdvisor (TRIP) in a prior issue of our Hedge Fund Wisdom newsletter.

New Position... But How New?

It's particularly difficult to say when and by how much Viking was adding to this position due to a few factors. Firstly, TripAdvisor completed its spin-off from Expedia (EXPE) on December 20th, 2011. Right before this, EXPE completed a one-for-two reverse stock split and then shareholders became entitled to receive one share of TRIP and one share of EXPE for every two shares of the old EXPE entity owned.

Viking Global did not own shares of Expedia as of the end of the third quarter (September 30th, 2011). Also, due to the fact that SEC filings are made on a delayed basis, Viking won't have to disclose their 2011 year-end positions until February 15th. As such, it's entirely possible that they bought shares of EXPE in December and received TRIP shares in the spin-off.

However, something also worth considering is the fact that Viking did not cross a regulatory threshold required to file with the SEC until January 23rd. At the very least, that means that they purchased some TRIP shares recently. And theoretically, they could have simply bought their entire position of the separate TRIP entity post spin-off.

Either way, Viking's position in TripAdvisor is a new holding for them because they hadn't disclosed a position in Expedia or TripAdvisor prior to now.

But given the opacity surrounding the situation, it's impossible to know exactly when they were buying. And that certainly makes a difference given the fact that shares of TripAdvisor began trading at around $24 and are currently trading 43% higher.


TripAdvisor Company Background

Per Google Finance, TripAdvisor is "is an online travel research company, enabling users to plan and have a trip. TripAdvisor features reviews and advice on hotels, resorts, flights, vacation rentals, vacation packages and travel guides. TripAdvisor’s travel research platform features reviews and opinions from its community of travelers about destinations, accommodations (hotels, bed and breakfasts, specialty lodging and vacation rentals), restaurants and activities worldwide, through its TripAdvisor brand."

To see the bull and bear case on Expedia and TripAdvisor, sign-up for our premium Hedge Fund Wisdom newsletter and download the old issues.

Dan Loeb's Third Point: Top Holdings & Latest Exposures

Dan Loeb's hedge fund firm Third Point LLC returned 3.8% in January to start off 2012. Their offshore fund currently manages $4.59 billion and has seen an annualized return of 17.5%.

Third Point's Top Holdings (as of 1/31/12)

1. Yahoo! (YHOO)
2. Gold
3. Eksportfinans ASA
4. Delphi Corp (DLPH)
5. Ally Financial

There are some notable changes to the upper echelon of this hedge fund's portfolio since we last looked. Eksportfinans ASA has emerged as a meaningful position and Ally Financial (the former GMAC entity) has entered their top 5 stakes. Gold and Yahoo remain top holdings and you can see Third Point's bull case for YHOO here.

One former top holding now notably absent from their top positions list is Sara Lee (SLE). While one could assume they still own it given their 'attractive assets' thesis, it's hard to say if they reduced exposure to the name or if they merely added to other positions.

Also worth highlighting: They've held a stake in Delphi post bankruptcy and the company began trading again in the fourth quarter of 2011 with numerous prominent hedge funds as owners. However, one notable holder (Paulson & Co) has apparently reduced its position size substantially.

In terms of attribution, Third Point saw gains from their stakes in Delphi, gold, UniCredit Spa, Technicolor, and Eksportfinans. They lost money last month from positions in Yahoo, and four undisclosed short positions (2 consumer shorts, 1 communications short, and 1 healthcare short).


Third Point's Net Exposure

After spending much of last year with low net exposure to equities (as low as 15% net long), Third Point has slightly ramped exposure back up. They are now 44.8% long and -16.6% short, leaving them 28.2% net long equities. Their largest exposure comes via technology where they are 12.6% net long (most of which is their activist stake in Yahoo).

In credit, Third Point is 15.6% net long the asset class via 9.6% net long exposure to distressed, 8.7% net long exposure to performing, 14.5% net long exposure to asset backed securities (ABS) and -17.2% net short government securities.

Geographically speaking, Loeb's hedge fund is 58% net long the Americas, -4% net short EMEA, and -3% net short Asia.

For thoughts on their portfolio, head to Third Point's Q3 letter. We'll be sure to post up their Q4 letter when it is released.

Confidence Game Trailer: Documentary About Bear Sterns' Final Week

Below is the Confidence Game movie trailer, a documentary about the final week of Bear Stearns before its collapse during the financial crisis.

The film is directed by Nick Verbitsky and features interviews with former employees, whistleblowers, as well as Bryan Burrough, William D. Cohan, and Andrew Ross Sorkin.

Here's the Confidence Game trailer video (email readers click on the link to come watch):




Be sure to also check out previews of other financial films like the Margin Call movie trailer and the Chasing Madoff trailer.

Steve Cohen's SAC Capital Boosts Positions in American Eagle Outfitters (AEO) & Peet's Coffee (PEET): 13G Filings

Steve Cohen's hedge fund SAC Capital filed two 13G's with the SEC regarding transactions in American Eagle Outfitters (AEO) and Peet's Coffee & Tea (PEET) this month.

American Eagle Outfitters (AEO)

Per their 13G filing, SAC increased its position size by 1056% since the close of the third quarter. SAC Capital now owns 9,418,880 shares of AEO, or 4.9% of the company.

This is up massively from the 814,560 shares they owned at the end of Q3. This 13G filing was triggered due to activity on January 18th.

Per Google Finance, American Eagle Outfitters is "is an apparel and accessories retailer that operates more than 1,000 retail stores in the United States and Canada, and online at ae.com. Through its family of brands, American Eagle Outfitters, Inc., offers clothing, accessories and personal care products. Its online business, AEO Direct, ships to 76 countries worldwide. The Company operates under the American Eagle, aerie by American Eagle, and 77kids by american eagle brands."


Peet's Coffee & Tea (PEET)

SAC Capital owns 740,074 shares of PEET according to their latest filing. They've increased their position size by 32,516% since the end of the third quarter as they only owned 2,269 shares back then. Now, SAC owns 5.7% of the company due to portfolio activity on January 13th.

This stake is intriguing because Cohen mentioned that fellow beverage brewer Green Mountain Coffee Roasters (GMCR) was one of his favorite plays at this time last year. However, over the course of 2011 his firm gradually cut exposure to the name. Additionally, shares of GMCR have been attacked by Greenlight Capital's David Einhorn (see his short thesis on GMCR here). So it will be interesting to watch shares of PEET in the future.

Per Google Finance, Peet's Coffee & Tea is "is a specialty coffee roaster and marketer of fresh roasted whole bean coffee and tea. The Company sells its Peet’s brand coffee through multiple channels of distribution, including grocery stores, home delivery, office, restaurant and foodservice accounts and Company-owned and operated stores in six states."

Corsair Capital's Investment Thesis on Aperam

Earlier today we posted up hedge fund Corsair Capital's Q4 letter. We're also posting up an addendum from their letter: their investment thesis on Aperam (AMS:APAM), a core holding.

In summary, the hedge fund likes this stainless steel manufacturer as it "offers investors over 200% potential upside with limited downside given its low leverage with no near term maturities, high dividend yield, strong cross-cycle earnings power, and credible cost-cutting program."

The company was spun-off from Arcelor Mittal (MT) and Corsair thinks APAM could trade between $38 and $63, and in an extreme scenario as high as $88.

Embedded below is Corsair's investment thesis on Aperam (email readers click to come read it):



And if you missed it earlier, be sure to read Corsair's Q4 letter.

We've also posted up other hedge fund letters recently: Greenlight Capital and East Coast Asset Managment.

Corsair Capital Talks Lyondell Basell, Six Flags & Innophos: Q4 Letter

Jay Petschek and Steve Major's hedge fund Corsair Capital is out with their Q4 letter. For 2011, the hedge fund finished -3.7% and since inception in January 1991, the firm has seen a compound net annual return of 14.4%.

They note that 2011 was a difficult year because, "correlations between stocks and most asset classes were near record highs, seemingly subject to the whims of investors choosing to either put 'risk on' or to take 'risk off.' "

Corsair also touches on some of their positions noting that Lyondell Basell (LYB) saw strong insider buying during the stock's dip. They continue to also like Neo-Material Technologies (TSE:NEM) as think it's worth $15+ (it currently trades around $8.30).

The hedge fund likes that Six Flags (SIX) has refinanced its debt and announced a new $250mm buyback plan. Lastly, Corsair fancies Innophos Holdings (IPHS) as "the company trades at under 10x our cash estimate for 2012 and we continue to believe it is worth 15x given the quality of its business model and clean balance sheet." We've previously highlighted Corsair's thesis on Innophos.

Embedded below is Corsair Capital's Q4 letter (email readers click the link to come view it):



We've also posted up their new write-up of a core investment: Corsair's thesis on Aperam (APAM NA).

What We're Reading ~ 1/27/12

A good performance year for some Tiger Cubs [Institutional Investor]

David Einhorn rapped for insider trading in UK [FINalternatives]

Ken Griffin's Citadel back above high watermark [Dealbreaker]

20 common sense investing rules [Reformed Broker]

Is anyone any good at picking hedge fund managers? [Big Picture]

On why Sears (SHLD) isn't going private [ValuePlays]

Pivot Capital on China's investment boom (& pending bust) [Zero Hedge]

On the value of an independent financial review [Research Puzzle]

Rethinking the equity risk premium [CFA Institute]

The great hedge fund humbling of 2011 [Reuters]

Warren Buffett's apprentice makes strong debut [FinancialPost]

Days of easy money for fund managers are over [Bloomberg]

Federal officials charge 7 in insider probe [WSJ]

Joel Greenblatt assesses his Magic Formula results [Morningstar]

How to conquer a banking job [Salon]

Biggest Discount to the Value Investing Congress Expires Tomorrow

We wanted to let readers know that the Spring Value Investing Congress is right around the corner on May 6th & 7th. This year it's taking place in Omaha, Nebraska right after Warren Buffett's annual meeting at Berkshire Hathaway at the CenturyLink Center. Now you can squeeze two value investing events into one trip.

Biggest Discount Expires Tomorrow!

If you sign-up before tomorrow at midnight, our readers save $1,600 by clicking here and using discount code: O12MF3


Here are the speakers announced thus far:

Doug Kass - Seabreeze Partners
J. Carlo Cannell - Cannell Capital
Keith Trauner - Goodhaven Capital
Larry Pitkowsky - Goodhaven Capital
Thomas Russo - Gardner Russo & Gardner
David Nierenberg - D3 Family Funds
Matthew Swaim - Advisory Research
Bruce Zessar - Advisory Research
Whitney Tilson - T2 Partners
Glenn Tongue - T2 Partners

One thing worth highlighting: Trauner and Pitkowsky previously worked at Bruce Berkowitz's Fairholme Capital before founding their new firm Goodhaven Capital so it will be interesting to hear their ideas.


Click here to receive the biggest discount to the Value Investing Congress and use discount code: O12MF3. Act fast because the discount expires tomorrow at midnight!

East Coast Asset Management's Q4 Letter: Embracing Uncertainty

Christopher Begg is out with East Coast Asset Management's Q4 2011 letter to investors. In it, he discusses the concept of embracing certain uncertainties. He writes,

"We observe a general misclassification between uncertainty and risk. Looking forward, we also anticipate the general perception of 'risk' versus 'risk-free' assets will change. Central bank intervention to mitigate the effects of the inevitable deleveraging cycle will raise the cost of capital and compromise the value of paper currency. We expect this could be a disappointing realization for those seeking long-term shelter in cash and bonds."

They've somewhat touched on this notion before when in a past letter they outlined why they see heightened and prolonged inflation ahead. This falls into one of their seven broad views in which they have constructed their portfolio currently:

1. Deleveraging
2. 'Fair Wind' for high quality equities
3. Inflation
4. Emerging market consumer
5. Eurozone consequences
6. Jobs and housing
7. Adaptation

We want to draw specific attention to their focus on the emerging market consumer because they aren't the only firm fixated on this phenomenon. Hedge fund Kleinheinz Capital has pointed to the power of the emerging market consumer, but also cautions that inflation is the biggest threat in emerging markets.

On the subject, Begg writes that, "This 'impression, sunrise' of the emerging market consumer is one of the most underappreciated change agents that will ultimately drive global economic growth over the decades to come, and help move the world economy beyond the deleveraging currently at hand."

Embedded below is East Coast's Q4 letter:




Given that East Coast's letters often serve as vehicles for passing along timeless educational aspects of investing, be sure to check out their pieces on competitive advantage and gaining an investment edge.

David Einhorn's Greenlight Capital Q4 2011 Letter: Covered First Solar, Bought Dell

After a brief hiatus, MarketFolly.com is back in action covering top hedge funds. Right to the action: if you missed it, we wanted to post up David Einhorn's Greenlight Capital Q4 2011 letter to investors.

Key Takeaways:

- Covered their short in First Solar (FSLR)
- Covered short in Diamond Foods (DMND)

- New position: bought Dell (DELL) @ average price of $15.53
- Re-established position: bought Xerox (XRX) @ average price of $7.61

- Sold Travelers (TRV): Greenlight cut their forward earnings forecast
- Sold Pfizer (PFE)
- Sold Becton Dickinson (BDX) due to disappointing guidance
- Sold CVS (CVS) to fund more compelling opportunities

Embedded below is David Einhorn's letter where you can read Greenlight's rationale for their new buys of Dell (DELL) and Xerox (XRX):




For more from this hedge fund, you can also check out Greenlight Capital's Q3 letter as well as David Einhorn's short case on Green Mountain Coffee Roasters (GMCR).

New Hedge Fund Wisdom Issue Now Available!

The brand new Q3 2011 issue of our premium Hedge Fund Wisdom newsletter is now available! Current subscribers, please login at hedgefundwisdom.com to download it.

Included In The New 91-Page Issue:

- Long versus short: An analysis of battleground stock Netflix (NFLX)
- Investment thesis on potential housing recovery play: Lowe's (LOW)
- In-depth equity analysis of payment-processor: Visa (V)
- Hedge fund consensus buy & sell list
- Portfolio updates on 25 prominent hedge funds
- Expert commentary on their latest portfolio moves


Written by hedge fund analysts, our convenient newsletter saves you a ton of time by aggregating and summarizing the latest hedge fund activity. And most importantly, it tells you WHY they were buying or selling a particular stock.

See a FREE SAMPLE of a full past issue by clicking here (.pdf)


See What Top Hedge Funds Have Been Buying & Selling:

Published four times a year. To pay by credit/debit card or PayPal, please click the 'subscribe' button below and read the next page carefully to select your method of payment.


1 Year Subscription (Save 20% with this option): $299.99 per year

Quarterly Subscription: $89.99 per quarter

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See What Top Hedge Funds Are Buying & Selling: Subscribe to Our Newsletter

The brand new Q3 issue of our premium Hedge Fund Wisdom newsletter will be released on November 21st. Our publication aggregates and summarizes everything you need to know about all the recent hedge fund buys & sells in one convenient document and saves you a ton of time.

Written by hedge fund analysts, our quarterly newsletter includes:

- The latest portfolios of 25 top hedge funds (4 issues each year)

- Consensus list of the top buys & sells

- Expert commentary & analysis on each fund's moves

- In-depth equity analysis section: the investment thesis behind their picks



Hedge fund portfolios featured in our newsletter:

Seth Klarman (Baupost Group)
Warren Buffett (Berkshire Hathaway)
David Einhorn (Greenlight Capital)
Stephen Mandel (Lone Pine Capital)
David Tepper (Appaloosa Management)
Bill Ackman (Pershing Square Capital Management)
John Paulson (Paulson & Co)
Bruce Berkowitz (Fairholme Capital)
Chase Coleman (Tiger Global Management)
John Burbank (Passport Capital)
Leon Cooperman (Omega Advisors)
Dan Loeb (Third Point)
John Griffin (Blue Ridge Capital)
Lee Ainslie (Maverick Capital)
Julian Robertson (Tiger Management)
George Soros (Soros Fund Management)
Roberto Mignone (Bridger Management)
Philippe Laffont (Coatue Management)
Richard Perry (Perry Capital)
Larry Robbins (Glenview Capital)
Andreas Halvorsen (Viking Global)
Thomas Steyer (Farallon Capital)
Carl Icahn (Icahn Capital)
Barry Rosenstein (JANA Partners)
Alan Fournier (Pennant Capital)


*** FREE SAMPLE: Check out a full past issue by clicking here (.pdf)



See What Top Hedge Funds Are Buying & Selling: Subscribe Below

To pay by credit/debit card or PayPal, please click the 'subscribe' button below and read the next page carefully to select your method of payment.


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Quarterly Subscription: $89.99 per quarter

If you would like to pay via check, please email us: info@hedgefundwisdom.com

What We're Reading ~ 11/11/11

Memo to David Einhorn re: gold miners [Reformed Broker]

On Apple (AAPL) fatigue [Abnormal Returns]

4 major secular bear markets, 1900-2011 [Big Picture]

Five rising hedge fund stars to watch [Absolute Return + Alpha]

Viking Global to close to new investments [Absolute Return + Alpha]

Analyst antics at Green Mountain Coffee Roasters [CNBC]

How a cash-rich split could take Yahoo! to $41/share [Forbes]

Top 50 CIO salary list [Charles Skorina]

A view from the buyside [Distressed Debt Investing]

John Paulson hopes to profit from Delphi IPO [WSJ]

Tsang says Ackman will lose money on HKD bet [Bloomberg]

On hedging for financial advisors: rent-a-bear? [WSJ]

Long/short: cleaning up an absolute mess [FT Adviser]

Turmoil hits Lansdowne as hedgies falter [City AM]

Cardano seeks distressed debt opportunities [eFinancialNews]

Peter Thiel's founders fund raising up to $600 million [Bloomberg]

Hedge Fund Scout Capital Buys More Arcos Dorados (ARCO)

James Crichton and Adam Weiss' hedge fund Scout Capital just filed an amended 13G with the SEC regarding their position in Arcos Dorados (ARCO).

They've boosted their position size by almost 48% since the end of the second quarter. Scout now owns 10.78% of Arcos Dorados with 13,962,000 shares per portfolio activity on November 9th.

In other activity from the hedge fund, we detailed that they acquired total return swaps on Domino's Pizza.

Also, we've posted Scout's presentation on Williams (WMB) and Sensata Technologies (ST) from the Value Investing Congress.

Per Google Finance, Arcos Dorados is "is a McDonald’s franchisee. As of December 31, 2010, the Company operated or franchised 1,755 McDonald’s-branded restaurants, which represented 6.7% of McDonald’s total franchised restaurants globally. It operates McDonald’s-branded restaurants under two different operating formats, Company-operated restaurants and franchised restaurants."

Steve Cohen's SAC Capital Adds to GNC Holdings (GNC)

Steve Cohen's hedge fund firm SAC Capital has filed a 13G with the SEC on shares of GNC Holdings (GNC). In it, we see that SAC now has a 4.8% ownership stake in the company with 4,908,334 shares.

This marks a whopping 21,138% increase in their position size since the close of the second quarter because they only held 23,111 shares back then. The date of transaction requiring this filing was October 31st.

You can view some of SAC Capital's other portfolio activity here.

Per Google Finance, GNC Holdings is "is a holding company. It is a specialty retailer of nutritional supplements. Nutritional supplements include vitamins, minerals and herbal supplements (VMHS), sports nutrition products, diet products and other wellness products. GNC operates in three segments: Retail, Franchising, and Manufacturing/Wholesale."

Leon Cooperman on Risks to Equity Market Outlook: Invest For Kids Presentation

Yesterday, we posted up comprehensive notes from the Invest For Kids Chicago conference where numerous hedge fund managers presented their latest investment ideas. Omega Advisors' Leon Cooperman was one of the speakers and we're proud to present his slideshow presentation on risks to the equity market outlook below.

Cooperman pitched CHRS, KFN & ETFC at the event and you can click the link to read about his thoughts on those stocks. His actual slideshow, though, focused on economic data and risks to the equity market outlook.

Embedded below is Leon Cooperman's slideshow presentation from Invest For Kids Chicago (email readers click the link to come view it):



And for more picks from hedgies at this conference, head to notes from Invest For Kids Chicago.

Notes From Invest For Kids Chicago: Lasry, Perry, Cooperman, Zell & More

Yesterday at Invest For Kids Chicago, numerous high profile hedge fund managers shared their latest investment ideas. The event had 800 attendees and raised $1.1 million (100% of the proceeds went to charities benefiting children). Please click the links below to view notes on each speaker's presentation:


Invest For Kids Chicago Notes:


Marc Lasry (Avenue Capital): Long General Motors & Hovnanian Bonds


Richard Perry (Perry Capital): GSE Junior Preferred Securities & RBS Tier 1 Securities


Leon Cooperman (Omega Advisors): Charming Shoppes (CHRS), KKR Financial (KFN), E*Trade Financial (ETFC)


Sam Zell (Equity Group Investments): Brazil's Investment Opportunity


Barry Rosenstein (JANA Partners): long McGraw Hill (MHP)


Thomas Russo (Gardner Russo & Gardner): Look abroad for opportunities, Nestle


Michael Milken (Milken Institute): Thoughts on Capital Markets


John Keeley (Keeley Asset Management): ITT Corp (ITT)


Barry Sternlicht (Starwood Capital Group): Likes Lowe's, Toll Brothers, NVR


Michael Elrad (GEM Realty Capital): Long Macerich (MAC)



For more of our coverage of the latest investment conferences, be sure to also head to notes & presentations from the Value Investing Congress.

Marc Lasry: Long General Motors & Hovnanian Bonds ~ Invest For Kids Chicago Notes

At Invest For Kids Chicago yesterday, Marc Lasry of Avenue Capital gave a presentation on going long General Motors (GM).

Be sure to check out all notes from Invest For Kids Chicago where numerous high profile hedge fund managers shared their latest investment ideas.


Long General Motors (GM)

Lasry pitched GM, saying that the company had the largest US market capitalization at $12.2 billion in the late 1950's. In 2000, GM's revenue was higher than Wal-Mart at $189 billion. Currently, GM equity trades at less than 1.0x EV/EBITDA (including JVs at 17.9B, cash 20.3B, Market Cap 41.7B, other assets 4.3B, 5.5B in debt, and 6.9B preferreds).

He compares GM now to Apple (AAPL) back when they needed $150 million from Microsoft (MSFT) or AAPL would have gone bankrupt. Since that loan from Microsoft, Apple many years later has become the largest company in the world at $350 billion.

Lasry says investors are focusing on timing re: GM and that's not the right way to do it. Ultimately, he acknowledges there's lots of risk out there. But the key question you have to ask, he says, is "are you getting paid enough to invest?"

The risk for GM is another recession and people buy fewer cars. As a true contrarian, he likes to buy when others aren't. He started buying the bonds when it was 2x EBITDA and you can get an even better entry point today. We just covered how David Einhorn's Greenlight Capital bought GM equity in the third quarter as well.


Long Hovnanian (HOV)

Lasry also mentioned that he liked homebuilder Hovnanian as rates and prices are both very low. The company has 350 million in cash, 1B inventory and 1B NOLs. He likes the 6 to 7% bonds at 35 with 20% yield. You get paid to wait and thinks you are covered and he'd rather get paid to wait with the bonds than take on more risk with the equity. Avenue Capital believes that the US GDP will have 1% growth next year and no double-dip recession.

You can view full notes from Invest For Kids Chicago here.

Richard Perry: Long GSE Junior Preferreds, RBS Tier 1 Securities (Invest For Kids Chicago Notes)

At Invest For Kids Chicago yesterday, Richard Perry of Perry Capital gave a presentation on going long GSE Junior Preferred securities as well as RBS Tier 1 Securities.

Be sure to check out all notes from Invest For Kids Chicago where numerous high profile hedge fund managers shared their latest investment ideas.


Long GSE Junior Preferred Securities

Perry founded his firm 23 years ago and now manages $8 billion. He's only had 1 down year in 23 years. His first pick was to go long GSE Junior Preferred Securities as a highly asymmetric play.

Many people believe GSE's are the cause of the crisis and represent and endless black hole to the taxpayer and numerous politicians have called for their elimination. Perry takes the opposite view and believes GSE's will soon be breakeven and/or in a position to recapitalize themselves. He argues they provide necessary counter cyclical liquidity.

At 8.5 cents on the dollar, Perry thinks they offer asymmetric risk reward for huge upside. By changing the guarantee fee "a little bit," the CBO says they could raise $30 billion for each 10bps increase in fee and that could reopen the mortgage market and spur the economy (could happen over 2-3 years).


Long RBS Tier 1 Securities

Perry's other idea was going long securities of a bank that was at one point the largest in the world. In 2008 & 2009, RBS underwent a big housecleaning. Their Tier 1 securities have 'must-pay' dividends and 'may pay'. 'May pay' was shut off with the bailout through 2014 and trades at a 25-35% discount. This is the security he likes.

With Basel 3, core Tier 1 are likely to go away. All "real banks" will buy back to take off balance sheets. There's £10 billion of these and he expects them to turn on in 2012 (April for RBS and January for Lloyds).

Perry says that RBS' balance sheet is restructuring and you must analyze loan to deposits. US is roughly 95% and Italy is 120% to 150%. The UK has a government asset protection scheme where if RBS has a loss of ~60 billion, the government backstops other pool.

Systematically important banks trade at 7% yield on preferred stocks (Bank of America, Barclays, SocGen, BNP, UBS). If RBS pays the dividend they save 80 bps on funding (where better banks are) or 6 billion and pays 400 million in dividends which he says is good arbitrage.

For more of our coverage of Perry Capital, we've detailed Perry's investment thesis on Iron Mountain (IRM) as well as their thoughts on European markets.


You can view full notes from Invest For Kids Chicago here.

Leon Cooperman: Long Charming Shoppes, KFN & ETFC ~ Invest For Kids Chicago Notes

At Invest For Kids Chicago yesterday, Leon Cooperman of Omega Advisors gave a presentation on going long Charming Shoppes (CHRS), KKR Financial (KFN), and E*Trade Financial (ETFC).

Be sure to check out all notes from Invest For Kids Chicago where numerous high profile hedge fund managers shared their latest investment ideas.


Long Various Equities

Cooperman previously worked at Goldman Sachs for 25 years and made money in bottom-up stockpicking even when the market did nothing during the first 10 years of his career. He points out that currently everything in the markets is correlated and eventually this will change in time.

He agrees with Marc Lasry that we'll see low growth (1% GDP) and no double-dip recession. In order to dent unemployment, he argues we need to see 3% GDP growth.

Regarding the markets, Cooperman says that "people are light risk and that was why October was up so strong." He believes the market is discounting very conservative set of expectations and that the ECB will do what it takes to solve the Euro crisis. He believes there is no chance of a repeat of 2008.

Cooperman continues to preach that stocks are the best house in the neighborhood. This is the same message he presented at the Value Investing Congress. In particular, he likes three names:

Charming Shoppes (CHRS) - He likes the Layne Bryant division which services a niche of large women's apparel. He thinks the division is worth $700 million while the company has $227 million in cash and $140 million in debt and says it's probably worth 2x.

KKR Financial (KFN) - He likes the debt management arm of KKR as the 9% dividend is 2x covered by earnings. You get a 5-6% return plus the 9% dividend he says.

E*Trade Financial (ETFC) - He continues to like the improvement in the company's mortgage portfolio after their horrible foray into the market went so poorly years ago.

Additionally, Cooperman mentioned he likes the following stocks as well: Apple (AAPL), Boston Scientific (BSX), SLM (SLM), and Energy XXI (EXXI). For more from this manager, head to Cooperman's presentation from the Value Investing Congress here.


You can view full notes from Invest For Kids Chicago here.