Strategist Jeff Saut Sees Decline This Month But Higher Market By Year-End

This week market strategist Jeff Saut has penned his latest commentary on how many investors are "wired backwards" and love to buy when the market has headed higher and often dump stocks when the market has declined and offered compelling entry points.

Saut writes,

"The reality is that when you have a 'fell good' environment, the game is usually in the late innings.  As often stated, 'the equity markets do not care about the absolutes of good or bad, but rather are things getting better or worse.  An, things are definitely getting better.  However, in my speaking tour last week most investors don't believe it.  Nor do they believe the stock market has been rising because things are getting better.  Indeed, many of the folks I talked to believe the only thing buoying the stock market has been the Federal Reserve."

Saut actually thinks that the market could see its first meaningful decline of the year this month.  At the same time, he feels the S&P 500 will pass the high from late May by year-end.

Embedded below is Saut's weekly commentary:




You can download a .pdf copy here.


For more from this strategist, head to Saut on characteristics of market breakouts from big bases as well as Saut on the odds of a new secular bull market.

Third Point Offshore June Exposure Report

Dan Loeb's hedge fund Third Point Offshore returned -1.8% in June and is up 12.6% year-to-date according to their June performance report.

Exposure Levels

Third Point was 62.2% long and -14.7% short equities during the month, leaving them with 47.5% net long equity exposure.  Compared to May, they reduced gross exposure, but their net exposure remains the same.

In credit, Third Point is 37.8% long, -5.8% short, leaving them 32% net long.  This is largely the same as the month prior.

Geographically, they're net long the Americas by 61%, EMEA at 8% net long, and Asia at 14% net long.  The only changes here compared to May are a 1% increase in America exposure and a 1% decrease in Asia exposure.


No Longer Reporting Top Holdings

The big takeaway here is that Third Point is no longer disclosing its top 10 holdings and top winners/losers each month.  They used to report this information in their Offshore report, but are no longer doing so.

For the most recent info we have seen, head to Third Point's recent portfolio activity here and you can also check out Dan Loeb's latest letter to Sony.

George Soros on Why We Need to Rethink Economics (Video)

Today we're posting a short interview with legendary investor George Soros.  He's also the co-founder of the Institute for New Economic Thinking and he tackles the question of what's wrong with economics and what can we do to change it?

Embedded below is the video of George Soros on why we need to rethink economics:



While Soros is not involved in the day-to-day affairs, we've posted some of the recent portfolio activity from his family office, Soros Fund Management.

Google Reader Users: Last Chance To Find A New Way To Receive Market Folly's Posts; Instructions Below

After this weekend, Google Reader will no longer exist.  If you've been receiving Market Folly's free updates via RSS feed and use Google Reader, you need to find a replacement ASAP otherwise you'll miss our posts going forward!


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Corvex Management Exercises Call Options on TW Telecom

Keith Meister's hedge fund firm Corvex Management has filed an amended 13D with the SEC on shares of TW Telecom (TWTC).  Per the filing, Corvex has revealed a 6.03% ownership stake in TWTC with 9,069,224 shares.

Corvex's filing indicates they've exercised all call options that we originally outlined when the hedge fund first filed a 13D on TWTC back in May. This latest filing was due to exercise of options on June 27th.  All of their put options expired/terminated as well.  You can view their options activity at the very bottom of this link.

We previously posted Keith Meister's presentation on TWTC from the Ira Sohn Conference where he outlined that it could be a possible takeover target, is a market share gainer, and has balance sheet optionality. 

Per Google Finance, TWTC is "a national provider of managed network services, specializing in business Ethernet, data networking, Converged, Internet protocol-based virtual private network (IP VPN), Internet access, voice, including voice over Internet Protocol (VoIP), and network security services to enterprise organizations, including public sector entities, and carriers throughout the United States, including their global locations."

What We're Reading ~ Hedge Fund Links 6/28/13

Glenview Capital explains grand gains [Hedge Fund Intelligence]

The 2013 hedge fund rising stars [Institutional Investor]

Kyle Bass: Next 18 months will redefine economic orthodoxy for the west [ZeroHedge]

Dalio's Bridgewater seen as a loser in market sell-off [Reuters]

For Third Point manager, it's not easy being short [CNBC]

John Paulson cashes in on CNO Financial bet [Indianapolis Business Journal]

DoubleLine's Jeff Gundlach bought agency MBS in recent days [WSJ]

Hedge fund managed accounts get serious attention [P&I]

A new crop of faces for the hedge fund hall of fame [II Alpha]

Another recent interview with Whitney Tilson [Motley Fool]

David Einhorn playing in the one drop poker tournament [Pokernews]

Marcato Capital Management Trims CyrusOne (CONE) Position

Mick McGuire's hedge fund Marcato Capital Management has filed a Form 4 with the SEC regarding shares of CyrusOne (CONE).

Per the filing, Marcato has sold 383,000 shares on June 26th at prices ranging between $18.95 and $19.10.  After the sales, the hedge fund still retains a position of just over 2.2 million CONE shares.

We previously posted about Marcato's CONE stake in April.

McGuire originally pitched CyrusOne as an idea as part of Cincinnati Bell (CBB).  CONE was spun-off from the company via an IPO.  He pitched CBB/CONE at the Great Investors' Best Ideas investment symposium in Dallas late last year. 

Per Google Finance, CyrusOne is "a owner, operator and developer of enterprise-class, carrier-neutral data center properties. The Company provides mission-critical data center facilities that protect operation of information technology (IT) infrastructure for approximately 500 customers. As of September 30, 2012, the Company’s property portfolio included 23 operating data centers in nine markets: Austin; Chicago; Cincinnati; Dallas; Houston; London; San Antonio; Singapore, and South Bend providing approximately 1,630,000 net rentable square feet (NRSF) and powered by approximately 125 megawatts of utility power."


To hear McGuire's latest investing ideas, register for the Value Investing Congress where he'll be speaking in September, along with other prominent hedge fund managers.  Market Folly readers receive a discount to the event here.

What We're Reading ~ Analytical Links 6/26/13

10 risks we face right now [TheStreet]

On the Sharpe ratio [Research Puzzle]

Value badly lagging glamour: value premium is now a discount [Greenbackd]

Taking a deeper look at Rosetta Stone (RST) [Investing 501]

On the Fed and interest rates [Aswath Damodaran]

Interview with Liberty Media's (LMCA) John Malone [Denver Business Journal]

If cable is dying, why is it still making so much money? [TheAtlantic]

Nook sales tumble 34%, Barnes & Noble rethinks strategy [CNN Money]

Owens Illinois (OI): Glass bottles lend pop to soda makers [WSJ]

Barron's midyear 2013 roundtable [Barrons]

Why boring stocks beat exciting ones [WSJ]

On the IRS' study of REITs [FT]

Government Accountability Office says airline merger reduces competition (duh) [NYTimes]

On art as an investment [NPR]

Inside story of fraud at Ranbaxy, Indian drug company [Fortune]

Larry Robbins Rare Interview on HMA, Tenet & What He Thinks About This Market

Larry Robbins' hedge fund Glenview Capital is having another big year.  This is on the heels of stellar 2012 performance as well.  Robbins made a rare media appearance on CNBC to talk about how he's looking to replace 8 board members at Health Management Associates (HMA).


Robbins on HMA

Given that Robbins has essentially gone activist here (he calls it "suggestivist"), it should come as no surprise that he's made such an appearance to drum up shareholder support for his plan.  After all, Glenview owns around 14% of the company.

While Robbins acknowledges that consolidation is a potential outcome for HMA, he notes that the company needs to line-up a better management team and become an excellent standalone company regardless.  He says,

"The companies that did well not only for our long-term portfolio, but for the long-term portfolio of all their owners, are the companies that not only took advantage of that consolidation transaction but drove their company forward with strong operations and strong use of cash flow in an opportunistic format.  The hospitals are no different, yes there were 7 large public hospital chains with yesterday's news that Tenet will buy Vanguard there are now 6, and there are absolutely key benefits not only strategic, but financial to consolidation between one or more large hospital operators.  We are absolutely open minded that that is one way to drive value, but that is not exclusive of the other way to drive value which is a very strong management team and a very strong path to independence, regardless if we (as HMA) become a division of a larger company or whether HMA goes forth on its own right."


Robbins on THC & the Stock Market Overall

In the interview, Robbins also touched on one of his other large hospital plays, Tenet Healthcare (THC).  He likes their deal for Vanguard and notes the company has made prudent decisions.

THC has been a big winner for Glenview over the past year but we highlighted how Glenview's trimmed their THC position recently.

The hedge fund manager also addressed his view on the market overall: "We are not taking risk-off, we believe this is still a very above average opportunity set for long-term investors and frankly as an industry, we all need to remind ourselves to think and act like owners."

Embedded below is the video of Robbins' CNBC appearance:




For more on this hedge fund, be sure to check out Glenview's presentation on HMA that was released today.

Glenview Capital's Presentation Revitalize HMA - The Case For Change

Earlier today we posted up a rare interview with Glenview Capital's Larry Robbins.  Today his hedge fund released a letter to HMA shareholders as well as a presentation entitled "Revitalize HMA - The Case For Change" as he attempts to replace 8 board members at Health Management Associates (HMA).


Glenview's Letter To HMA Shareholders

Embedded below:





Glenview's Presentation: Revitalize HMA

Embedded below:





Be sure to also watch Robbins' interview as he rarely appears in the media.

Scout Capital's Letter to Tim Hortons' Board

Adam Weiss and James Crichton's hedge fund Scout Capital today filed an amended 13D with the SEC regarding Tim Hortons (THI).  Per the filing, their position size in THI remains unchanged (we originally flagged Scout's activist position in THI here).

Scout has sent a letter to the board of directors outlining their issues with the company and we've embedded it below:




For more on this hedge fund, check out some of Scout's other portfolio activity here.

Mick McGuire's Hedge Fund Trims DineEquity Stake

Mick McGuire's hedge fund firm Marcato Capital Management just filed an amended 13D with the SEC regarding its position in DineEquity (DIN).  Per the filing, Marcato has revealed a 0.3% ownership stake in DIN with 66,916 shares.

This marks a decrease of 38% in their common stock position size as they've sold over 40,000 shares since the end of the first quarter.  As of June 22nd, Marcato ceased to be the beneficial owner of more than 5% of shares, which triggered the filing.  The hedge fund also had numerous stock option transactions which you can view here.

Mick McGuire is an activist investor and will be presenting his latest investment ideas at the upcoming Value Investing Congress.  Our readers can receive a discount to the event by clicking here and using discount code: N13MF2  

But hurry because this offer expires in two days!

Per Google Finance, DineEquity "owns, operates and franchises two restaurant concepts in the casual dining and family dining categories of the restaurant industry: Applebee's Neighborhood Grill and Bar and International House of Pancakes (IHOP). The Company operates in four segments: franchise operations, company restaurant operations, rental operations and financing operations."

What We're Reading ~ Hedge Fund Links 6/21/13

Stanley Druckenmiller on China's future and investing in the new normal [Zero Hedge]

David Tepper says don't fear the taper, stocks still strong [CNBC]

Subprime star Michael Burry looking to raise money again? [WSJ]

John Paulson starting fund betting on land [CNBC]

Hedge fund Brevan Howard hit by emerging market slide [Reuters]

Dan Loeb belief in Abenomics drives pursuit of a Sony shakeup [Bloomberg]

Hedge fund Grandmaster Capital sees crash in China [Reuters]

Hedge fund industry growth stagnant as larger players dominate [MarketWatch]

Carl Icahn increases stake in Dell and calls for stock buyback [Dealbook]

Pershing Square blasts Herbalife customer claims [FINalternatives]

Female hedge fund manager says lean in, it makes you money [WSJ]

In-depth interview with Kase Capital's Whitney Tilson [Outlook India]

Starboard Value urges Smithfield split over sale [FINalternatives]

Aptus Capital founder: risk management key to long term success [FINalternatives]

Blackstone's GSO Capital: lenders of last resort [Institutional Investor]

What We're Reading ~ Analytical Links 6/19/13

Timeless investing wisdom from great hedge fund managers [The Art of Value Investing]

Oakmark's Bill Nygren on Google (GOOG) [Reformed Broker]

Are higher mortgage rates bad for the economy? [ValuePlays]

Overcoming your negativity bias [Dealbook]

James Montier: doing nothing not a bad idea in this market [InvestmentNews]

Pairs trading: performance of a relative-value arbitrage rule [Turnkey Analyst]

A framework to analyze utility stocks [Graham Disciple]

3 things Bill Gates has learned from Warren Buffett [Bill Gates]

Time Warner (TWX) looks fully priced now [Barrons]

On a potential Kabel Deutschland/Liberty Global connection [FT]

On behavioral portfolio management [CFA]

Why Netflix (NFLX) is producing original content [Felix Salmon]

As interest rates rise, banks face new stress tests [Fortune]

US regulator says Deutsche Bank (DB) horribly undercapitalized [Reuters]

Barnes & Noble (BKS) keeps slashing Nook tablet prices [CNNMoney]

Google (GOOG) takes home half of worldwide mobile internet ad revenues [eMarketer]

The Physics of Wall Street: A brief history of predicting the unpredictable [Seeking Alpha]

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).

Soros Fund Discloses New Position in SDL Plc

George Soros' family office Soros Fund Management has disclosed a new position in London listed SDL plc (LON:SDL).  Due to trading on June 18th, Soros Fund now own the equivalent of 3.62% of SDL's voting rights.  Approximately 35% of the stake is held via contracts for difference (CFDs).

Per Google Finance, SDL plc is "is engaged in providing global information management solutions     and related software applications to a variety of multinational businesses. The Company operates in three segments: the language services segment, which is engaged in the provision of a translation     service to customer’s multilingual content; the language technologies segment, which is into the     sale of enterprise, desktop and statistical machine technology developed to help automate and     manage multilingual assets together with associated consultancy and other services, and the content  management technologies segment, which is into the sale of content management technologies."

This is the second new position that Soros Fund has disclosed via the London Stock Exchange recently.  We highlighted Soros' new 1Spatial stake last week.

Nantahala Capital Raises Stake in Motorcar Parts of America (MPAA)

Wilmot Harkey's hedge fund firm Nantahala Capital filed an amended 13G with the SEC regarding shares of Motorcar Parts of America (MPAA).  Per the filing, Nantahal has revealed a 9.45% ownership stake in MPAA with 1,366,613 shares.

This marks around a 12% increase in their position size since the end of the first quarter.  The amended 13G was required due to portfolio activity on June 7th.

Per Google Finance, Motorcar Parts of America is "manufactures , remanufactures and distributes new and remanufactured steering components, brake calipers, master cylinders, hub assembly and bearings, and clutches and clutch hydraulics for virtually all passenger and truck vehicles. It remanufactures alternators and starters for import and domestic cars, light trucks, heavy duty, agricultural and industrial applications. These products are distributed to both the do-it-yourself (DIY) and do-it-for-me (DIFM) markets. Its products are distributed predominantly throughout North America. The Company sells its products to the auto parts retail chains and traditional warehouses chains and to automobile manufacturers for both their aftermarket programs and their warranty replacement programs (OES).The Company operates in two segments: the rotating electrical segment and the under-the-car product line segment."

For more on this hedge fund, we posted up about another stock Nantahala has been buying.

Jeff Ubben, Mick McGuire to Speak at Value Investing Congress: Special Offer Below

It's been announced that ValueAct Capital's Jeff Ubben and Marcato Capital Management's Mick McGuire will both be speaking at the Value Investing Congress in New York City on September 16th.  These are two highly successful activist investors and they'll be presenting their latest investment ideas at the event.

Special Offer For Market Folly Readers

Market Folly readers receive a 36% discount to the event by clicking here and using discount code: N13MF2

Take advantage of this special offer because it expires in just over one week (June 27th).


Full Speakers List

There will be a ton of hedge fund managers presenting investment ideas at this year's New York event.  Here's the full list:

Jeff Ubben, ValueAct Capital
Mick McGuire, Marcato Capital Management
Alexander Roepers, Atlantic Investment Management
Guy Gottfried, Rational Investment Group
Evan Vanderveer & David Shapiro, Vanshap Capital
Mark Boyar, Boyar Value Group
Rahul Saraogi, Atyant Capital India
Chris Mittleman, Mittleman Brothers
Carl Chen & Tom Lu, Temple Honor Asia (Taiwan)
Chris Mayer, Capital & Crisis
Joe Altman & Chris Kyriopoulos, COMPOUND Capital
Whitney Tilson, Kase Capital

Even more speakers will be announced in the coming weeks as well.


Why Attend?

- Hear the latest investment ideas from top hedge fund managers
- One successful pick will easily more than cover your cost of admission
- Huge networking opportunity with other investors/managers
- Discounted registration prices for being a Market Folly reader

Save $1700 off the normal admission price by registering here with our special offer code: N13MF2

Dan Loeb's 2nd Letter to Sony, Pushing For Spin-Off Again

Dan Loeb's hedge fund firm Third Point has been pushing for a partial spin-off of Sony's (SNE) entertainment division.  Loeb initially hand-delivered a letter to Sony's management team, outlining his plan for the company.

Loeb has since increased his position in Sony to around 7% of the company and sent another letter to Sony's CEO which we've posted below via WSJ:

"Mr. Kazuo Hirai
President and CEO
Sony Corporation
7-1, Konan 1-Chome, Minato-ku,
Tokyo 108-0075 Japan 

Dear Mr. Hirai: 

Sony Corporation (“Sony” or “the Company”) appears to be regaining its competitive edge. Recent highlights include the debut of PlayStation 4 with its consumer-friendly approach to next-generation gaming and Xperia, which recently overtook Apple as the #1 smartphone in Japan. We expect the upcoming Xperia Z Ultra to generate similar success in Europe and were pleased to see Vodafone VOD.LN +0.90%’s CEO using an Xperia Z in a recent meeting. 

As a sign of our increased confidence in the Company’s direction under your leadership, funds managed by Third Point LLC (“Third Point”) have increased their stake in Sony to 70 million shares valued at ¥136.5 billion ($1.4 billion), held via 46 million shares of ordinary stock valued at ¥89.7 billion ($944 million) and economic exposure to 24 million shares valued at ¥46.8 billion ($492 million) through cash-settled swaps. Given our large stake, we reiterate our offer to serve on Sony’s Board of Directors. 

Another sign of progress is the news that the Company has retained financial advisors to help evaluate our proposal to publicly list a minority stake in Sony Entertainment (“Entertainment”) through a rights offering backstopped by Third Point. We remain convinced that the proposed transaction will strengthen the Company as a whole. The newly-listed entity will thrive with a governance structure which focuses on increasing profitability, competitiveness and accountability. We expect that this transaction will strengthen rather than diminish Sony’s ability to exploit meaningful synergies between the Entertainment and Electronics divisions, a goal we share. 

Our proposal is a simple one: it contemplates a semi-independent governance structure. We believe that you, Mr. Hirai, should serve as Chairman of both Boards, to promote synergies between Entertainment and Sony Corporation. Entertainment’s dedicated Board should be composed of diverse individuals with deep knowledge of media, entertainment and digital technology, who value creative talent and can institute best practices of governance. Today, Entertainment is a sleeping giant — a multi-platform content business with a global footprint, encompassing leading film and television production, cable networks and music interests. An incredible opportunity exists to integrate Entertainment’s components to create a dominant creative platform for today’s artist-entrepreneurs – but the right leadership at the Board level is imperative. 

An independent Entertainment Board will go a step further: holding management accountable by establishing goals for growth while setting compensation tied to value creation using stock and options. It can also help determine important capital allocation decisions, ensuring that Entertainment’s robust cash flow is used efficiently. A capital shortfall has prevented Sony from taking advantage of attractive acquisition opportunities; instead, the Company has resorted to joint ventures and costly loans to engage in strategic transactions like those in music publishing (i.e. EMI). Our research has confirmed media reports depicting Entertainment as lacking the discipline and accountability that exist at many of its competitors. In light of this track record, it seems difficult to argue that Entertainment would not be strengthened by the transparency that comes with public reporting, an active media analyst community evaluating financial performance regularly, and an expert Board with strongly aligned incentives. 

We understand past Sony management teams have considered a complete spin-off of Entertainment, but concluded that the potential for synergies outweighed the obvious value that would result. We respectfully disagree with any suggestion that listing a minority stake in the Entertainment division would curtail opportunities for cooperation. While we trust management’s judgment that this theoretical opportunity is ripe, it remains an unfulfilled aspiration twenty-four years after the acquisition of Columbia Pictures. Shareholders should not have to wait any longer. We support efforts to create an integrated Sony ecosystem but must not forget that today the Company’s most valuable untapped synergies lie within Entertainment itself. 

While the transaction we have proposed is not a panacea, it will provide a necessary organizational apparatus to streamline an overly cumbersome corporate structure and allow each company to focus on its strengths without sacrificing potential alliances. We encourage management and the newly-appointed Board members to maintain the brisk pace of change you have recommended. Indeed, Sony has an opportunity to serve as a shining example of how structural reforms, the “Third Arrow” of Prime Minister Abe’s economic plan, can be implemented successfully through constructive shareholder engagement. 

Although we have not yet been asked to discuss our ideas with the Company’s investment bankers or Board, we would like to do so promptly. We hope that after seriously considering the merits of our proposal, Sony’s Board will share the enthusiasm that other shareholders have resoundingly expressed for it. We can think of no better opportunity for you and the Board to demonstrate real commitment to your declaration that “Sony Must Change.” 

Sincerely, 

Daniel S. Loeb
Chief Executive Officer"


For more on this hedge fund, we posted up Third Point's latest exposure report.

Scout Capital Goes Activist on Tim Hortons, Boosts Position

Adam Weiss and James Crichton's hedge fund firm Scout Capital has filed a 13D with the SEC regarding shares of Tim Hortons (THI).  Per the filing, Scout has revealed a 5.5% ownership stake in with 8.4 million shares.

This marks a 271% increase in their position size since the end of the first quarter as they only owned 2.26 million shares then.  The 13D was filed due to portfolio activity on June 6th.

The fine print of the filing also outlines what Scout is trying to accomplish with their new activist position:

Scout has "engaged and expect to continue to engage in discussions with senior management of the Issuer with respect to the Issuer’s optimal capital structure, capital expenditures, timing and magnitude of share repurchases, management compensation metrics, and technology investments, among other matters."

Per Google Finance, Tim Hortons is "a quick service restaurant in North America. The Company’s menu includes premium coffee, espresso-based hot and cold specialty drinks, including lattes, cappuccinos and espresso shots, specialty teas, fruit smoothies, home-style soups, grilled Panini and classic sandwiches, wraps, hot breakfast sandwiches and fresh baked goods, including donuts."

For more on this hedge fund, we highlighted a new stock Scout has been buying recently.