Guy Gottfried's Presentation on Glentel & Supremex: Value Investing Congress

We're posting up notes from the 2013 Value Investing Congress in New York.  Next up is Guy Gottfried of Rational Investment Group.  He gave a presentation called "Needles in a Haystack: More Small Cap Values" that focused on Glentel and Supremex.

Guy Gottfried's Value Investing Congress Presentation

His picks at this event on average are up 60% & he pitched 2 Canadian stocks:

Glentel (GLN)

3.4% yield. Wireless retailer. Canada, US, Australia. Second largest Verizon retailer in US.  Carriers pay them a bounty/commission.  Profits from commissions, not phone hardware.

7.5x FCF, Management aligned with shareholders. Good capital allocation record.  Dividend while you wait. 

 

Why cheap?  Made a big acquisition. Wireless Zone. Confusing accounting. Some divisions making no money.  Lots of non-recurring items.  Arcane accounting; put obligation recorded on balance sheets, marked to market.  To make it look cheap, you have to do a lot of adjustments.

Family owns 46% of company.  Good record of acquisitions.  Deals with Costco, kiosks inside.  Some divisions with no cash flow but still valuable.  So many adjustments to income to get the valuation.

He gets $1.66 per share FCF, 7.5x when he adjusts share price for the amt segment. Lots of accounting tricks needed to make it look cheap.

Supremex (SXP)

Illiquid stock.  Canada's largest envelope maker. Declining industry.  60% market share. FCF up due to cost cutting.

3.1x FCF. 7.5% dividend yield, 23% payout ratio.  Cheap because no coverage, conference calls. Cut dividend by 90% a few years ago.

 Activist owns 45%.  Cut debt with FCF by 69%. 1.5x debt.

Catalysts: Likely big dividend hike. Insiders won't waste cash on bad acquisitions.  Could double it to 15% and still be paying less than 50% of FCF.  In the past, this would lead to 30-50% stock move.

Even in FCF decline of double digits, can sustain 15% yield for 5 years. Still cuts debt.

Q&A: How do you know it doesn't decline faster than you expect? A: Believes his double digit decline assumptions are realistic. 


Embedded below is Gottfried's PDF slideshow presentation on Supremex & Glentel:

Be sure to check out the other presentations from the New York VIC here.

Tiger Global Increases BBA Aviation Stake

Chase Coleman and Feroz Dewan's investment firm Tiger Global Management has increased its stake in London listed BBA Aviation (LON: BBA). Due to trading on September 9th, Tiger Global now own 5.11% of BBA Aviation’s voting rights and this represents around a 21% increase in their position size. 

We previously highlighted that Tiger Global first disclosed an interest in BBA in July 2013. 

Per Google Finance – “BBA Aviation plc is a provider of aviation services and aftermarket support to   operators of business and general aviation, military and commercial aircraft. The Company delivers   its services at over 220 locations on five continents. The Company operates through two segments:   Flight Support segment and Aftermarket Services segment. The Company’s Flight Support segment   provides refuelling, ground handling and other services to the business, general and commercial   aviation markets. Its Aftermarket Services segment maintain, manufacture and support engines   and aerospace components, sub-systems and systems. The Flight Support segment consists of   Signature Flight Support and ASIG, and Aftermarket Services and Systems segment consists of Engine   Repair and Overhaul, Legacy Support and APPH. Its Flight Support has approximately 200 locations   worldwide, and its Aftermarket Services has approximately 23 locations worldwide.”

Sohn London Investment Conference: Registration Now Open (Sign Up Early For 25% Discount)

We wanted to let our readers across the pond know that the Sohn London Investment Conference is now open for registration and will take place on October 31st.  They're offering early registration tickets with a 25% discount until October 1st, so you've got 2 weeks to save. You can register for the Sohn London Conference here.

As many of you are already aware, the Sohn conferences are some of the best in the industry.  And most importantly, they benefit great causes by supporting pediatric cancer research and treatment.   

Also, the events are known for great presentations from well-known hedge fund managers.  Check out the speaker line-up below and you'll see why: 

Confirmed Speakers List  

John Armitage, Egerton Capital
Chris Hohn, Children's Investment Fund 
Rob Citrone, Discovery Capital  
Tony Chedraoui, Tyrus Capital 
Mala Gaonkar, Lone Pine Capital 
Eashwar Krishnan, Tybourne Capital (ex-Lone Pine)
Bruno Rocha, Dynamo Capital 
Julian Sinclair, Talisman Global Asset Management 
Masroor Siddiqui, Naya Management (ex-TCI)
Nicolai Tangen, AKO Capital 
Professor David Cunningham, Royal Marsden Hospital 
Peter Harf, Delete Blood Cancer UK 


Event Details  

When: Thursday, October 31st, 2013  
Time: 12:00 to 5:30 PM 
Where: London Marriott Hotel Grosvenor Square


Register Before October 1st For 25% Off

You can click here to take advantage of the discount.

FINforums Annual Hedge Fund Summit

FINforums Annual Hedge Fund Summit  

Thursday, September 19, 2013  |  New York City 

Now in its third year, the FINforums Annual Hedge Fund Summit is a must attend for anyone   involved in the hedge fund industry, including fund managers, high-net-worth investors, institutional investors, lawyers, accountants, technology providers, private bankers, advisors and consultants. 

Keynote Address: 

• Barbara Novick, Vice Chairman, BlackRock 

Topics Covered Include: 

• The Global Macro Outlook 
• The Business of Running a Hedge Fund 
• Tips on Marketing and Capital Raising 
• An Investment Consultants Roundtable 

Registration: 

Buy-Side / Fund Managers / Investors: $395.00 
Service Providers / Other: $695.00 

Friends of MarketFolly receive a 15% discount. Use code: MF15  

Register Today 

Visit www.finforums.com for a more information, including a detailed agenda

What We're Reading ~ Analytical Links 9/4/13

The Manual of Ideas: The Proven Framework for Finding the Best Value Investments [Amazon]

Risk is not a four-letter word [Herb Greenberg]

How the Verizon-Vodafone deal was sealed over gym talk & a breakfast [Globe & Mail]

Vodafone (VOD) spreadsheet post-deal [MicroFundy]

Is discounted cashflow the best way to value a company? [Google Plus]

Profile of billionaire Jorge Lemann [BusinessWeek]

MSFT: Ballmer out, ValueAct in - get ready for the next shoe to drop [All Things D]

Microsoft / Nokia: the deal that makes no sense [Stratechery]

Why is chicken more expensive? Ask McDonald's [BusinessWeek]

The biggest risk Zillow (Z) faces isn't what you think it is [LittleBear]

How 'Teslanaires' made fortunes on Tesla stock [Sun-Sentinel]

CNBC ratings hit 20-year nadir [NYPost]

Bruce Berkowitz Talks Fannie/Freddie Preferreds, AIG & Sears

Fairholme Capital's Bruce Berkowitz owns preferred shares of both Fannie Mae and Freddie Mac and joined David Faber of CNBC to talk about the securities in a rare interview.


Fannie/Freddie Preferreds

We've highlighted before that Berkowitz is seeking dividends on these securities.  The fund manager notes that you can buy the securities at such discounts with the potential for them to trade at par again if they start paying dividends.

Fairholme likes to buy stakes in systemically important institutions and Berkowitz says Fannie & Freddie are just that.


Berkowitz Talks AIG

He also touched on his stake in AIG (AIG).  He said: "Investing is all about comparing what you give versus what you get.  Now when you look at today's stock price with AIG, it still sells significantly below liquidation value.  So at some point the stock market price will meet the book value of AIG."  

He says book value is around $60 per share currently and he expects liquidation value will double in a few years. 

So when will he sell?  He said he'll have to consider the idea of selling in the event that shares eventually trade at book value & higher. 

He also addressed his large position size, noting that Benjamin Graham once distributed shares of GEICO rather than selling when the position size became too large for his fund.  So it sounds like Berkowitz is considering this option as well for the future.


Talks Sears (SHLD)

Berkowitz thinks Eddie Lampert has been doing a good job and he notes he's in the minority in that opinion.  He compares Sears to Simon Properties (SPG) and it's clear Berkowitz views as SHLD as a real estate play.


Embedded below is the video of Berkowitz's interview:



For more on this manager, you can check out Fairholme's latest portfolio in the new issue of our premium newsletter.

Glenview Capital Becomes Large J.C. Penney Shareholder

We know you'd love to stop hearing about J.C. Penney (JCP), but when this many major hedge funds are trading shares, it's worth highlighting over and over again.  This latest activity:  Larry Robbins' Glenview Capital has boosted its holdings in the retailer.

Per a 13G filed with the SEC, Glenview has disclosed a 9.10% ownership stake in JCP with 20,060,830 shares.  This marks almost a 138% increase in their position size since the end of the second quarter.  The filing was required due to activity on August 22nd.

To see the rest of Glenview's US equity portfolio, we recently released a brand new issue of our premium newsletter.


Other Hedge Funds Involved in JCP

As we've flagged earlier: Bill Ackman has sold entirely out of JCP.  Richard Perry's hedge fund bought some of those JCP shares.  And yesterday we saw that Kyle Bass has purchased JCP.  And now we see that Glenview Capital has added to their position.  Not to mention, other big names like Soros Fund also own shares.

We'll continue to monitor the SEC filings for further activity to see which funds are taking advantage of a large seller's exit or are wagering on a company turnaround, or at the very least, stability.

Market Strategist Jeff Saut: September Historically the Worst Month For Markets

It's been a while since we checked in with market strategist Jeff Saut, so below is his latest weekly commentary entitled, "Money and Savings?"  In it, he talks about the difficulty in timing the market and how he's tried to manage risk the past few months while expecting a decline.

While things haven't quite played out as he's thought recently, he still pulls some interesting data out:

"September is truly the worst month historically.  Indeed, September has seen the worst average returns for the D-J Industrials over the past 50 and 100 years."

Embedded below is Saut's latest commentary:




You can download a .pdf copy here.

We've previously posted how Saut has raised cash in anticipation of a decline in stocks.

Viking Global Boosts Triumph Group Stake

Andreas Halvorsen's hedge fund firm Viking Global has filed a 13G with the SEC regarding shares of Triumph Group (TGI).  Per the filing, Viking now owns 5.4% of the company with 2,834,161 shares.

This marks an increase of over 37% in the number of shares they own since the end of the second quarter.  The 13G was required due to portfolio activity on August 20th.

Per Google Finance, Triumph Group "designs, engineers, manufactures, repairs, overhauls and distributes a portfolio of aerostructures, aircraft components, accessories, subassemblies and systems. It offers a range of products and services to the aerospace industry through three groups of operating segments: Triumph Aerostructures Group, whose companies' revenues are derived from the design, manufacture, of metallic and composite aerostructures and structural components; Triumph Aerospace Systems Group, and Triumph Aftermarket Services Group, whose companies serve aircraft fleets. In March 2013, United Technologies Corp sold the former Goodrich Corporation pump and engine control systems business to the Company. In May 2013, the Company announced the acquisition of Primus Composites from Precision Castparts Corp."

For more on this hedge fund, we've also posted up excerpts from Viking's Q2 letter.

Kyle Bass Discloses J.C. Penney Stake; Perry Buys Some of Ackman's Shares

If you aren't tired of hearing about J.C. Penney yet (JCP), here's even more hedge fund activity in the name:

Kyle Bass Starts J.C. Penney Stake

First, a 13G filed with the SEC has revealed that Kyle Bass' Hayman Capital owns a 5.2% stake in J.C. Penney (JCP) with over 11.4 million shares. This is a brand new position for the hedge fund as they did not own any JCP at the end of the second quarter.


Perry Buys Ackman JCP Shares 

Recently, we highlighted how Richard Perry's hedge fund Perry Capital had taken a position in JCP.  Well, they've since added to that position.  We also flagged how Bill Ackman was exiting his JCP stake and as it turns out, Perry was one of the buyers, purchasing 3 million shares at $12.90.  They now own around 8.62% of the company

This whole JCP saga will make for a very interesting investing/business school case study one day.

Stock Pick Performance From Value Investing Congress Speakers Presenting at September's Event

The Value Investing Congress is only a few weeks away and will take place on September 16th & 17th in New York.  MarketFolly readers can receive discounted admission by clicking here and using code: N13MF7  This code expires tonight so be sure to take advantage.


Performance of Last Year's Picks From Speakers

We thought we'd check in on the performance of the stock picks from last year's Value Investing Congress.  These picks are from speakers who presented last year that will also be presenting again this year.

Here's the performance breakdown from October 3rd, 2012 until August 29th, 2013:

- 17 out of 21 picks outperformed the S&P 500

- Average performance of picks: +49%

- Performance of S&P 500 over same time frame: +13.3%


Jeff Ubben's Picks
Long Valeant Pharmaceuticals (VRX) +77.1%
Long Moody's (MCO): +44.2%
Long CBRE (CBG): +14.3%
Long Motorola Solutions (MSI): +11.7%

He also mentioned these names: Halliburton (HAL): +42.5%, Adobe (ADBE) +41%, & C.R. Bard (BCR): +9.8%


Mick McGuire's Picks
Long Gencorp (GY): +50.5% 
Long Brookfield Residential Properties (BRP): +39.6%

Long Alexander & Baldwin (ALEX): +28.7%


Alex Roepers' Picks
Long Rockwood Holdings (ROC): +34.9%
Long Energizer (ENR): +34%
Long Clariant (CLN VX): +33.9%
Long FLSmidth (FLS DC): -5.7%
Long Joy Global (JOY): -45.1%


Whitney Tilson's Picks
Long Netflix (NFLX): +409.8%
Long Howard Hughes (HHC): +46%
Long Berkshire Hathaway (BRK.A): +26.1%


Guy Gottfried's Picks
Long Canam Group (TSE:CAM): +81.2%
Long ClubLink Enterprises (TSE:CLK): +19.1%


Bob Robotti's Picks
Long Calfrac Well Services (TSE:CFW): +34.8%


As you can see, these managers' picks performed quite well on average.  And don't forget: each one of them will be presenting their new picks at this year's event in a few weeks along with plenty of other new speakers (full list of speakers here).


Hear Ubben, McGuire, Roepers & More Pitch Their Latest Ideas

Find out what stock picks these hedge fund managers will pitch at this year's Value Investing Congress in September.  Market Folly readers can save $800 off admission by registering here and using code: N13MF7  Remember, the code expires tonight!

Sequoia Fund's Investor Day Transcript: Valeant Pharmaceuticals, Google, Sirona Dental Systems & More

Ruane Cunniff Goldfarb's Sequoia Fund had its investor day earlier this summer and they finally released a transcript of the event. 

In it, they talk about their big position in Valeant Pharmaceuticals (VRX) numerous times.  Just keep in mind that since their investor day, Valeant has acquired Bausch & Lomb. 

Sequoia Fund managers also talked about their investment thesis on World Fuel Services (INT), Ritchie Brothers (RBA), Sirona Dental Systems (SIRO), Google (GOOG), Rolls-Royce, Advance Auto Parts (AAP), O'Reilly (ORLY) and many other stocks.

Additionally, the portfolio managers talked about their investment process and how they value companies.

Embedded below is Sequoia Fund's annual investor day transcript.  It's an in-depth read that we highly recommend:




You can download a .pdf copy here.

Mark Yusko & Morgan Creek Capital's Q2 Review and Outlook

Today we present Mark Yusko's second quarter review and outlook from Morgan Creek Capital Management.

Embedded below is the Q2 review:




For more on this manager, we've also previously highlighted Mark Yusko's presentation on Japan from The Grant's Conference.

Bill Ackman Dumps J.C. Penney Stake

If you missed it, Bill Ackman's hedge fund Pershing Square Capital Management has dumped its stake in retailer J.C. Penney (JCP) according to an amended 13D filed with the SEC. 

Ackman offloaded the shares to Citigroup, who in turn will sell them to other investors.  Dow Jones reported that Citi offered the shares between $12.50 and $12.90.

Pershing had previously owned 18% of the company and it looks like they'll lose ~$400 million on the trade.  To walk through Ackman's thinking on his JCP decision, you can check out Pershing Square's Q2 letter which gave hints that he was leaning toward selling.

Some investors have called Ackman's sale a 'capitulation' of sorts and a potential contrarian signal for the stock to head higher, but then you also have to consider that it would still be a bet on the company's fundamentals.

Ackman was also recently interviewed by Charlie Rose.

Lone Pine Capital Adds to B/E Aerospace, Dollar General & DSW

Steve Mandel's hedge fund firm Lone Pine Capital has filed 3 separate 13G's with the SEC.  Here's the breakdown:


B/E Aerospace (BEAV)

First, Lone Pine has disclosed a 5% ownership stake in B/E Aerospace (BEAV) with 5,285,850 shares.  The 13G filed with the SEC was required due to portfolio activity on August 16th and represents a 22% increase in their position size since the end of Q2.

BEAV was analyzed in our premium Hedge Fund Wisdom newsletter last November and is up over 58% since then. Lone Pine originally started their BEAV position back in the first quarter of 2012.

Per Google Finance, B/E Aerospace is "a manufacturer of cabin interior products for commercial aircraft and business jets and distributor of aerospace fasteners and consumables. The Company sells its products directly to the airlines and aerospace manufacturers. It also designs, engineers and manufactures customized fully integrated thermal and power management solutions for participants in the defense industry, aerospace original equipment manufacturers (OEMs) and the airlines. In addition, it provides aircraft cabin interior reconfiguration, program management and certification services. The Company operates in three segments: commercial aircraft, consumables management and business jet."


Dollar General (DG)

Second, Mandel's hedge fund also revealed a 5.4% ownership stake in Dollar General (DG) with 17,684,604 shares.  The 13G was filed with the SEC due to trading activity on August 14th.  Their position size has increased almost 30% since the end of Q2.

Per Google Finance, Dollar General is "a discount retailer in the United States primarily in the southern, southwestern, midwestern and eastern United States. The Company offers a selection of merchandise, including consumables, seasonal, home products and apparel. The Company's merchandise includes national brands from manufacturers, as well as private brand selections with prices at substantial discounts to national brands. It offers its merchandise at everyday low prices through its convenient small-box (approximately 7,200 square feet) locations"


DSW (DSW)

Lastly, Lone Pine has disclosed a 5.6% ownership stake in DSW (DSW) with 2,045,064 shares.  This means they've over doubled their exposure to this name since the end of the second quarter.

The 13G Lone Pine filed with the SEC signifies portfolio activity on August 16th.

Per Google Finance, DSW is "a United States branded footwear and accessories specialty retailer.  DSW has two segments: the DSW segment, which includes the DSW stores and dsw.com sales channels, and the leased business division segment"

For more on this hedge fund, we've also highlighted some of Lone Pine's other activity here.

Dan Loeb's Third Point Boosts Sotheby's Stake: 13D Filing

Dan Loeb's hedge fund firm Third Point has filed a 13D with the SEC regarding shares of Sotheby's (BID).  In it, they reveal a 5.7% ownership stake in BID with 3,925,000 shares.

This marks a 57% increase in their position size since the end of the second quarter.  Third Point initially started their BID stake in Q1 of this year, ramped it up in Q2, and have now added to it further.  The 13D filing was required due to portfolio activity on August 15th.


Other Activist Investors Involved

Third Point's 13D contains the standard boilerplate saying that they intend to engage the board of management.  It's also worth highlighting that another activist investor is involved in shares as well: Mick McGuire's Marcato Capital Management.  They disclosed a stake in BID at the end of July.  Additionally, Nelson Peltz's Trian Fund Management just started a new position in Sotheby's in Q2 as well.

Per Google Finance, Sotheby's is "a global auctioneer of authenticated fine art, decorative art, and jewelry. The Company operates in three segments: Auction, Finance, and Dealer. The Company's Auction segment functions as an agent by offering works of art for sale at auction and by brokering private sales of artwork. Sotheby’s also purchases and resells works of art through its Dealer segment, conducts art-related financing activities through its Finance segment and is engaged, to a lesser extent, in brand licensing activities. The Sotheby’s name is also licensed for use in connection with the art auction business in Australia, art education services in the United States and the United Kingdom and print management services."

Bill Ackman's Interview With Charlie Rose

Bill Ackman of hedge fund Pershing Square Capital Management recently appeared on Charlie Rose for an interview. 

While Ackman has been in the media a lot regarding his short position in Herbalife (HLF) and long position in J.C. Penney (JCP), this is the first appearance Ackman himself has made in quite some time.  As such, we wanted to highlight his latest thoughts on the various situations he's involved in.

Embedded below is the video of Ackman's interview:



If you missed it earlier, you can also check out Ackman's Q2 letter.

David Einhorn & Jim Chanos on Similarities Between Poker & Investing

Bloomberg recently highlighted a poker tournament featuring hedge fund managers David Einhorn and Jim Chanos.  In it, they asked the hedgies to compare poker to investing. 

Einhorn said that, "Over time, as you invest in lots and lots of stocks over a long period of time, skill I think dominates.  And the same is true in poker.  If you play lots and lots of hands and lots and lots of tournaments, eventually the better players are going to come out on top." 

Chanos added that, "Like in investing, poker you deal with incomplete information."

This comparison is by no means new.  A few years ago, we highlighted the link between hedge fund managers and poker as many hedgies have played the game and commented on the similarities.

Embedded below is the Bloomberg video:



H/T Santangel's Review

Bill Ackman's Q2 Letter: Updates on Pershing's Positions

The New York Post has shared Bill Ackman's Q2 letter and it's quite in-depth and worth highlighting.  The Pershing Square manager provides updates on many of his positions, including his new position in Air Products & Chemicals (APD), his controversial Herbalife (HLF) short, as well as their troubled stake in J.C. Penney (JCP) and more.

Embedded below is Ackman's Q2 letter:




For more from this manager, you can check out Ackman's presentation on Procter & Gamble.

What We're Reading ~ Hedge Fund Links 8/26/13

Christopher Hohn turns up heat on EADS [II Alpha]

Hedge funds lag on short problems [ValueWalk]

How the hedge fund pricing model of 2/20 is changing [247wallst]

Lansdowne's Paul Ruddock defends merits of short selling [ValueWalk]

Comparing 20-year hedge fund & S&P 500 performance [SoberLook]

Family offices are increasingly wary of hedge funds [Forbes]

Hedge funds and general solicitation - don't leap in just yet [Lexology]

The final frontier in hedge fund outsourcing [FierceFinanceIT]

Very few managers outsourcing COO role [COOConnect]

Jeff Ubben's biggest battle yet: Microsoft [II Alpha]

On Larry Summers' hedge fund stint [NYTimes]

Eric Sprott on gold [Globe & Mail]

Ackman blasts Herbalife [NYPost]

In praise of activist investment [Reuters]

JOBS act will create hedge fund jobs [HedgeCo]

As investors jump ship, SAC looks to cut back [Dealbook]

Phil Falcone/Harbinger agree to settlement [SEC]