Warren Buffett's Berkshire Hathaway Acquires More DaVita Shares

In a Form 4 filed with the SEC, Warren Buffett's Berkshire Hathaway has revealed new purchases in shares of DaVita (DVA). 

On November 6th, 7th, and 8th, Berkshire acquired 3,700,294 shares in total at prices ranging from $52.78 to $56.41.

After all was said and done, Berkshire now owns 35,147,124 shares of DaVita.  Keep in mind that the company had a 2-for-1 stock split on September 6th of this year.

This has been a position Berkshire has been heavily adding to ever since new portfolio managers Todd Combs and Ted Weschler came onboard.  We've highlighted Berkshire's purchases of DVA shares earlier this year in the summer, as well as in 2012.

Per Google Finance, DaVita is "a provider of dialysis services in the United States for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD)."

For more on Berkshire, head to a recent interview with Warren Buffett where he said stocks are fairly priced.

Passport Capital Discloses 58.com Stake

John Burbank's hedge fund firm Passport Capital has filed a 13G with the SEC regarding shares of 58.com Inc (WUBA).  Per the filing, Passport now owns 11.8% of the company with 2,821,526 shares (via 1,410,763 ADR shares).  The filing was made due to activity on November 1st.

Per Yahoo Finance, the company "Beijing 58 Information and Technology Co., Ltd. owns and operates an on-line classified advertisement services Web Site under the name 58.com. The Web Site helps individuals and SMEs to broadcast and search information relating to job opportunities, housing, dating, community events, services, and trading of second hand products. Beijing 58 Information and Technology Co., Ltd. was founded in 2005 and is based in Beijing, China."

For more from this hedge fund, head to John Burbank's thoughts at the Excellence in Investing Conference, as well as Burbank's comments at the Alpha Hedge West Conference.

Scout Capital Increases COTY Holdings

Adam Weiss and James Crichton's hedge fund firm Scout Capital Management filed a 13G with the SEC regarding shares of COTY (COTY).  Per the filing, Scout has revealed a 4.3% ownership stake in COTY with 3,530,000 shares.

This marks an increase of 30,000 shares since the the end of the second quarter.  The new filing was required due to activity on October 28th.

Per Google Finance, COTY is "engaged in the manufacturing, marketing and distribution of women’s and men’s fragrances, color cosmetics and skin and body care related products globally. The Company operates in three segments: Fragrances, Color Cosmetics and Skin & Body Care. The Company’s power brands consists of adidas, Calvin Klein, Chloe, Davidoff, Marc Jacobs, OPI, philosophy, Playboy, Rimmel and Sally Hansen. The Company sells products in each of its segments through retailers, including hypermarkets, supermarkets, independent and chain drug stores and pharmacies, upscale perfumeries, upscale and mid-tier department stores, nail salons, specialty retailers, duty-free shops and traditional food, drug and mass retailers."

For more portfolio activity from Scout Capital head here.

Dan Loeb Discloses New FedEx Stake

Third Point's founder Daniel Loeb today disclosed a new position in FedEx (FDX) at the Dealbook conference which was shown on CNBC and said he met with the CEO.

Loeb said that, "We had a very constructive discussion about the company."  He also commented that he is not looking to oust the CEO.

Third Point isn't the only prominent hedge fund interested in the company, either.  Our Hedge Fund Wisdom newsletter highlighted that John Burbank's Passport Capital and Richard Perry's Perry Capital both initiated stakes in FDX in the second quarter.  Perry's position was quite notable at the time, as they owned over $384 million worth and it was one of their largest disclosed US longs.

The thesis on this name focuses on improvement in profitability, bringing margins more in-line with competitors, as well as favorable tailwinds like gas prices.

Loeb also talked about shareholder activism and specifically about Sony (SNE).  Loeb argues they're more like private equity investors.  When asked whether or not Sony was a bet on Japan, Loeb replied, "We remain very bullish on Japan."

Embedded below are the videos of Loeb's comments:

Video 1 on FedEx:

Video 2 on Sony:

Video 3 on activism:

Video 4 on Herbalife:

For more on this hedge fund, we've posted up Third Point's Q3 letter as well.

Eminence Capital Goes Activist on Mens Wearhouse, Now Largest Shareholder

Ricky Sandler's hedge fund firm Eminence Capital recently filed an activist 13D with the SEC regarding shares of Men's Wearhouse (MW).  Per the filing, Eminence has disclosed a 9.8% ownership stake in the company with 4,684,200 shares, making them the largest shareholder.

The filing shows Eminence was buying MW shares in early October around $34 and then later in the month between $42 and $44.

Men's Wearhouse has recently been approached by fellow retailer Jos A. Bank (JOSB) about buying the company.  MW rebuffed the offer and now Sandler has sent a letter to MW's board asking them to reconsider.

While Sandler agrees that JOSB's $48 offer for MW undervalues the company, he argues that there are large synergies to be had in a merger.

In his letter, Sandler asks for the company to, "1) instruct your financial advisors to evaluate MW's strategic alternatives, including soliciting competing proposals to acquire MW and analyzing a leveraged recapitalization of MW in the public marketplace, and 2) enter into a dialogue with JOSB regarding a possible combination.  We intend to exercise our rights as shareholders to hold you accountable if you fail to take these actions by close of business on November 11th."

For more on this hedge fund, we've covered Eminence Capital's portfolio activity here.

Pennant Capital Boosts BioScrip & MRC Global Positions

Alan Fournier's hedge fund firm Pennant Capital has filed 2 separate 13G's with the SEC regarding two of their pre-existing positions.


BioScrip (BIOS)

First, Fournier has revealed an increased stake in BioScrip (BIOS).  Per the filing, Pennant now owns 8.44% of the company with 5,737,773 shares.  This is an increase of 250% in their position size since the end of the second quarter.  The filing was made due to activity on October 30th.

Per Google Finance, BioScrip is "a provider of pharmacy and home health services, which partners with patients, physicians, hospitals, healthcare payors and pharmaceutical manufacturers to provide clinical management solutions and the delivery of prescription medications and home health services. Its platform provides service capabilities and the ability to deliver clinical management services, which offers patients a community-based and home-based care environment. Its core services are provided in coordination with, and under the direction of the patient’s physician. Its home health professionals, including pharmacists, nurses, respiratory therapists and physical therapists, work with the physician to develop a plan of care suited to its patients’ specific needs. In August 2013, BioScrip Inc completed the acquisition of the business of CarePoint Partners Holdings LLC and its subsidiaries."


MRC Global (MRC)

Second, the hedge fund also increased its holdings of MRC Global (MRC). Per the 13G filing, Fournier's firm now owns 7.34% of MRC with 7,468,433 shares.  This marks an increase of around 13% since the end of Q2.  The filing was required due to activity on November 7th.

Per Google Finance, MRC is "the distributor of pipe, valves and fittings (PVF) and related products and services to the energy industry. The Company operates in two segments: North American segment and International segment. Its North American segment includes over 180 branch locations, six distribution centers in the United States, one distribution center in Canada, 11 valve automation service centers and over 170 pipe yards located in the oil and natural gas regions in North America. Its International segment includes over 40 branch locations throughout Europe, Asia and Australasia with distribution centers in each of the United Kingdom, Singapore and Australia and 10 automation service centers in Europe and Asia. In July 2013, MRC Global Inc announced that it has completed the previously announced acquisition of the operating assets of Dan H. Brown, Inc., D/B/A Flow Control Products (Flow Control)."

What We're Reading ~ Analytical Links 11/6/13

Individual investor bullishness hits 6 year high [PragCap]

What to do in this market [Brooklyn Investor]

On a consistent and repeatable investment process [Research Puzzle]

Portfolios With Purpose: Stock picking for a cause [WSJ]

The 20 smartest things Jeff Bezos has ever said [Fool]

The bull case on Valeant Pharmaceuticals [Barrons]

Quick glance at Du Pont [Modern Graham]

A look at QEP Resources and Rick's Cabaret [HF Intelligence]

Springleaf Holdings and the re-emergence of subprime consumer lending [CFA]

Take-Two: A compelling value with 2 asymmetric options [First Adopter]

Disney and Dish wrangle not over broadcast fees, but the future of TV [NYTimes]

Can companies maintain their extraordinarily high margins? [WSJ]

Whitney Tilson's observations from his trip to China [Seeking Alpha]

On China's pollution problem [NYTimes]

Ajit Jain feeds Buffett's hunger [Insider Quarterly]

Why Twitter's IPO is a bigger deal than Facebook's [WSJ]

For new MBA's, tech more appealing than Wall Street [WSJ]

Lee Cooperman Discloses dELiA's Stake

Lee Cooperman has filed a 13G with the SEC disclosing a brand new equity position in dELiA's (DLIA).  Per the filing, he owns 6.93% of the company with 4,761,905 shares.

The filing was made due to portfolio activity on October 24th.  On that day, the company also issued over 20.7 million shares upon automatic conversion of over $21.7 million in principal of the company's secured 7.25% convertible promissory notes.

Just last week, we highlighted how David Gallo's Valinor Management started a DLIA stake as well.

*Update: II Alpha talked to Cooperman about the stake and he said it was for his personal account and he bought it "because a guy I respect recommended it to me.  I have done no original work other than taking my granddaughter shopping in one of their stores as she likes the merchandise."

Lee Cooperman files with the SEC under his own name, but his hedge fund Omega Advisors files its SEC documents under that name as well, so it's interesting to hear this is a personal position.  It's also interesting to hear that he simply bought this stock on a tip with hardly any research.

Per Google Finance, dELiA's is "a retail company comprised of two lifestyle brands primarily targeting teenage girls and young women. The Company generates revenue by selling predominantly to teenage consumers through direct mail catalogs, Websites and retail stores. It operates in dELiA*s brand. Through its e-commerce Webpages, catalogs and retail stores, dELiA*s (the brand) offers a variety of product categories to teenage girls to cater to an entire lifestyle. Through its catalogs and the e-commerce Webpages, it sells many name brand products along with its own brand products in key teenage spending categories. These products include apparel and accessories. Its mall-based dELiA*s specialty retail stores derive revenue primarily from the sale of apparel and accessories and, to a lesser extent, branded apparel to teenage girls. It operates in two segments: direct marketing and retail stores."

For more on Omega Advisors, head to Cooperman's 4 long ideas at the Invest For Kids Chicago conference.

Bill Ackman's Talk on Investing at Oxford

Bill Ackman of hedge fund Pershing Square Capital Management recently sat down as part of Saïd Business School & the University of Oxford's distinguished speaker series.  Ackman talks about investing, how he got started in the hedge fund business, activism, and other finance topics.

For more on Ackman, we've also posted up Pershing Square's Q3 letter and some recent Pershing Square portfolio activity.

Embedded below is the video of Ackman's talk:



H/T to ValueWalk for the find

Hedge Fund Investment Conferences in 2013: Links to All Our Notes

The 2013 investment conference season has been a whirlwind with a ton of conferences recently.  To make sure you didn't miss anything, we're aggregating all our notes in one place so you can easily find this year's stock picks from top hedge fund managers.  Click each link below to go to the separate notes.


Sohn London Conference Notes 2013:  Chris Hohn, Nikolai Tangen, John Armitage, Mala Gaonkar, Julian Sinclair, Eashwar Krishnan, Ross Turner, Mas Siddiqui, Bruno Rocha, Andrew Weiss.


Invest For Kids Chicago Notes 2013: Marc Lasry, Steve Eisman, Lee Cooperman, Nelson Peltz, Dinakar Singh, Sam Zell, Jeff Gundlach, Mark Kingdon, Steve Kuhn, Rick Rieder, Stephen White, Peter Zaldivar


Great Investors' Best Ideas Dallas Notes 2013: Michael Price, Chuck Akre, T. Boone Pickens, Karen Finerman, Tom Russo, Caroline Cooley, Tom Gayner   


Excellence in Investing: San Francisco Notes 2013:  John Burbank, Kurt Billick, Mick McGuire, Mason Morfit, Christopher James, David Herro, Malcolm Fairbairn, Christopher Lord, Brian Zied, Carl Kawaja, Michael Moe, Christopher Balding


Alpha Hedge West Conference Notes 2013: Kyle Bass, John Burbank, Bruce Richards, Kurt Billick, Peter Lupoff, Worth Gibson, Paul Twitchell, Jason Huemer, Philip Weingord, Emanuel Friedman, Andrew Springer, Ronnie Jaber, Michael Schmanske, Christopher Cole, Zem Sternberg, Joe Reynoso


Value Investing Congress New York Notes 2013:  Jeff Ubben, Jeff Smith, Mick McGuire, Winklevoss Twins, Don Yacktman, Alex Roepers, Guy Gottfried, Michael Castor, John Mirshekari, Chris Mittleman, Clifton Robbins, Mark Boyar, Joe Altman, Chris Kyriopoulos, Harvey Sawikin, Rahual Saraogi, Charles de Valux, Whitney Tilson, Daniel Miller, Evan Vanderveer, David Shapiro, Charl Chen, Tom Lu, Chris Mayer


London Value Investor Conference Notes 2013:  Howard Marks, Michael Price, James Montier, Gary Harding, Anthony Bolton, Gary Channon, Richard Oldfield, Simon Denison-Smith, Ian Lance, Nick Purves, Jeremy Hosking, Richard Titherington


Virginia Investment Symposium Notes 2013: Julian Robertson, Paul Tudor Jones, John Griffin


Sohn New York Conference Notes 2013: Stan Druckenmiller, David Einhorn, Steve Eisman, Paul Singer, Jim Chanos, Kyle Bass, Bill Ackman, Jeff Gundlach, Jonathon Jacobson, Mitch Julis, Keith Meister, David Stemerman, Li Lu, Clifton Robbins, Tor Olav Troim, Simeon McMillan


Value Investing Congress Las Vegas Notes 2013: Steve Romick, Phil Goldstein, John Hempton, David Nierenberg, Tim Eriksen, Marcelo Lima, Geoffrey Batt, Zack Buckley, Isaac Schwartz, Amitabh Singhi, Chan Lee, Albert Yong, Jeff Pintar, Chris Mayer, Whitney Tilson, Guy Gottfried, Mark Boyar, Vitaliy Katsenelson, Zeke Ashton, Joe Altman, Chris Kyriopoulos, David Hurwitz, Chris Mittleman, Ori Eyal, Harris Kupperman

Perry Capital Trims North American Energy Partners Position

Richard Perry's hedge fund firm Perry Capital has filed an amended 13D with the SEC regarding its stake in North American Energy Partners (NOA).  They've disclosed a 9.71% ownership stake in NOA with 3,526,968 shares.

This is a decrease of 23% in their position size since the end of the second quarter as they sold over 1 million shares. 

The filing details that Perry sold a bulk of shares on October 31st at $6.00 per share, with some other sporadic sales in late October as well.

Per Google Finance, North American Energy Partners "provides a range of heavy construction and mining and pipeline installation services to customers in the Canadian oil sands, industrial construction, commercial and public construction and pipeline construction markets. The Company’s primary market is the Canadian oil sands, where it supports the customers’ mining operations and capital projects. NAEPI provides services through all stages of an oil sands project’s lifecycle, its core focus is on providing recurring services, such as contract mining, during the operational phase."

You can view Perry Capital's other recent portfolio activity here.

Baupost Group Increases Idenix Pharmaceuticals Stake

Seth Klarman's hedge fund firm Baupost Group has filed a 13D with the SEC regarding shares of Idenix Pharmaceuticals (IDIX).  Per the filing, Baupost has revealed a 27.55% ownership stake with 36,910,868 shares.

This marks an increase of 38% in their position size since the end of the second quarter.   The 13D contains the standard boilerplate that they might engage in discussions with management.

Recent trading activity from Baupost is also outlined in the filing.  Klarman's firm bought the majority of their new shares on November 1st at $3.98, and in early October at prices ranging from $3.56 to $4.85.

This is the second time that Baupost has increased its stake in Idenix this year, as we also highlighted their purchase back in late January.  The main difference now is that Baupost has switched from a passive 13G filing, to a potentially activist 13D filing.

Per Google Finance, Idenix Pharmaceuticals is "a biopharmaceutical company engaged in the discovery and development of drugs for the treatment of human viral diseases with operations in the United States and France."

Soros Fund Boosts Mercury Systems Stake

George Soros' family office Soros Fund Management has filed a 13G with the SEC regarding their stake in Mercury Systems (MRCY).  Per the filing, Soros has revealed a 5.02% ownership stake in MRCY with 1,666,666 shares.

This means their equity stake has increased to the tune of 400,000 shares since the end of the second quarter, or around a 32% boost from their last disclosure.  The latest filing was required due to portfolio activity on October 22nd. 

This has been a longstanding position for Soros as we covered their stake back in 2009, when they owned equity and also convertible notes.

Per Google Finance, Mercury Systems is "formerly Mercury Computer Systems, Inc., designs, manufactures and markets real-time digital signal and images processing sub-systems and software for specialized defense and commercial markets. The Company's solutions are involved in a range of applications, processing and transforming sensor data to information for storage, analysis and interpretation. In military reconnaissance and surveillance platforms, the Company's sub-systems receive, process, and store real-time radar, video, sonar and signals intelligence data. The Company operates in two segments: Advanced Computing Solutions and Mercury Federal Systems."

For more on this firm, head to Soros Fund's recent portfolio activity.

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

What We're Reading ~ Analytical Links 10/31/13

A look at TransDigm Group (TDG) [Brooklyn Investor]

Repeatedly burned, short sellers avoid momentum stocks [Reuters]

Liberty Global: On the European empire John Malone's built [BusinessWeek]

Michael Lewis on the next crisis [BusinessWeek]

For once mighty Sears, pictures of decay [Dealbook]

Amazon and the profitless business model fallacy [Eugene Wei]

A write-up on Emerald Oil (EOX) [Dedwardssays]

Trucking companies inching toward using natural gas as fuel [WSJ]

The new reality of international bonds [Vanguard]

Time to buy former retailing darling Tesco [Institutional Investor]

GlaxoSmithKline's China conundrum [FT]

Moats widen for railroads & luxury goods [Morningstar]

Eastman Chemical: specialty chemical for commodity price [Seeking Alpha]

Current tech euphoria in Silicon Valley isn't exactly like 1999 [WSJ]

Great Investors' Best Ideas Conference Notes 2013: Price, Akre, Gabelli, Pickens, Russo & More

Below are some brief notes from the 7th annual Great Investors' Best Ideas Conference in Dallas benefiting the Michael J. Fox Foundation for Parkinson's Research and the Vickery Meadow Youth Development Foundation.


Notes From Great Investors' Best Ideas Conference


Michael Price (MFP Investors): He pitched three ideas:  long Hospira (HSP), long Songbird Estates (SBD.LN) and long Dolby Labs (DLB).  HSP has seen value guys buying it, transitioning away from growth investors as the investor base changes.  The company has good free cash flow and he thinks the stock can hit $60.  His thesis on Songbird is a discount to NAV story (around 30%).  Dolby (DLB) has a ton of cash and no debt with huge royalty streams (80% of revenue).  As tablets and PCs continue to grow, they'll make money.


Chuck Akre (Akre Capital Management):  His picks were Moody's (MCO) which he likes due to its oligopoly position, solid return on equity and pricing power,  as well as O'Reilly (ORLY), the auto parts supplier which recently bought CSK Auto and the integration has gone well and now they're buying back shares.  His presentation also focused on how you should stick with your circle of competence and acknowledge when you're unsure of things. Focus on 3 things in a business:  growth of capital (high ROIC), good management, and solid reinvestment (how they used past FCF).  The price you pay is very important.


T. Boone Pickens (BP Capital):  He pitched Diamondback Energy (FANG) which he likes for its growth potential, no debt and a lot of cash.  He also likes Basic Energy Services (BAS) as excess capacity has been taken out.  He also touched on his picks from last year: National Oilwell Varco (NOV) which he still likes, as well as Pioneer Resources (PXD), almost a double and he likes the Permian basin acres (continues to like this stock as well).


Karen Finerman (Metropolitan Capital Advisors):  She pitched North Atlantic Drilling (NADL.NS) traded in Norway which was a spin-off from Seadrill (SDRL).  The spread between non-Norway rates and Norway rates is very big and many contracts already locked in.  She likes the cheap valuation, big dividend (potential for it to grow), says there's limited downside due to the backlog. There's also a catalyst with an IPO coming for a US listing and it won't be too dilutive. 


Tom Russo (Gardner, Russo & Garnder):  He pitched Nestle (NSRGY) and Berkshire Hathaway (BRK.A/B).  It seems like Russo always pitches Nestle when he speaks somewhere.  He's a global value investor and is looking for companies like See's Candies and invests for the long-term.  They have a lot of European companies in their portfolio and like market volatility as it provides opportunities to long-term investors.  The last major portfolio buys they made were AB Imbev (BUD) and Mastercard (MA) 3 years ago.


Mario Gabelli (Gabelli Funds):  He presented Cablevision (CVC) as a potential buyout candidate with John Malone (and Charter Communications) active and pushing for consolidation.  Will the Dolans sell CVC?  Argues that the company is worth up to $23 in a buyout, versus current levels of around $16.


Caroline Cooley (Crestline Investors):  She's focused on event-driven plays.  She specifically mentioned Macquarie Infrastructure (MIC) which is involved with infrastructure building, has a nice yield and could see it head higher.  It's undervalued because it cut the dividend in '09 and has limited sell-side following. says this story is probably in the middle innings.


Tom Gayner (Markel):  He pitched General Electric (GE).  He pitched the same stock at GIBI in 2007 when it was $40 and now the stock's at $25.  They still own shares and now have a $23 cost basis.


For more conference notes, we also posted up notes from Invest For Kids Chicago (Lasry, Eisman, Cooperman).

Keith Meister's Corvex Management Files 13D on Fidelity National Financial

Keith Meister's activist hedge fund Corvex Management filed a 13D with the SEC regarding shares of Fidelity National Financial (FNF).  They've disclosed a 7% ownership stake in the company with 17,435,547 shares.  This is a brand new position for them.

Their stake includes an aggregate of 14,601,900 shares underlying call options, so that's worth noting. Over 8.1 million of these shares are represented by calls with a $15 strike and August 29, 2014 expiration.  Over 6.4 million shares are via October 31, 2014 calls with a $16 strike.  Shares of FNF currently trade around $28.

Meister's activist filing says that they are "supportive of the Issuer's announced acquisition of Lender Processing Services" and they have had and may continue to have discussions with management.  The filing was made due to activity on October 21st.

Per Google Finance, Fidelity National Financial is "a holding company. FNF, through its subsidiaries, provides title insurance, mortgage services and diversified services. FNF operates in four segments: Fidelity National Title Group, Remy, Restaurant Group and Corporate and Other. The Fidelity National Title Group segment consists of the operations of FNF’s title insurance underwriters and related businesses. The Remy segment is a designer, manufacturer, remanufacturer, marketer and distributor of aftermarket and original equipment electrical components for automobiles, light trucks, heavy-duty trucks and other vehicles. The Restaurant Group segment consists of the operations of ABRH. The corporate and other segment consists of the operations of the holding company."

We've covered Corvex's past portfolio activity here.

Tiger Global Adds to Carter's Stake

Chase Coleman and Feroz Dewan's investment fund Tiger Global just filed an amended 13G with the SEC regarding their stake in Carter's (CRI).  Per the filing, they've disclosed an 8.2% ownership stake in CRI with 5,653,031 shares.

This marks a 41% increase in their position size since the end of second quarter.  They bought over 1.6 million shares and the event date that required the filing was October 24th, the same day CRI shares were down 8% after reporting earnings.

Prior to this filing, Tiger Global was already one of the largest institutional holders of Carter's shares, and now they own even more.

Numerous other prominent hedge funds we track have also been long CRI shares as of Q2, including Viking Global, Hound Partners, Pennant Capital, Corvex Management, and Glenview Capital.  In a few weeks, we'll see who remains long as of the end of Q3.

Per Google Finance, Carter's is "is a branded marketer of apparel for babies and young children in the United States. The Company owns two brand names in the children’s apparel industry, Carter’s and OshKosh. Its Carter’s brand provides apparel for children sizes ranging from newborn to seven. OshKosh brand provides its line of apparel for children sizes newborn to 12. Its Carter’s, OshKosh, and related brands are sold to national department stores, chain and specialty stores and discount retailers."

For more on this hedge fund, we've posted some other recent Tiger Global portfolio activity here.

Invest For Kids Chicago Notes 2013: Lasry, Eisman, Peltz, Cooperman & More

The fifth annual Invest For Kids Chicago conference just took place and MarketFolly has notes from the event which featured tons of prominent hedge fund managers presenting investment ideas to benefit charities.


Notes From Invest For Kids Chicago 2013

- Marc Lasry (Avenue Capital): Long JC Penney & Connacher Debt

- Lee Cooperman (Omega Advisors): 4 long ideas

- Steve Eisman (Emrys Partners): Long Ocwen Financial & Altisource Portfolio Solutions

- Nelson Peltz (Trian Fund): Presentaiton on Mondelez

- Dinakar Singh (TPG-Axon): 2 investment ideas

- Sam Zell (Equity Group Investments): Real estate thoughts

- Jeff Gundlach (DoubleLine): His presentation

- Mark Kingdon (Kingdon Capital): Thesis on Boeing & Aegerion Pharma

- Steve Kuhn (Pine River Capital): Pitch on American Capital

- Rick Rieder (BlackRock): His presentation

- Stephen White (Castle Union): Pitch on Avid Technology

- Peter Zaldivar (Kabouter Management): Long Hotel Shilla

Marc Lasry Long JC Penney Debt: Invest For Kids Chicago Presentation

Next up in our notes from Invest For Kids Chicago 2013 is Marc Lasry of Avenue Capital.  He pitched J.C. Penney (JCP) as a long at the event.


Marc Lasry's Presentation at Invest For Kids Chicago 2013

•    Reason all the risk in the system is that LIBOR is that 25 bps
•    Supposed to generate a 40x RFR for get 10% per annum. But isn’t there risk there?
•    Why is that risk?


•    Idea #1 is J.C. Penney Debt
o    Why JC Penney? Convince to go and shop
o    Everyone believes JCP will file for bankruptcy
o    Bonds mispriced based on that assumption
o    JCP operates in 49 states (no Hawaii)
o    Slowing retail environment and they get rid of old CEO and bring in Ron Johnson
o    Ron Johnson took a bunch of risk
o    Coupons and promotions here historical
o    Prior to new strategy $17 billion in sales $1.4 billion of EBITDA yet goes to -$500 million of EBITDA
o    Able to raise $2.2 billion of new debt to get to $3 billion of debt and $2.5 billion on unsecured – but that have $2 billion of cash
o    Interest payments are $250 million so hard to file of bankruptcy
o    JCP survives unless the value differential
o    Make ~25% return per year for 2 years in debt so you are making 80x RFR due to the believe that JCP will file bankruptcy
o    Same stores sales are flat to up
o    So you are creating the company
o    Majority is telling you “you are wrong”
o    “Nobody likes noise and don’t want to deal with it and that creates opportunity”

While Lasry's talking about debt, numerous other prominent hedge funds have been in and out of JCP equity and you can scroll through that link to follow the saga.


•    Idea #2: Connacher Oil & Gas Bonds at 70
 o    Worth par over a year to a year and a year and a half
o    Pure oil sands company in western Alberta
o    Crude is at $90 a barrel and the price of crude was $45 in 2012
o    Keystone pipeline was delayed and so shipping crude was expensive by rail and they have reduced arbitrage from $16 per barrel in operating margin to $32 (should still rise)
•    Buying investment at 43% discount to NAV because the market doesn’t understand what Connacher is doing and create something at a big discount to a proven value (as opposed to under comps) 


Check out the rest of the hedge fund presentations from Invest For Kids Chicago here.