What We're Reading ~ 2/8/17

Misbehaving: The Making of Behavioral Economics [Richard Thaler]

Honored to be listed in 2016's most influential finance Twitter accounts [Sentieo]

Shameless plug: if you don't already, follow @marketfolly on Twitter

Mitigating short exposure: learning from others' mistakes [CFA Institute]

Interview with Ed Thorp, the man who beat the casinos & markets [FT]

Stop chasing the wrong kind of growth [Harvard Business Review]

On analyst ratings and the institutional imperative [Base Hit Investing]

Old Mutual boss on how to run an active fund patiently [Daily Mail]

FIZZ: The secret history of the LaCroix fad [Bon Appetit]

How streaming is changing music consumption [HeavyBlogisHeavy]

Cannabalization, intense competition both roadblocks for Chipotle [Peridot]

The individual investors' performance incentive system [Rational Walk]

A look at NAFTA and American manufacturing [Vox]

Fidelity's bond king banks on Trump reflation trade [Bloomberg]

Facebook is trying everything to re-enter China and it's not working [WSJ]

BlackRock's robot stock-pickers post record losses [Bloomberg]

Becoming Warren Buffett HBO Documentary

Warren Buffett of Berkshire Hathaway was recently profiled in an HBO Documentary entitled, "Becoming Warren Buffett."  The film by Peter Kunhardt examines the life of the great investor.

Below are some notes and anecdotes:

-  He was always fascinated by numbers and it talks about how at an early age he discovered the power of compound interest.  He concluded, "It's a pretty simple concept, but over time it accomplishes extraordinary things."

- He goes to McDonald's everyday for breakfast on the way to work and has three options based on how much change his wife has given him for the day.  Yup, one of the biggest owners of American Express (AXP) pays for breakfast in cash.

- He framed newspapers from various financial crises and hung them on the wall as a reminder that "anything can happen in this world."

- As a young student, all his teachers owned AT&T at the time and he shorted the stock and showed the teachers proof to kind of spite them.

-  Buffett learned two rules of investing from Benjamin Graham: Rule 1: Never lose money.  Rule 2: Never forget rule number one.

- Doesn't hang his diploma from undergrad or graduate school, but instead the certificate from the Dale Carnegie course of public speaking, which he says changed his life since he was so scared of it.

- Charlie Munger said Buffett made a lot of money early on buying thinly traded securities that were incredibly cheap statistically ("cigar butt" investing).

- Started his first partnership with $105,100 - $100 from himself and the rest from investors.

- Buffett says, "The trick in investing is to just sit there and watch pitch after pitch go by and wait for the one in your sweet spot.  There's a temptation for people to act far too frequently in stocks simply because they're so liquid.  Over the years, you develop a lot of filters.  I do know what I call my circle of competence.  I stay within that circle.  Defining what your game is, where you're going to have an edge is enormously important."

- He later adds, "If you're emotional about investment you're not going to do well."

- Charlie Munger had a big impact on him by shifting him to look at wonderful companies at fair prices rather than fair companies at wonderful companies.

- Buffett said he spends 5-6 hours a day reading.  He likes to just sit and think.  When asked to describe what one word describes his success, he said 'focus.'

- "The biggest thing in making money is time.  You don't have to be critically smart, you just have to be patient."

- "Look for the job you'd take if you didn't need a job."

Someone else has uploaded it YouTube and the video is embedded below:



For more on the Oracle from Omaha, be sure to also check out Warren Buffett's recent interview with Charlie Rose.

Foxhaven Asset Management Shows Trivago Stake

Michael Pausic's hedge fund firm Foxhaven Asset Management has filed a 13G with the SEC regarding Trivago (TRVG).  Per the filing, Foxhaven now owns 8.7% of Trivago with over 2.61 million shares.

This is a newly disclosed equity position and the filing was made due to activity on January 25th.  TRVG recently completed its initial public offering (IPO) but is controlled by Expedia (EXPE), which owned 63.5% of the company as of the end of the third quarter in 2016.

At the end of the third quarter in 2016, Foxhaven also owned almost 800,000 shares of Expedia too.  They also had additional long exposure to the online travel booking segment via Priceline (PCLN) and MakeMyTrip (MMYT).


About Foxhaven Asset Management

This is the first time Foxhaven has been featured on the site.  Prior to founding the fund in 2013, Mike Pausic worked at Maverick Capital as head of the media and telecom team.  Foxhaven focuses on the technology, media, and telecom sector as well as consumer and internet. 


About Trivago

Per Google Finance, Trivago is "a company based in the Netherlands that operates an online hotel search platform. The platform allows users to search for, compare and book hotels. It gathers information from various third parties' platforms and provides information about the hotel, pictures, ratings, reviews and filters, such as price, location and extra options. The Company offers access to approximately 1.3 million hotels in over 190 countries via more than 50 localized websites and applications in various languages. The Company also offers marketing tools and services to hotels and hotel chains, as well as to online travel agencies and advertisers, among others. Its principal executive offices are located in Germany."

ValueAct Capital Sells Allison Transmission Shares Back to Company

Jeff Ubben's activist firm ValueAct Capital recently announced an agreement with Allison Transmission (ALSN) to sell shares back to the company, per an 8-K filed with the SEC.

Allison will buy 10.52 million shares at a price of $34.50 per share and the transaction is expected to close tomorrow.  ValueAct will no longer own a stake and its member will not seek re-election on the board of directors. 

Just yesterday, we highlighted how ValueAct also sold some Microsoft (MSFT) shares.  Given these two sales, perhaps they're looking to put capital to work in another name?

Also worth noting: Ashe Capital Management, an owner of 6.1% of ALSN, just filed a 13D noting that they'd be nominating William Harker to the board of the company in absence of ValueAct's representative.

Per Google Finance, Allison Transmission "design and manufacture commercial and defense fully-automatic transmissions. The Company manufactures fully-automatic transmissions for medium- and heavy-duty commercial vehicles and medium-and heavy-tactical the United States defense vehicles. The Company operates through manufacture and distribution of fully-automatic transmissions segment. The Company's transmissions are used in a range of applications, including on-highway trucks (distribution, refuse, construction, fire and emergency), buses (primarily school, transit and hybrid-transit), motorhomes, off-highway vehicles and equipment (energy, mining and construction) and defense vehicles (wheeled and tracked). The Company's transmissions are sold under the Allison Transmission brand name and remanufactured transmissions are sold under the ReTran brand name. The Company has developed over 100 different models that are used in over 2,500 different vehicle configurations."

ValueAct Capital Trims Microsoft Position, Adds To Alliance Data Systems

Jeff Ubben's activist investment firm ValueAct Capital has filed two separate Form 4's with the SEC regarding their recent activity.

ValueAct Reduces Microsoft Stake

First, Ubben's firm has reduced its position in Microsoft (MSFT).  Per the filing, ValueAct sold 11 million shares between February 1st through 3rd at prices of $63.72, $63.12, and $63.33.

After these transactions, they're left owning over 27.62 million MSFT shares. This was their top holding at the end of the third quarter

Per Google Finance, Microsoft "develops, licenses, and supports a range of software products, services and devices. The Company's segments include Productivity and Business Processes, Intelligent Cloud and More Personal Computing. The Company's products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; video games, and training and certification of computer system integrators and developers. It also designs, manufactures, and sells devices, including personal computers (PCs), tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories, that integrate with its cloud-based offerings. It offers an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content, and it provides solution support and consulting services."


Ubben's Firm Adds To Alliance Data Systems

Second, ValueAct has also filed a Form 4 with the SEC regarding their Alliance Data Systems (ADS) stake.  Per this filing, they bought 57,400 shares on January 26th at varying prices (the bulk at $217.57 and $219.18).

After these buys, they now own over 5.87 million shares of ADS. 

Per Google Finance, Alliance Data Systems is "a provider of data-driven marketing and loyalty solutions serving consumer-based businesses in a range of industries. The Company offers a portfolio of integrated outsourced marketing solutions, including customer loyalty programs, database marketing services, end-to-end marketing services, analytics and creative services, direct marketing services, and private label and co-brand retail credit card programs. The Company operates through three segments: LoyaltyOne, which provides coalition and short-term loyalty programs through the Company's Canadian AIR MILES Reward Program and BrandLoyalty; Epsilon, which provides end-to-end, integrated marketing solutions, and Card Services, which provides risk management solutions, account origination, funding, transaction processing, customer care, collections and marketing services for the Company's private label and co-brand retail credit card programs."

Senator Investment Group Shows Equity Stakes in Star Bulk Carriers and Noble Corp

Doug Silverman and Alex Klabin's hedge fund firm Senator Investment Group has filed two 13G's with the SEC recently.

Senator Shows Star Bulk Carrier Equity Position (SBLK)

First, Senator has filed a 13G on Star Bulk Carriers (SBLK) indicating they own 6.83% of the company with over 4.07 million shares.  This is a newly disclosed equity position for the firm and the filing was made due to activity on January 23rd.

This was part of a private placement of common shares where Oaktree Capital and Senator pruchased at $8.154 per share.  The sale netted the company $51.5 million and they've agreed to "grant shelf registration rights to the investors for the resale of their common shares"  per a press release.

Per Google Finance, Star Bulk Carriers is "an international shipping company. The Company owns and operates a fleet of dry bulk carrier vessels. The Company's segment is operating dry bulk vessels. The Company will have a fleet of approximately 76 vessels consisting primarily of Newcastlemax and Capesize, as well as Kamsarmax, Ultramax and Supramax vessels, with a carrying capacity between 45,588 dwt and 209,537 deadweight tonnage (dwt). Its fleet, which emphasizes Capesize vessels, primarily transports minerals from the Americas and Australia to East Asia, particularly China, as well as Japan, South Korea, Taiwan, Indonesia and Malaysia. The Company's Supramax vessels carry minerals, grain products and steel between the Americas, Europe, Africa, Australia and Indonesia and from these areas to China, Japan, South Korea, Taiwan, the Philippines and Malaysia. Its vessels include Maharaj, Star Poseidon, Leviathan, Peloreus, Star Borealis, Star Angie, Star Georgia, Star Nina and Mercurial Virgo."


Senator Also Shows Noble Corp (NE) Stake

Second, the hedge fund firm also has filed a 13G on Noble (NE) indicating they own 5.76% of the company with 14 million shares.  This is another newly disclosed equity position and the activity was made due to activity on January 24th.

Per Yahoo Finance, Noble "operates as an offshore drilling contractor for the oil and gas industry worldwide. It owns and operates a fleet of mobile offshore drilling units."

Balyasny Asset Management Adds To Restoration Hardware Holdings

Dmitry Balyasny's hedge fund firm Balyasny Asset Management has filed a 13G with the SEC regarding its stake in Restoration Hardware (RH).  Per the filing, Balyasny now owns 5.41% of the company with over 2.2 million shares.

This marks an increase in their position size of over 1.85 million shares since the end of the third quarter of 2016.  The filing was made due to activity on January 30th.

Per Google Finance, Restoration Hardware is "a luxury retailer in the home furnishings marketplace. The Company offers merchandise assortments across a range of categories, including furniture, lighting, textiles, bathware, decor, outdoor and garden, tableware, and child and teen furnishings. The Company classifies its sales into furniture and non-furniture product lines. The Furniture category includes both indoor and outdoor furniture. The Non-furniture category includes lighting, textiles, accessories and home decor. As of October 29, 2016, the Company operated a total of 85 retail galleries, consisting of 51 legacy Galleries, six larger format Design Galleries, seven next generation Design Galleries, one RH Modern Gallery and five RH Baby & Child Galleries throughout the United States and Canada, as well as 15 Waterworks showrooms in the United States and in the United Kingdom. In addition, as of October 29, 2016, the Company operated 28 outlet stores."

Valiant Capital Shows Yatra Online Stake

Chris Hansen's hedge fund firm Valiant Capital has filed a 13G with the SEC regarding shares of Yatra Online (YTRA).  Per the filing, Valiant now owns 13.6% of the company with over 4.37 million shares.

The filing was made due to activity on December 31st.  Yatra recently completed its initial public offering (IPO) at the end of last year.  Valiant has previously invested in the company when it was still private back in 2011.


About Valiant Capital

Chris Hansen founded Valiant Capital in 2008 after previously being a Managing Director at Blue Ridge Capital.  Valiant is a globally focused firm with many international holdings in both private and public companies and has had between $2-2.5 billion in assets under management, preferring to stay smaller to be more nimble.  Valiant returned 4.9% in 2015.


About Yatra Online

Per Google Finance, Yatra Online is "an India-based consumer travel platform and online travel agent. The Company’s segments include Air Ticketing, Hotels and Packages, and Others. Through Internet and mobile-based platform and call-centers, the Company provides the facility to book and service international and domestic air tickets to customer through business-to-consumer (B2C) and business-to-business-to-consumer (B2B2C) channel. Through an Internet and mobile-based platform, call-centers and branch offices, the Company provides holiday packages and hotel reservations. The Other segment includes the advertisement income from hosting advertisements on its Internet Websites, income from sale of rail and bus tickets, and income from facilitating Website access to travel insurance companies. It offers multiple mobile applications for a range of consumer segments and services, including Yatra, Yatra Mini, Yatra Web Check-In, Yatra Corporate, Travelguru HomeStay and Yatra Hoteliers DESTranet."

Warren Buffett's Interview With Charlie Rose: "Bought $12 Billion of Common Stocks Since Election"

Charlie Rose recently sat down with both Warren Buffett of Berkshire Hathaway as well as Bill Gates of Microsoft. 

They started off talking about the giving pledge and philanthropy and they've been surprised at the overwhelming participation. 

On business, Buffett noted that it's imperative that he be able to know and understand the business and to stay within that sphere of competence.  Of his two younger managers (Ted Weschler and Todd Combs), he notes, "I have two people who themselves have different circles of competence."  They weren't chosen because of that, but it's nice to have a huge circle he says.

He says it's harder to find acquisitions mainly because of the size of Berkshire these days.  On how he finds them, he might get a call, he might be thinking about certain areas.  Occasionally, he decides to act.

One key takeaway from the interview was that Buffett said,"We've bought $12 billion net of common stocks since the election.  (Ted and Todd) have probably bought some too." 

When asked by Rose about his purchase of airline stocks last year, Buffett said it was largely his decision to do so.

The conversation then shifted to allocation of time and Gates poignantly noted that, "You control your time.  Sitting and thinking might be a much higher priority.  It's not a proxy of seriousness that you fill every minute of your schedule."

Buffett added, "I can't buy time" and Rose noted it's the most precious resource.

Buffett thinks a 4% growth rate that the Trump Administration is targeting is pretty high and in actuality, a 2% rate would be fantastic and could potentially be possible.

Embedded below is the video of Charlie Rose's interview with Warren Buffett:

Lone Pine Capital Starts Rice Energy Position

Steve Mandel's hedge fund firm Lone Pine Capital has filed a 13G with the SEC regarding shares of Rice Energy (RICE).  Per the filing, Lone Pine now owns 5.8% of the company with over 11.68 million shares.

This is a newly disclosed equity position for the firm and the filing was made due to activity on January 23rd, 2017.

Per Google Finance, Rice Energy is "an independent natural gas and oil company. The Company is engaged in the acquisition, exploration and development of natural gas, oil and natural gas liquids (NGL) properties in the Appalachian Basin. The Company conducts its operations through two segments: Exploration and Production, and Midstream. The Exploration and Production segment is engaged in the acquisition, exploration and development of natural gas, oil and NGLs. The Exploration and Production segment operates in the cores of the Marcellus and Utica Shales. The Company controls approximately 231,000 net acres in the Marcellus and Ohio Utica Shale cores. It operates approximately 1,164 drilling locations. The Midstream segment is engaged in the gathering and compression of natural gas, oil and NGL production of, and in the provision of water services to support the well completion activities of, Rice Energy and third parties."

Hedge Fund Links ~ 2/3/17

Excerpts from Viking Global's Q4 letter [ValueWalk]

The case for (some) hedge funds [ai-cio]

Kyle Bass: global markets at the beginning of tectonic shift [Yahoo Finance]

Long-short hedge funds are ditching the shorts to focus on longs [Bloomberg]

The failed quest to bring down Wall Street's most wanted man [Bloomberg]

Hedge funds strike paydirt on Actelion deal after tracking private jet [Bloomberg]

Private equity and hedge fund pros on why they won't hire you [eFinancialCareers]

Pershing Square, nine others hit with SEC 'pay to play' violations [Reuters]

Citadel pays SEC to settle charges of misleading customers [Reuters]

Harvard endowment to lay off half its staff [WSJ]

Activist investor teaming up for CSX stake [Reuters]

A hedge fund expects 'hundreds of billions of dollars' in tech deals [Business Insider]

Numerai is a crowdsourced hedge fund for machine learning experts [TechCrunch]

Scaramucci's SkyBridge to sell majority stake [StreetInsider]

Here's the indictment against Platinum Partners [Business Insider]

When your hedge fund managers buys a Ferrari, find a new manager [Bloomberg]

Third Point's Q4 Letter: Bullish on Financials

Dan Loeb's hedge fund Third Point finished 2016 up 6.1%.  Third Point's fourth quarter letter outlines their bullish stance on markets, noting that de-regulation and tax decreases under various policies from President Donald Trump should spur US economic activity.

That said, they're still keeping an eye out on the potential for trade wars and/or inflation.

Particularly, they like financials and increased exposure to the sector in November and December: "We reallocated half our initial holdings from high-multiple, FCF businesses in payments, ratings, and P&C (which traditionally outperform during periods of deflation), to more traditional reflationary exposures in banks, brokers, and geographically, in Japan."

Third Point highlights that the bank stocks they're playing trade for less than 10x earnings with EPS growth in the high-teens.

Embedded below is Third Point's Q4 letter:



We've also posted up other letters today, so be sure to also check out Greenlight Capital's Q4 letter as well as Oaktree Capital's Howard Marks' latest memo.

Greenlight Capital's Q4 Letter: Dramatically Increased General Motors Position

David Einhorn's hedge fund Greenlight Capital finished 2016 up 8.4% and has returned 16.1% annualized since inception in 1996.

Their fourth quarter letter examines how their portfolio is positioned now that Donald Trump is president and will be trying to change policies. 

Greenlight is long various US value stocks that could benefit from corporate tax cuts (AMERCO, CC, Dillard's, DSW), they're long companies that can benefit from repatriation of foreign cash (Apple (AAPL)), and they're long companies that can benefit from demand for consumer durables (General Motors (GM), a position in which they've "dramatically increased their position."

They're also short 'bubble basket' stocks (Netflix), oil frackers, and Caterpillar (CAT).

Turning back to their thesis on GM, Greenlight writes that, "While the bears have been screaming 'peak auto' for the last couple of years, we think a strengthening job market will sustain the current upcycle and lead to better than expected credit performance at GM's finance subsidiary.  While the bears also cite long-term concerns over self-driving cars, we see a huge intermediate-term opportunity in assisted-driving cars."

During the quarter, David Einhorn's firm also exited its positions in AECOM (ACM), Michael Kors (KORS), and Take-Two Interactive Software (TTWO).   They also covered short positions in FLSmidth (Denmark: FLS), Mead Johnson Nutrition (MJN), and Reynolds American (RAI).

At the end of 2016, their largest positions in alphabetical order were: AerCap, Apple, CONSOL Energy, General Motors, and gold.  Their average exposures were 106% long and 81% short.

Embedded below is Greenlight Capital's Q4 letter:



We've posted up a bunch of letters today, so be sure to also check out Third Point's Q4 letter as well as Howard Marks' latest memo.

Howard Marks' Latest Memo: Expert Opinion

Oaktree Capital's Chairman Howard Marks has penned yet another memo entitled Expert Opinion.

He notes that, "There are no facts about the future, just opinions.  Anyone who asserts with conviction what he thinks will happen in the macro future is overstating his foresight, whether out of ignorance, hubris or dishonesty."

Embedded below is Oaktree Capital's latest memo from Howard Marks: "Expert Opinion"

 

We've posted up a bunch of letters today, so be sure to also check out Third Point's Q4 letter as well as Greenlight Capital's Q4 letter.

What We're Reading ~ 1/25/17

US investors favored passive funds over active by a record margin in 2016 [Morningstar]

The best investment writings of 2016 [Meb Faber]

On 3G Capital and the Kraft Heinz merger [Fortune]

A chat with Daniel Kahneman [Collaborative Fund]

Lunch with Bill Gates [FT]

What is your edge? [Base Hit Investing]

On expected risk [A Wealth of Common Sense]



Simon Property Group fights to reinvent the shopping mall [Fortune]

Facebook: Inside Instagram's reinvention [Recode]

Amazon expands into ocean freight [WSJ]

A pitch on Bolloré [Greenwood Investors]

Trump team compiles infrastructure priority list [McClatchy]

New FCC chief wants to destroy net neutrality [CNBC]

The great A.I. awakening [NYTimes]

Summary of some of the latest tech products featured at CES [Learning By Shipping]

Americans use debit cards twice as much as credit [Marketwatch]

China's biggest messaging app is on a collision course with Apple [TechInAsia]

How Social Cash made WeChat the app for everything [Fast Company]

When the Chinese come out to shop [OliverWyman]

How Netflix lost big to Amazon in India [Backchannel]

The best and worst airlines of 2016 [WSJ]

Carlos Slim's profit margins are right where Mexico wants them [Bloomberg]

Reasons to buy bonds in 2017 [Peter Lazaroff]

Holiday Gift Guide For Investors & Financial Professionals

Each year we highlight some relevant gift ideas for investors & financial professional besides the obvious (liquor).  Whether you need ideas for clients, partners, employees, or even for yourself, here's the 2016 guide:

Discounts on Publications

Wall Street Journal Discount - 50% off 12 months

Hedge Fund Wisdom - Our quarterly newsletter summarizing 13F filings


Recommended Books

  Margin of Safety - If you have someone to impress, get them a rare physical copy of Seth Klarman's book that has been out of print for many years

  So You Want To Start a Hedge Fund - Somewhat cheesy title, but in reality a good book & quick read with lessons on success and failure from major funds (see our review here) 

  Influence: The Psychology of Persuasion - Frequently recommended by Charlie Munger; Enough said 

  Quality Investing: Owning the Best Companies for the Long Term - Good read by Larry Cunningham 
  
  The Undoing Project - Michael Lewis's new book on the beginnings of behavioral finance 

  The Power of Habit: Why we do what we do in life and business


TV Shows / Movies / Documentaries

  Billions (Season 1) - The first major show about a hedge fund manager, starring Paul Giamatti and Damian Lewis.  Play catch up before Season 2 starts in 2017

  The Big Short - Movie adaptation of Michael Lewis's book of the same name; Starring Christian Bale, Ryan Gosling, Brad Pitt & Steve Carell

  Margin Call - One of the few good movies on Wall Street.  Features Kevin Spacey and Zachary Quinto, among others

  Jiro Dreams of Sushi - There's a lot of parallels to investing in this documentary (we wrote about it here) about one of the world's top sushi chefs and his dedication to perfecting his craft


Technology

  Amazon Echo - The famous 'Alexa' personal assistant

  Apple Macbook Pro Laptop - The newly released version with Touch Bar

  Apple Macbook Laptop - Ultra portable and lightweight laptop with retina display, perfect for travel

  24-inch or 27-inch IPS Computer Monitors by Acer - Get 2 or 3 for a great multi-screen setup for work or home office

  Sonos Wireless Speakers - Great for streaming music; put one in each room


Miscellaneous

  Wall St Bull Mini Statue - Pretend you're David Tepper and rub the bull's balls for good luck on trades

  Buy / Sell / Hold Dice - Nice office accessory; Roll the dice for your investment decisions

  Lehman Brothers Coffee Mug - Sip ironically
  
  Crystal Whiskey Decanter & Glasses - Class up an office Mad Men-style

  "Hedge fund" Piggy Bank - Gag gift

  Board Game: Catan - A strategic game where players acquire and trade natural resources to develop holdings


Happy Holidays!

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Sohn London Conference Notes 2016: Hohn, Bishop, Croxson & More

The Sohn London 2016 conference recently ended and featured hedge fund managers sharing investment ideas to benefit the treatment and cure of pediatric cancer and childhood diseases.  Please click the links below to go to each speaker's presentation.


Sohn London Conference Notes 2016

Chris Hohn (Children's Investment Fund): Long Charter (CHTR)

Robert Bishop (Impala Asset Management): Long Rio Tinto (LON:RIO)

Adrian Croxson (Och-Ziff Management): Long Ryanair (LON:RYAN) 

Masroor Siddiqui (Naya Capital): Short Aryzta (VTX:ARYN)

Erik Karlsson (Bodenholm Capital): 2 long ideas

Nicolas Walewski (Alken Asset Management): Long B&M Value Retail (LON:BME)

Elif Aktug (Pictet Asset Management): Long Leonardo

Anne-Sophie d'Andlau (CIAM): Long Euro Disney (EPA:EDL)

Ivan Martin Aranguez (Megallanes Value): Long Sonae (ELI:SON)

Marc Chatin (Parus Fund): Short Australian banks

Michel Massoud (Melquart): Long Opera Software (STO:OPERAO)

Dureka Carrasquillo (Canadian Pension Investment): Long Mobileye (MBLY)

Mans Larsson (Makuria Investment Management): 2 long ideas

Bo Bortemark (Carve Capital): Long Ferrovial (BME:FER)



Be sure to also check out notes from other recent investment conferences here.

Sir Chris Hohn Long Charter Communications: Sohn London Conference

We're posting notes from the Sohn London investment conference 2016.  Next up is Sir Christopher Hohn of Children's Investment Fund (TCI) who pitched a long of Charter Communications (CHTR).


Sir Chris Hohn's Sohn London Conference Presentation

TCI have already been invested in Charter for 3 years, but Hohn sees it as a multi-year investment. Charter is a public leveraged buyout which makes it an interesting special situation. It bought Time Warner Cable, a much bigger company, using a large amount of debt. Charter can compound at about 25% per year.

Cable companies are interesting because they should no longer be labelled as television businesses but as broadband businesses. Broadband businesses are a toll road on the internet.

Four reasons to like the business:

-    Telephone companies are not competitors to broadband providers

-    Digitization and cloud technology will change the capital expenditure profile reducing the intensity while the top line is growing.

-    Donald Trump will deregulate the sector leading to more pricing power and take away the regulatory risks.

-    Cable will also be a disruptor to wireless in the future.

There is a lot of upside still to come for Charter which is underestimated by the investment community. Nearly everyone needs broadband. Charter has the potential to double its customer base over time. Charter is 4x leveraged and TCI wants it to stay that way. In 2012, half the profits were coming from the TV business. Today only 22% come from TV. Hohn thinks that about 90% of the real value of the business is in broadband.

John Malone is the largest shareholder with about 20% of the equity and 25% of the voting rights. TCI own about 5% of the company. Malone is one of the world’s great investors with compounded returns of about 30% per annum. He is shareholder friendly and is committed to share buybacks.

Hohn always tries to find businesses that are protected from competition.  TCI have returned 17% per annum net of fees for the last 13 years using this approach. It is hard to break into the fiber broadband market. Google tried recently but have now essentially given up. The industry has effectively become a duopoly between Charter and Comcast (CMCSA), even then because they do different things they are monopolistic within their sectors. Charter has pricing power. It has been raising its pricing by 5% per year. Charter has 30% margins but these could rise to 50% or even 55%.

Risks: the TV business could decline, unbundling will come, wireless could be a threat.  Cable will be a disruptive player in wireless. Both Comcast and Charter will probably enter the wireless sector. He thinks Verizon may try to buy Charter in the future.

Be sure to check out the rest of the Sohn London conference presentations here.

Adrian Croxson Long Ryanair: Sohn London Conference

We're posting notes from the Sohn London investment conference 2016.  Next up is Adrian Croxson head of European Equities at Och-Ziff Management who pitched long Ryanair (LON:RYAN).


Adrian Croxson's Sohn London Conference Presentation

Long Ryanair Holdings (LON: RYAN) 

Och-Ziff have owned Ryanair stock for two years. Ryanair’s own projections suggest that they can grow volumes at 8% per year for the next 8 years. They have enough capacity to do that because they have lower costs. They fly 120 million passengers per year. Demand for air travel will continue to grow. Ryanair keeps taking market share from competitors. It can grow market share from 15% to 25% over the next few years.

It is the lowest cost producer in Europe with 50% less overhead than main competitor Easyjet. Staff costs are low due to route density not necessarily because they pay staff less. They require fewer crews as staff can work out of more than one airport. Landing costs for Ryanair have been flat over the last couple of years because they have gone into airports where other airlines have gone bust.  They have a good record for buying planes cheaply as they tend to buy when demand is low. They are getting better at cross selling passengers hire cars and hotels. They do not spend a lot of money on marketing.

Net income can double in the next seven years and the share count will diminish due to buybacks. The CEO owns £1bn of stock.

Be sure to check out the rest of the Sohn London conference presentations here.