Hedge Fund Links ~ 10/13/17

Hedge funds ain't dead yet [WSJ]

Hedge funds dabbling in more obscure markets [WSJ]

Mark Yusko wanted to do round 2 of Buffett vs hedge funds bet [CNBC]

Warren Buffett decides not to do second wager against hedge funds [CNBC]

Nope, hedge funds are still in the dumper [Bloomberg]

Baupost one of the larger holders of Puerto Rican debt [The Intercept]

Man Group letting computers trade all on their own [CNBC]

Down $240 million on his 7-year short, a China bear gives in [Bloomberg]

Sun co-founder gets secretive hedge fund to make huge chip bet [Bloomberg]

Man starting world's biggest crypto fund calls bitcoin a bubble [Bloomberg]

Viking Global Shows Deciphera Pharmaceuticals Stake

Andreas Halvorsen's hedge fund firm Viking Global has filed a 13G with the SEC regarding shares of Deciphera Pharmaceuticals (DCPH).  Per the filing, Viking now owns 8.1% of the company with over 2.47 million shares.

This is a newly disclosed public equity stake for the hedge fund, however Viking had previously invested privately in the company via Series C financing.  The filing was made due to portfolio activity on October 2nd as the company just completed its initial public offering (IPO).

For more from this hedge fund, we've posted up some other recent portfolio activity from Viking Global here.

Per Google Finance, Deciphera Pharmaceuticals is "a clinical-stage biopharmaceutical company. The Company is developing drugs to improve the lives of cancer patients. Its drug candidate includes DCC-2618, DCC-3014 and Rebastinib. Its proprietary kinase switch control inhibitor platform, inhibit the activation of kinases. DCC-2618, an orally administered kinase switch control inhibitor, for the treatment of gastrointestinal stromal tumors (GIST), advanced systemic mastocytosis (ASM), gliomas, including glioblastoma multiforme (GBM), and other solid tumors driven by pan-KIT or PDGFR alpha. DCC-3014 is an orally administered, potent and highly selective inhibitor of colony stimulating factor receptor 1 (CSF1R). Rebastinib is an orally administered, potent and selective inhibitor of the TIE2 immunokinase. Rebastinib binds potently into the switch pocket of TIE2, stabilizing the inhibitory switch and displacing the activation switch to block TIE2 signaling."

Carl Icahn's Herbalife Ownership Increases Due To Company Buyback

Activist investor Carl Icahn has filed an amended 13D regarding his position in Herbalife (HLF).  Per the filing, Icahn now owns 26.22% of the company.  This is up from his previous ownership stake of 24%, but it's not due to him buying more shares.  He still retains the same amount as he previously did: 22.87 million shares.

Herbalife recently announced results from its self-tender offer to buy around $600 million of its own stock.  It accepted over 6.73 million shares at $68 per share.

Sellers of stock received a contingent value right (CVR) for each share tendered that provides a right to payment should the company be taken private in the next two years.  After the tender completes, HLF will have around 87 million shares outstanding.

As a result, Icahn's ownership percentage increased without him doing anything.

And as we've highlighted previously,  Bill Ackman continues to be short Herbalife as well.

Per Google Finance, Herbalife Ltd. is "a global nutrition company. The Company develops and sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products, as well as personal care products. Its operating segments are based on geographical operations in six regions: North America; Mexico; South and Central America; Europe, the Middle East, and Africa (EMEA); Asia Pacific, and China. The Company categorizes its products into five groups: weight management, targeted nutrition, energy, sports and fitness, outer nutrition, and literature, promotional and other. As of December 31, 2016, it marketed and sold approximately 140 products encompassing over 4,700 stock keeping units (SKUs) globally. Its product categories include meal replacement; protein shakes; drink mixes; dietary and nutritional supplements containing herbs, vitamins, minerals and other natural ingredients; facial skin care; body care; hair care products; sales tools, and educational materials."

What We're Reading ~ 10/11/17

Richard Thaler wins Nobel Prize for work on behavioral economics [NYTimes]

Thaler's book: Misbehaving: The Making of Behavioral Economics [Richard Thaler]

His other book, Nudge: Improving Decisions About Health, Wealth, and Happiness [Richard Thaler]

Warren Buffett bets on the fossil fuel highway [WSJ]

Victoria's Secret is on the right runway [Bloomberg]

Decoding the Chinese internet market [Slideshare]

A new round in the battle of the brands [Harding Loevner]

As goes the middle class, so goes TGI Fridays [Eater]

The thrill of losing money investing in a Manhattan restaurant [New Yorker]

Baupost Group Slightly Increases Veritiv Stake

Seth Klarman's investment firm Baupost Group has filed a 13G with the SEC regarding its position in Veritiv (VRTV).  Per the filing, Baupost now owns 19.45% of the company with over 3.05 million shares.

This means they've increased their position size by 9,339 shares since the end of the second quarter.  The filing was made due to portfolio activity on September 30th.

Per Google Finance, Veritiv is "a business-to-business distributor of print, publishing, packaging and facility solutions. The Company also provides logistics and supply chain management solutions to its customers. The Company's segments are Print, Publishing & Print Management (Publishing), Packaging, Facility Solutions, and Corporate & Other. The Print segment sells and distributes commercial printing, writing, copying, digital, wide format and specialty paper products, graphics consumables and graphics equipment. The Publishing segment sells and distributes coated and uncoated commercial printing papers. The Packaging segment provides standard, as well as custom and packaging solutions. The Facility Solutions segment sources and sells cleaning, break-room and other supplies such as towels, tissues, wipers and dispensers, can liners, commercial cleaning chemicals, soaps and sanitizers, sanitary maintenance supplies and equipment, safety and hazard supplies, and shampoos and amenities."

ValueAct Capital Pares Down Willis Towers Watson Stake Again

Jeff Ubben's activist investment firm ValueAct Capital has filed a Form 4 with the SEC regarding its position in Willis Towers Watson (WLTW). We've highlighted previously how ValueAct has been trimming its WLTW stake and that trend continues.

This time around, the hedge fund sold 8,118 WLTW shares on October 6th at a price of $156.06.  After this sale, they're left owning 2.97 million shares.

This firm has been quite busy as of late and we also posted about another stock ValueAct has been trimming.

Per Google Finance, Willis Towers Watson "operates as a global advisory, broking and solutions company. It is engaged in offering risk management, insurance broking, consulting, technology and solutions, and private exchanges. The Company operates through eight segments: Willis International; Willis North America; Willis Capital, Wholesale & Reinsurance (CWR); Willis GB; Towers Watson Benefits; Towers Watson Exchange Solutions; Towers Watson Risk and Financial Services; and Towers Watson Talent and Rewards. The Willis GB segment comprises four business units: Property and Casualty, Transport, Financial Lines and Retail Networks. The Willis Capital Wholesale and Reinsurance segment includes Willis Re; Willis Capital Markets & Advisory; Willis' wholesale business, and Willis Portfolio Underwriting Services. The Willis North America segment provides risk management, insurance brokerage and related risk services."

Invest For Kids Chicago Conference 2017 Right Around the Corner

The 9th annual Invest For Kids Chicago Conference is just under one month away.  It will feature top investors presenting their latest investment ideas in order to benefit smaller charitable organizations.  Over the past 8 years, they've supported 47 organizations with gifts of $150,000 to $225,000 each.  This year 7 organizations will be beneficiaries.

You can learn more about the event and register for the conference here.


Invest For Kids Conference Details

When: November 2nd, 2017 1:30pm to 5:30pm

Where: Harris Theater, Chicago


2017 Speakers List

Dmitry Balyasny, Balyasny Asset Management

Sam Zell, Equity Group Investments

Alec Litowitz, Magnetar Capital

Amos Meron, Empyrean Capital

Rick Rieder, Blackrock

Michael Sacks, GCM Grosvenor

Jimmy Levin, Oz Management

Bart Stephens, Blockchain Capital

Rajiv Jain, GQG Partners

Bethany McLean, Journalist

Arne Duncan, Emerson Collective


The event always has three goals: assemble highly regarded managers to share their ideas, bring the Chicago investment community together, and of course provide support for various smaller organizations in an effort to support underprivileged children. 

If you're near the Chicago area or in the Midwest, it's definitely worth checking out.

Click here to register for Invest For Kids Chicago.

Notes From Great Investors Best Ideas Conference (GIBI) Dallas 2017: Ackman, Einhorn & More

The 11th annual Great Investors Best Ideas (GIBI) Dallas Investment Symposium just took place where managers shared investment ideas to benefit The Michael J. Fox Foundation for Parkinson's Research and Vickery Meadow Youth Development Foundation.  Below are some brief notes on the event:


Notes From GIBI Dallas Conference 2017

David Einhorn, Greenlight Capital

Still owns a huge position in General Motors (GM) but has been trimming it since it's grown too large (risk management, position sizing, etc).  Still his largest position by a longshot though.  Still thinks it's very cheap and points to an opportunity for a new shareholder base to get into shares.  Likes they've gotten rid of its riskiest international business and is investing in autonomous cars and electric vehicles: the future.

He also likes Tempur Sealy (TPX).  Thinks estimates are way too low (notes that management's incentives are way higher).  The company had a dispute with Mattress Firm and stopped selling its mattresses there.  Despite that, customers still actively sought out the TempurPedic brand, so the co is replacing its lost Mattress Firm sales elsewhere at higher margins.  Thinks there's also a reasonable chance MF comes back to them since MF has lost sales.

Einhorn said that his 'bubble basket' of shorts in highflying tech stocks like Amazon and Tesla are valued like profits don't matter ... ever.  He says eventually people will wake up and profits will matter and their stocks will crater.  He also pointed to somewhat of a cult following status that is attached to Tesla's stock with all the hype that Elon Musk continuously builds with various projects.  There's around 30 stocks in Einhorn's bubble basket.   He noted he owns a Tesla, but also points out that the company probably lost $20-30k selling it.  Says company hasn't figured out how to make cars profitable on a unit basis.  You can also read Greenlight Capital's Q2 letter here.


Bill Ackman, Pershing Square Capital

Pitched his newest long: Automatic Data Processing (ADP).  Has an activist position.  Thinks it's a quality business: simple, not capital intensive, secular tailwinds (sees lots of growth ahead).  Automating employees.  Ackman thinks the stock's a double.  We've posted Ackman's presentation on ADP previously.

Also mentioned the GSEs he's involved with: Fannie Mae & Freddie Mac.  Still owns and thinks there's huge upside there.  He originally pitched these plays three years ago at the same conference.  Thinks they will eventually trade multiples higher of where they are now.

He's still short Herbalife (HLF) and has lost millions on the bet as the stocks' up around 40% from his average short price.  Said that of the risk factors considered for the position, Carl Icahn coming in and buying 20+% of the company wasn't one he considered.

Noted he still owns Howard Hughes (HHC) and while he doesn't see any immediate catalysts, thinks it's a long-term play as a high quality business.

Says average investor can be plenty concentrated with 10-15 holdings.  Biggest mistake of his career?  Not selling when new information emerged that didn't jive with his investment thesis.  You can read Pershing Square's Q2 letter here.



Tom Russo. Gardner Russo Gardner

Spoke about global brands and various companies still controlled by the founding families.  His best idea was the company hit with a scandal and PR crisis: Wells Fargo (WFC).  Previously he had noted how his WFC stake has remain unchanged (around 6% of his assets) and that he thought the company simply became too fixated singly on one variable (cross-selling) which lead to a bunch of accounts being opened in customers names.  The company now suffers from poor optics but on a risk level, direct financial harm has been modest and he has faith in the legal process.



Andrew Wellington, Lyrical Asset Management

A couple of picks:  Flex Ltd (FLEX), co is seeing double digit growth in its bottom line and 50% of FCF going to shareholders.  Trading around 12x earnings.

Affiliated Managers Group (AMG): asset management play, owns equity stakes in boutique management firms.  Says they own really good managers.  Trading around 12x NTM earnings.



Van Hoisington, Wasatch-Hoisington US Treasury Fund

He concluded that we're heading to a recession as the Fed has restrictive policies already in effect and money and credit are slowing noticeably.  Structural impediments to growth are over-indebtedness globally as well as adverse demographics.  Thinks rates will stay lower. 



Jeanie Wyatt, South Texas Money Management

A few ideas: Citigroup (C) as a value play.  Thinks it could re-rate from almost 1x book value to closer to 1.4x.  Since the crisis the company has a better situation and less subprime.

KAR Auction Services (KAR):  notes 20% EPS growth, end markets that are accelerating as well.  Trading just over 22x next year's earnings but with a big opportunity ahead as various leases will be coming to term.

Electronic Arts (EA): video game stock that's benefited from going over the top (OTT) as it leads to higher margins than the typical video game distribution model of physical games, etc.  Accelerating sales growth.  Also sees new potential upside in e-sports. 

Vodafone (VOD): Stock has traded sideways but the company has improved in end markets.  Thinks it offers good downside protection as sales growth has accelerated.


For more stock picks from recent investment conferences, we posted up notes from the Sohn San Francisco Conference yesterday.

Notes From Sohn San Francisco Investment Conference 2017: Okada, McGuire & More

We've already posted up notes from the Next Wave Sohn San Francisco Conference which featured emerging managers.  Now it's time for the main event presentations which featured top hedge fund managers sharing investment ideas to benefit the Excellence In Investing For Children's Causes Foundation.


Notes From Sohn San Francisco Investment Conference 2017

Mark Okada, Highland Capital Management

Idea: Vistra (VST)

Business: Integrated IPP.  Thesis:  Strong market position in bottoming cyclical industry.  An attractive valuation, balance sheet optionality / M&A opportunity.  Lower leverage than peers.  Texas is a power island (barrier to entry) and a rapidly growing state.  Imminent supply rationalization.  Optimal capital structure of 3.5x leverage could drive 13% FCF yield.  M&A potential - lot of interest in the space from 'smart money.'

Valuation: Current share price $19, multiple ways to win and drive a higher share price



Mick McGuire, Marcato Capital Management

Idea: Deckers Brands (DECK)

Activist position that they haven't spoken about publicly before.  Own ~6% of the company, 2nd largest position in their fund.

Business:  Multi-branded footwear and apparel company.  Known primarily for the Ugg shoe brand but also own Hoka One One (cult running brand), Sanuk and Teva brands.

Activist agenda:  Focus on core Ugg brand; pursue sale or spin off of non-core brands.  Reduce costs (best in class consultants think that the cost savings opportunity is $150mm-$200mm.  Recapitalize balance sheet to 1x net debt/EBITDA.  Use proceeds of recapitalization and sale of brands to repurchase shares.  Align management comp with margin, return and TSR improvement.  Ugg has been cast as a fad but has continued to grow.  Retail expansion has hurt margins and revenue per store has continued to decline.  Margins can double from 9% to 19% with recommended strategy.

Valuation:  Opportunity to unlock value from non-core brands - $464 million with very modest topline expectations. $66 share price today - can get to $135 to $158 based on a multiple of 7.0x to 8.0x



Christopher Lord, Criterion Capital Management

Idea: MercadoLibre (MELI)

Business: largest eCommerce and payments platform in Latin America (based in Argentina).  Operates across 18 countries in largest markets in Brazil, Argentina, and Mexico.

Thesis:  Large TAM: $1.2T with long growth runway with more e-commerce adoption.  Adoption should be supported by increasing broadband penetration and smartphone penetration.  Created their own logistics marketplace to help with deliveries.  LatAm has a large emerging middle class.

Growth rates have begun to inflect.  Mobile is expanding the addressable market.  Payments is becoming important to the business - developed a proprietary payments platform similar to PayPal; increases the TAM to $1.8T; provides option value.  Have 27% share of ecommerce in LatAm - expected to increase by 2020.  Revenue growth estimates are significantly higher than consensus for 2018, 19, and 20.

Valuation:  looks conservative relative to TAM opportunity versus analogs like Alibaba.

Bonus short idea: iRobot (IRBT).  Very high share of robot vacuums but Shark will introduce its own robotic vacuum at a very competitive price.  Consensus estimates are too high given the competitive launch.



Nancy Davis, Quadratic Capital Management

Idea: shorting leveraged credit (equity tranche of CLOs)

Thesis: CLOs are popular investments among insurance companies.  Levered credit market will be the first place that will feel the brunt of monetary tightening.

Ways to play it: Short BDCs: TICC Capital (TICC) and Prospect Capital Corp (PSEC).  Valuations are way too high given where LIBOR rates are.



Glen Kacher, Light Street Capital

Idea: Delivery Hero (DHER)

Business: consists of consumer platform, tech stack to transmit orders to restaurants and delivery operations.  #1 player in 35/43 countries; several top markets: Germany, South Korea, Turkey, Saudi Arabia, Kuwait; by far the dominant player in long tail markets

Online food ordering marketplace that operates in Europe.  Marketplace model is ~90% of orders and delivery model is ~10% of orders.  Little to no capex required.  Dark kitchen model where players operate food operations in competitors like SpoonRocket, Sprig, and Munchery has struggled; better business is the delivery and platform for existing restaurants.

Thesis: TAM of 72bn Euros across all markets where online delivery is underpenetrated.  Pricing power to raise prices because they provide value ot restaurant customers.  Expect EBITDA margins to scale significantly.  Multiple ways to win (increase in food delivery TAM, increase in online penetration, increase in market share, delivery hero take rate, LT EBITDA margin.

Valuation: Implied share price of 76 Euros based on the 20x EV/EBITDA multiple, 127% upside to current



Carl Kawaja, Capital Group

Idea: Sony (SNE)

Return of the Daikaiju

Thesis: New management is changing the culture.  Content is king - Sony's presence is underappreciated and the business is under earning.  Gaming, image sensors, music are the businesses that are very valuable; they comprise 2/3 of operating income and 1/3 of revenue.

Gaming: business is large and is evolving to a recurring revenue stream model where you pay a monthly subscription fees supplemented by in-game purchases.  Additionally, they have had some success in mobile games, have the #2 selling mobile game.  Transition to digital game downloads should lift margins.

Sensors:  Photo and video is the future of social interaction so images will continue to be an important business.  Sony's image sensors are critical for digital camera option.  Hal of all CMOS image sensors are Sony; 100% share of iPhone 7 and 8.  Profitability has been deperessed.

Music:  ~92 million paid music subscriptions globally.  #1 music publisher globally with 30% share and #2 record label.  Streaming is now 60% of digital revenues.  Digital music is more profitable than physical music.

Valuation:  Expect 50% upside based on sum of the parts valuation



Oleg Nodelman, EcoR1 Capital

Idea: Ironwood Pharmaceuticals (IRWD)

Business: Biotech company whose primary drug is Linzess - drug for Irritable Bowel Syndrome Constipation (IBSC); marketed by Allergan.

Thesis: Addressable market of 40mm Americans.  Linzess has safety and efficacy superior to competitive drugs.  Management with a long term focus.  Option value with another 7 drugs in the pipeline - current price gives no value to these R&D efforts.

Valuation: $16 per share price but intrinsic value is as high as $43 per share.  Adding in total pipeline value could increase value of $200/share.  Trades at a discount to peers in the space at 9.6x EV/Revenue.




Dan Morehead, Pantera Capital

Idea: Cryptocurrency

Bitcoin is a digital currency protocol similar to TCP/IP for the internet.  Blockchain is a serial killer (better than a category killer).  Fiat currencies are poor stores of value - even the dollar has still lost over 90% of its purchasing power since 1950.

Huge addressable market of the industries that Bitcoin could disrupt.  The protocol layer (Bitcoin) captures most of the value in crypto currency versus the internet where the application that is built on the protocol layer captures most of the value.

Two potential ideas: Kik will be the first major company to tokenize their entire cap table.  Funfair is a fast, fair secular online casino; Funfair aims to cut out the middleman.



Be sure to also check out the pitches from emerging managers via our notes from the Next Wave Sohn San Francisco Conference 2017 as well.

Next Wave Sohn San Francisco Conference Notes 2017

We're posting up notes from the Sohn San Francisco Investment Conference 2017.  First up is the Next Wave Sohn event which features emerging managers sharing their investment ideas to benefit the Excellence In Investing For Children's Causes Foundation.


Next Wave Sohn San Francisco Conference Notes 2017

Vineer Bhansali, LongTail Alpha

- Investing with Multiple Unknown Equilibria

- Volatility indices are at all time lows as are correlations across assets classes, but fear is at an all-time high – 2 potential ways to play this:

Idea/Theme 1: Offensive - Position for rising rates with central bank put still in place

- Sectors: Banks and Financials: XLF

- Outright: Index Call Options (SPX, Nasdaq)

- Structured: Levered Risk Reversals

Idea/Theme 2: Defensive - Position: Geo political volatility that raises risk premiums

Sectors: GLD, OIL

Derivatives (Outright: Put spreads on equity indices, HYG, Structures: Dispersion (Rising Correlations)



Marcelo Desio, Lucha Capital Management

Idea: GoDaddy (GDDY): Misunderstood growth stock, dominant market position, large TAM and low CAC

Business: A lot more than a domain company; domain is an onboarding strategy to sell a range of other services (hosting, business applications); 17mm customers; compete very effectively in the SMB space

Thesis:

1) Incumbency and scale - 80% of SMBs aware of GoDaddy (Share: 19% of the 335mm domains under management)

2)  Efficient customer acquisition at ~$67

3) Very attractive unit economics; top of the range versus other SAAS companies

4) Highly sustainable growth runway: Large $23bn+ TAM and ARPU continuing to grow (International is growing high teens based on secular dynamics of internet penetration.  Demonstrated ability to take share in new markets like India - Entered 5 years ago and now has #1 domain share)

5)  ARPU growth -> incremental margins.  High operating leverage that should drive margin expansion from 64% to 68%.

6)  Incremental margins drive strong FCF

7)  FCF will drive beneficial capital allocation

8)  Strong valuation support: undervalued relative to similar companies in the tech space

Valuation: attractive return profile: $76 stock, +75%, 28% IRR through year end 2019

Risks:  PE overhang, international growth stalls, DIY becomes a viable competitor (mobile web use drives "appification"), larger well capitalized tech players compete more effectively



Gil Simon, SoMa Equity Partners

Idea: Coupa (COUP)

SAAS category killer you've never heard of.  Underfollowed company with significant upside.  IPO'd last October, <$2bn market cap.  Spend management not a sexy category - helps companies manage their business spending; ~600 customers

Business model: Cloud platform for managing spending (procurement, invoicing, expenses) that all companies do.  $159mm in TTM revenue.  Allows businesses to consolidate all spending under one platform.  Helps customers save money -3-4% on average (Coupa provides visibility which enables cost cutting and negotiating leverage with suppliers.  Case Study: Sanofi targeting 10bn euro of annual spend through Copua; replaced patchwork of 22 disparate procurement systems.  Big competitor is SAP Ariba.  Ease of use is the key competitive advantage versus legacy systems; Also flexibility, free to suppliers and ability to integrate with all ERP systems

Thesis:  Partner ecosystem rapidly expanding from 500 two years ago to 2,000 which is a leading bullish indicator.  Spend under management is rapidly expanding and expected to reach $350bn by FY18.  Expect sustained revenue growth well above consensus.  Valuation: Think it's a potential double.  Takeout optionality to boot: SAP and Oracle have been aggressive in this space.



Seth Wunder, black-and-white capital 

Idea: Lending Club (LC)

Business: marketplace for consumer lending that benefits from diversifed sources of capital including banks, insurance, companies, asset managers and retail investors.  Make money from origination fees and servicing fees.  Reduced spread versus banks: lenders get more yield and borrowers pay lower rates.  Can be very scalable but won't take over consumer lending.

Thesis:  Advantages for all market participants including borrowers and lenders (platform investors).

Borrowers: Get lower cost of borrowing, better application experience, NPS score of 78 versus credit card companies in low single digits.

Lenders: Access to short term, unsecured consumer credit, attractive risk adjusted returns, several purchase options (whole loans, fractional loans, securitizations), loan servicing handled by LC

Capital-lite model enables unconstrained growth.  Large TAM $1.1T unsecured consumer credit and $1.2T auto loans.  Harnessing technology and big data to originate loans.  Expect high incremental margins going forward as operational investment needs moderate.  EBITDA margins eventually >35%.  Management team changed out with seasonal veterans from "fin" and "tech" due to some past marketing issues.

Misconceptions:  High leverage - not true; net cash.  High credit risk - risk is borne by platform investors.  Dependent on Credit HFs to buy loans - not true; traditional banks like Citi provided 44% of funding for loans.  Cost of capital disadvantage:  Capital comes from investors, not balance sheet

Valuation:  LC shares are worth $17, 175% upside.  2.8x EV/2018 revenues - significant discount to peers.  15.0x EBITDA on $468mm gets you to $17 implied share price.


We've also posted up notes from the main event, so be sure to check out those pitches as well: notes from the Sohn San Francisco Investment Conference 2017.

What We're Reading ~ 10/4/17

The Four: The hidden DNA of Amazon, Apple, Facebook & Google [Scott Galloway]

The main fundamental skills of all investing [Collaborative Fund]

Skilled managers should hold fewer stocks [Institutional Investor]

Machine learning for investors: a primer [Alpha Architect]

Blue skies ahead for John Malone's LiLAC Group [Barrons]

Benedict Evans on the future of cars [EconTalk]

On the characteristics of aggregators [Stratechery]

Elon Musk versus the haters [Institutional Investors]

The new world of monopoly? What about flying? [Marginal Revolution]

Amazon makes up 43% of all online sales [Inc]

Millennials are moving to the suburbs, buying big SUVs [Bloomberg]

Media companies are finally getting serious about data and targeted advertising [Adweek]

Shopify is an excellent business [Tom Tunguz]

A negative piece on Shopify [Citron Research]

Warren Buffett Acquires Pilot Flying J

Warren Buffett's Berkshire Hathaway has made another big buy.  It's just been announced that Berkshire Hathaway will be acquiring Pilot Flying J, the US's largest truck stop operator.  The chain owns 750 truck stops.

Berkshire has actually acquired a 38.6% minority stake that will eventually see them become the majority shareholder in 2023 when they acquire an additional 41.4% equity stake.  The Haslam family will retain a 20% ownership stake.  The company sees around $20 billion in revenue and has over 26,000 employees.

In a statement, Buffett said that, "The company has a smart growth strategy in place and we look forward to a partnership that supports the trucking industry for years to come."

For more from this investor, we posted a recent Warren Buffett's interview on a myriad of topics.

Highfields Capital Trims Silver Run Acquisition Stake

Jonathon Jacobson's hedge fund firm Highfields Capital has filed a Form 4 with the SEC regarding shares of Silver Run Acquisition Corp II (SRUN). 

Per the filing, Highfields sold over 3.24 million shares of SRUN on September 29th at a price of $10.17.  After this transaction, they were left with a position of over 8.25 million shares.

Silver Run Acquisition II is a private equity backed oil and gas play led by a former executive of Anadarko Petroleum.  Recently, in August, the company announced it was merging with Alta Mesa and Kingfisher Midstream to create a $3.8 billion company.

Viking Global Shows Abeona Therapeutics Stake

Andreas Halvorsen's hedge fund firm Viking Global has filed a 13G with the SEC regarding shares of Abeona Therapeutics (ABEO.  Per the filing, Viking now owns 5.6% of the company with over 2.23 million shares.

This is a newly disclosed equity stake for the firm and the filing was made due to portfolio activity on September 22nd.

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

Per Google Finance, Abeona Therapeutics is a "clinical-stage biopharmaceutical company developing novel gene therapies for life-threatening rare genetic diseases. The Company’s lead programs include ABO-102 (AAV-SGSH), an adeno-associated virus (AAV) based gene therapy for Sanfilippo syndrome type A (MPS IIIA) and EB-101 (gene-corrected skin grafts) for recessive dystrophic epidermolysis bullosa (RDEB). It is also developing ABO-101 (AAV-NAGLU) for Sanfilippo syndrome type B (MPS IIIB), ABO-201 (AAV-CLN3) gene therapy for juvenile Batten disease (JNCL), ABO-202 (AAV-CLN1) for treatment of infantile Batten disease (INCL), EB-201 for epidermolysis bullosa, ABO-301 (AAV-FANCC) for Fanconi anemia disorder and ABO-302 using a novel CRISPR/Cas9-based gene editing approach to gene therapy for rare blood diseases. The Company also has a plasma-based protein therapy pipeline, including alpha-1 protease inhibitor (SDF Alpha) for inherited COPD, using its proprietary Salt Diafiltration ethanol-free process."

What We're Reading ~ 9/27/17

Your tolerance for investment risk is probably not what you think [WSJ]

Is value investing dead? Depends on how you measure it [WSJ]

What do the best investors do that the rest don't? [Behavioral Value]

We're going to need more Lithium [Bloomberg]

Mastering three strategies of organic growth [McKinsey]

DaVita: Warren and Charlie's excellent insurance gambit [SIRF]

Old interview with Chuck Akre - never sell the gems [Value Research]

The history of Sears predicts nearly everything Amazon is doing [The Atlantic]

Don't believe the headlines, traditional retailers are thriving online [VentureBeat]

How Kirkland Signature became one of Costco's biggest successes [WSJ]

Altaba's endgame could reward investors nicely [Barrons]

Netflix's Sarandos aims to build the next great Hollywood studio [Bloomberg]

Our entire credit bureau system is broken [The Verge]

Snapchat's influencers are fleeing to Instagram for money [Bloomberg]

How successful people make decisions differently [Fast Company]

Senator Investment Group Takes D.R. Horton Stake

Alex Klabin and Doug Silverman's hedge fund firm Senator Investment Group has filed a 13G with the SEC regarding shares of D.R. Horton (DHI).  Per the filing, Senator now owns 5.34% of the company with 20 million shares (inclusive of 5 million shares underlying call options).

This is a newly disclosed stake for the investment firm.  The filing was made due to portfolio activity on September 15th.

For more on this hedge fund, we highlighted another stock Senator has been buying.

Per Google Finance, DR Horton is "a homebuilding company. The Company constructed and sold homes in 27 states and 79 markets, as of September 30, 2015. The Company's segments include its 39 homebuilding divisions, its financial services operations and its other business activities. In the homebuilding segment, the Company builds and sells single-family detached homes and attached homes, such as town homes, duplexes, triplexes and condominiums. The Company's 39 homebuilding divisions are aggregated into six segments: East Region, South Central Region, Midwest Region, West Region, Southwest Region and Southeast Region. In the financial services segment, the Company sells mortgages and collects fees for title insurance agency and closing services. The Company has subsidiaries that conduct insurance-related operations; construct and own income-producing rental properties; own non-residential real estate, including ranch land and improvements, and own and operate oil and gas-related assets."

12 West Capital Shows Laureate Education Stake

Joel Ramin's hedge fund firm 12 West Capital has filed a 13G with the SEC regarding shares of Laureate Education (LAUR).  Per the filing, 12 West now owns 6.5% of the company with over 2.3 million shares.

This is a newly disclosed equity position for the firm.  The filing was made due to activity on September 15th.

Per Google Finance, Laureate Education "provides higher education programs and services to students through an international network of licensed universities and higher education institutions (institutions). The Company’s programs are provided through institutions that are campus-based and Internet-based, or through electronically distributed educational programs (online). It offers its educational services through six segments: Brazil; Mexico; Andean and Iberian; Central America and United States (U.S.) Campuses; Online and Partnerships; and Europe, Middle East, Africa and Asia Pacific (EMEAA). Its institutions also offer an education that emphasizes professional-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines. As of June 30, 2017, the Company’s global network of 69 institutions comprised 57 institutions it owned or controlled, and an additional 12 institutions that it managed or with which it had other relationships. "

Darsana Capital Shows Stake in Social Capital Hedosophia Holdings (IPOA.U)

Anand Desai's hedge fund firm Darsana Capital has revealed a stake in Social Capital Hedosophia Holdings (IPOA.U).  Per a 13G filed with the SEC, Darsana now owns 5.07% of the company with 3.5 million shares.

This is a new position for the firm as shares of IPOA.U were just floated recently.  Hedosophia is a vehicle used by Chamath Palihapitiya's Social Capital to invest in 'unicorn' private tech companies.  They're trying to create a new model for taking private companies public via this 'blank check' structure.

Prior to founding Darsana, Desai worked at Eton Park Capital.

Per Google Finance, Social Capital Hedosophia Holdings is "a blank check company. The Company is formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. The Company seeks to focus on search for a target business operating in the technology industries. The Company had not identified any business combination target."

Eminence Capital Increases Arris Group Stake

Ricky Sandler's hedge fund firm Eminence Capital has filed a 13G with the SEC regarding its stake in Arris Group (ARRS).  Per the filing, Eminence now owns 5.3% of the company with just over 10 million shares.

This is an increase of 858,147 shares as they previously owned 9.15 million shares at the end of the second quarter.  This most recent filing was made due to portfolio activity on September 12th.

For more on this hedge fund, you can view other portfolio activity from Eminence Capital here.

Per Google Finance, Arris Group is "a media entertainment and data communications solutions provider. The Company operates in two segments: Customer Premises Equipment (CPE), and Network & Cloud (N&C). The Company enables service providers, including cable, telephone, and digital broadcast satellite operators, and media programmers to deliver media, voice and Internet Protocol (IP) data services to their subscribers. It is engaged in offering set-tops, digital video and IP television (IPTV) distribution systems, broadband access infrastructure platforms, and associated data and voice CPE, which it also sells directly to consumers through retail channels. Its solutions are complemented by an array of services, including technical support, repair and refurbishment, and system design and integration. The CPE segment consists of CPE Products-Video and CPE Products-Broadband. The N&C segment consists of Infrastructure Products, Cloud Software and Global Services."

Fairholme Capital Adds To St. Joe Position

Bruce Berkowitz's investment firm Fairholme Capital has filed an amended 13D with the SEC regarding its stake in St. Joe (JOE).  Per the filing, Fairholme now owns 40.5% of the company with just over 27 million shares.

The filing notes that Berkowitz was out buying across August and into early September, at prices ranging from $18.3016 to $19.2174.  In total, he purchased just over 1.55 million shares.

For more on this manager, we've also highlighted other recent portfolio activity from Fairholme Capital here.

Per Google Finance, St. Joe is "a real estate development, asset management and operating company. The Company operates through five segments: residential real estate; commercial real estate; resorts and leisure; leasing operations, and forestry. Its residential real estate segment plans and develops primary residential and resort residential communities of various sizes on its existing land. Its commercial real estate segment plans, develops, manages and sells real estate. Resorts and leisure segment features a portfolio of vacation rentals and hotel operations, as well as golf courses, a beach club, marinas and other related resort amenities. Its leasing operations business includes its retail and commercial leasing. Its forestry segment focuses on the management of its timber holdings in Northwest Florida."