Baupost Group Shows Position in Gabriel Resources (TSE:GBU)

Seth Klarman's hedge fund Baupost Group has disclosed an 11.37% ownership stake in Gabriel Resources (TSE:GBU) with 39,625,822 shares. This makes them the fourth largest shareholder.

This is an older disclosure as it was revealed on April 8th in a Canadian regulatory filing. Given how investors love to track Klarman, we figured we'd share since we hadn't seen it discussed before.

This position is interesting mainly because it's has exposure to gold mining. This is the second equity investment in a gold miner we've seen from Klarman's fund. As noted in the latest issue of our Hedge Fund Wisdom newsletter, Baupost started a new position in Allied Nevada Gold (ANV) back in the first quarter.

Gold Miners A Play on Inflation?

We'll have to see if building equity stakes in miners becomes a trend for Baupost. The firm could potentially be using these miners as a hedge. After all, we covered how Klarman is worried about inflation.

It's been well documented that John Paulson's gold fund invests in gold miners as a bet against the US dollar (inflation) as well. Paulson & Co also owns 17.62% of Gabriel Resources with 61,420,000 shares. They disclosed this position size in May 2008 and it was later amended to reflect their purchase of securities in a private placement in June 2009. So, two legendary investors own sizable chunks of GBU.

Gold Vs. Gold Miners

In the past, hedge fund managers have pondered whether gold or gold miners is a better way to play the precious metal, inflation, and uncertainty. So while many invest in gold miners for protection, we assume that Baupost is pursuing the same thesis (but again that's merely speculation on our part).

In other recent activity from the prominent hedge fund, Baupost trimmed its position in Audiovox (VOXX).

Per Google Finance, Gabriel Resources is " is engaged in the exploration and development of mineral properties in Romania. It is developing its 80.46% owned Rosia Montana gold project (the Project). Minvest S.A. (Minvest), a Romanian state-owned mining company, and one other private Romanian company, hold a 19.54% interest in Rosia Montana Gold Corporation (RMGC)."

For more from Klarman, see an excerpt from Baupost's 2010 letter.

What We're Reading ~ 6/16/11

Honored to be included in a list of must-follows on Twitter [Barron's]

And as always, you can follow @MarketFolly on Twitter here

Post re-org equities entering Russell indexes [Distressed Debt Investing]

Daytrading hipster takes on David Tepper [Dealbreaker]

Funny: the real Wall Street dress code [Reformed Broker]

Option traders most bearish since 2009 bottom [Trader's Narrative]

Warren Buffett on how inflation swindles equity investors [Fortune]

Paulson's funds struggle [WSJ]

FPA's Bob Rodriguez sees another crash coming [Fortune]

Debating a tech bubble [Economist]

Profiles on some big mutual fund managers [Bloomberg]

Hedge funds target Yankee stadium parking bonds [Bloomberg]

Online ventures lure Tiger Global back to India [WSJ]

We've covered some of Tiger's past investments here [Market Folly]

Former Third Point PM launches healthcare fund [AR+Alpha]

Hedge funds lured to new source of capital [MarketWatch]

Hedge Fund Compensation Report 2011

Those of you looking to enter the hedge fund industry, switch funds, or get a pay raise will find this hedge fund compensation report very helpful. This report gives you a benchmark to help negotiate your pay package based on industry averages.

It breaks down compensation based on size of the fund, employee title, base package versus bonus, and year over year comparisons.

The report is 47 pages, has over 40 charts and is based on data collected directly from big funds (like Citadel, Lansdowne, etc) and small funds as well. You can get the report by clicking here.

Whether you're an analyst, trader, investor relations professional, or CFO, this is a great way to measure your compensation against the industry and a great tool for negotiating so definitely check it out.

Strategist Saut Thinks Trading Bottom Is Near

Jeff Saut is out with his latest investment strategy comments, emphatically titled, "Ouch." This of course refers to the precipitous decline in markets as of late. He writes, that, "My risk management discipline forced me to raise more cash again on Friday, even though I believe the stock market is in the process of making a significant 'low.' "

We've covered Saut's risk management principles before and while those principles caused him to raise cash levels last week, he's confident that markets are now oversold.

He cites the great folks at Bespoke who said that "61.4% of the SPX's stocks are oversold. The current oversold level is only the 27th time since 1990 that more than 60% of stocks in the index have been [this] oversold."

At this point, Saut believes you should 'keep your head screwed-on straight' and start compiling your buy list. In addition to some of Saut's favorite stocks, he recently added Abbott Labs (ABT), Copa Holdings (CPA), Digital Realty Trust (DLR) and Norfolk Southern (NSC) as solid candidates.

Embedded below is Jeff Saut's latest market commentary where he talks about an impending trading bottom in stocks drawing near:



You can download a .pdf copy here.

GLG Partners Start Ovoca Gold Position

Due to a regulatory filing made on June 7th, UK based hedge fund GLG Partners has disclosed a brand new position in Ovoca Gold (LON: OVG). They own a 5.44% interest in the AIM listed gold mining company.

Ovoca Gold is also listed on the ESM market of the Irish Stock Exchange (OVX). The company's principal activity is gold exploration in the Magadan Region of the Russian Federation. Previously, Ovoca acquired, developed and sold the Goltsovoye silver project to JSC Polymetal. You can view other hedge fund positions in UK markets here (scroll through).

Last year, we posted up GLG's research on the effect of analyst recommendations which was intriguing and worth checking out if you missed it as well.

Bill Ackman's Presentation on Family Dollar (FDO)

At the recent Ira Sohn Conference, Pershing Square Capital's Bill Ackman presented Family Dollar (FDO) as his investment idea under the notion that it is a prime target for a leveraged buyout (LBO).

While we've presented notes from the hedge fund conference, today we present Ackman's actual presentation (powerpoint slides) from the event.

His presentation highlighted that the dollar store chain is like Walmart (WMT), but with more room to grow. Ackman points to the company's return on capital as attractive.

The hedge fund manager believes that FDO can benefit operationally by being taken private, citing KKR's past acquisition of Dollar General (DG) as a successful LBO in the space.

Since the presentation on May 25th, Ackman has doubled his position in FDO and now owns 8.9% of the company. Embedded below is the full presentation Ackman gave on why Family Dollar (FDO) is a compelling investment:



To see what else Ackman has invested in, sign-up for our Hedge Fund Wisdom newsletter.

Valinor Management Boosts Swift Transportation (SWFT) Stake

David Gallo's hedge fund Valinor Management just filed an amended 13G with the SEC regarding Swift Transportation (SWFT). Due to trading on June 2nd, Valinor now owns 8.8% of SWFT with 7,023,271 shares.

This marks a 47% increase in their position size as they owned only 4,767,170 shares at the end of the first quarter (March 31st). We covered when Valinor originally started their stake in SWFT back in December as the company went public.

Over the past few months we've also detailed activity from Gallo's hedge fund in Clearwater Paper (CLW) as well as Cott (COT).

We're always curious as to how hedge funds got their name, so it's interesting that Gallo's firm is named after lands inhabited by immortal souls from the books of J.R.R. Tolkien. Before founding Valinor, Gallo earned his MBA from Harvard Business School and worked at Roberto Mignone's Bridger Management.

Per Google Finance, Swift Transportation "formerly Swift Holdings Corp., is a transportation services company and a truckload carrier in North America. As of September 30, 2010, the Company operated a tractor fleet of approximately 16,200 units comprised of 12,300 tractors driven by company drivers and 3,900 owner-operator tractors, a fleet of 48,600 trailers, and 4,500 intermodal containers from 35 terminals positioned near major freight centers and traffic lanes in the United States and Mexico."

Philippe Laffont's Coatue Management Buys More Sina (SINA)

In a 13G filed with the SEC due to trading on June 1st, Philippe Laffont's hedge fund Coatue Management has increased its position in Sina (SINA). They now own 5.16% of the company with 3,187,477 shares.

Laffont's hedge fund focuses on technology, media, & telecom and you can view the rest of Coatue Management's portfolio in the new issue of our Hedge Fund Wisdom newsletter.

This is almost a 10% increase in their position size since March 31st when they owned 2,907,894 shares. Coatue isn't the only major hedge fund to have purchased shares of SINA recently either. John Thaler's JAT Capital acquired a massive SINA position as well.

Sina is a social media company based in China and needless to say is one of the hot investing trends right now. However, shares have seen heightened volatility as they've declined from a high of $147 in April to $86 per share currently.

Given the volatility in the past two weeks, it's tough to be entirely sure as to who which funds still hold a position. This stock is the definition of a 'momentum' name and it will be interesting to see who emerges as a true investor once the sell-off abates.

Seth Klarman's Baupost Trims Audiovox (VOXX) Stake

Due to trading on May 31st, Seth Klarman's Baupost Group has filed an amended 13G with the SEC. Per the filing, Baupost now shows a 4.12% ownership stake in Audiovox (VOXX) with 857,402 shares.

This marks a 19% reduction in the hedge fund's position since March 31st. Back then, they owned 1,060,576 shares. To see the rest of Klarman's equity investments, head to our newsletter.

Per Google Finance, Audiovox is "an international distributor in the accessory, mobile and consumer electronics industries. Audiovox markets the products under the Audiovox brand name, other brand names and licensed brands, such as Acoustic Research, Advent, Ambico, Car Link, Chapman, Code-Alarm, Discwasher, Energizer, Heco, Incaar, Invision, Jensen, Mac Audio, Magnat, Movies2Go, Oehlbach, Phase Linear, Prestige, Pursuit, RCA, RCA Accessories, Recoton, Road Gear, Schwaiger, Spikemaster and Terk, as well as private labels through domestic and international distribution network."

And for more resources from this prestigious hedge fund, head to a collection of Baupost Group letters.

Bill Ackman Buys More Family Dollar (FDO) & Fortune Brands (FO)

Bill Ackman's hedge fund Pershing Square Capital Management has been on a buying spree this week.


Fortune Brands (FO)

First, they scooped up shares of Fortune Brands (FO) on June 6th and 7th (and last week as well). In total, Pershing purchased 501,397 shares of FO at prices of $62.87 and $63 per share.

After said purchases, the hedge fund now owns 17,170,033 shares of Fortune Brands. This is an activist position for Ackman and we covered his initial 13D filing last year.

The thesis here centers on breaking up the company's collection of brands. Wheels are already in motion in this regard as FO seeks to become a pure-play on the spirits business and will spin off its other divisions.



Family Dollar (FDO)

Second, Ackman was also out buying even more Family Dollar (FDO). As we covered recently, Pershing initially bought FDO in the first quarter but as of June 9th now has a 8.9% ownership stake in FDO with 10,871,793 shares, almost doubling his position in recent weeks.

At the recent Ira Sohn Conference, Ackman laid out his FDO thesis and it is largely based on FDO being an attractive leveraged buyout candidate. As we've already detailed, Family Dollar actually received a bid to go private from its second largest shareholder, Nelson Peltz's Trian Fund. While they essentially offered between $55 and $60, shares currently trade around $52.75.

You can view the rest of Bill Ackman's portfolio by subscribing to our Hedge Fund Wisdom newsletter.

What We're Reading ~ 6/10/11

John Paulson loses half a billion in 24 hours [ZeroHedge]

RenTec and Tudor performance numbers [Dealbreaker]

How to spot a bubble in real time [The Big Picture]

Youku (YOKU): the good, the bad, and the very ugly [Stone Street Advisors]

Liberty Global (LBTYA) break-up value [Cautious Bull]

Bulls attempt goal line stand [Humble Student of the Markets]

Steve Eisman to leave FrontPoint Partners [Absolute Return + Alpha]

The irresistible nature of trading [Forbes]

The search for Einhorn's gold [Reuters]

UK's Lansdowne Partners faces testing times [FT]

Profile on Phil Falcone [Vanity Fair]

Hedge funds post May losses from choppy markets [WSJ]

Hedge funds running farms [NY Observer]

The SEC's new guns [Absolute Return + Alpha]

GMCR: From small beans big trouble one day brews [Financial Investigator]

LinkedIn shares were a bubble: academic model [Reuters]

How Facebook can put Google out of business [TechCrunch]

Funny: homeowner forecloses on Bank of America [Digtriad]

Dan Loeb's Third Point Reduces Equity Exposure

Dan Loeb's Third Point Offshore Fund finished May -0.4% and year-to-date is up 9.7%. Managing around $4 billion, the hedge fund is closed to new investors and has seen 18.8% annualized returns.


Equity Exposure

The month of May was a volatile one for the markets in general and hedge funds were no exception. Third Point ratcheted down exposure to equities as they were 42.6% net long at the end of the month (60.3% long and -17.7% short). The month prior, the hedge fund was 46.8% net long equities, marking a 4.2% decrease in exposure from April to May.

Third Point's largest exposure this time around continued to be the consumer sector at 9.5% net long and basic materials at 8.2% net long.

Credit Exposure

In credit, Third Point was 34.4% long, -7.7% short, leaving them 26.7% net long. This is down from 29.4% net long the month prior. Their largest exposure in this segment continues to be asset backed securities.

Top Positions

Third Point's top holdings at the end of May were:

1. Gold
2. Delphi
3. El Paso (EP)
4. Technicolor (Multiple Securities owned)
5. CVR Energy (CVI)

Earlier today we posted up that David Tepper's Appaloosa Management recently bought more CVR Energy. Also, we highlighted how Delphi will be going public and there are numerous hedge funds involved in that name as well.

In the month of May, Third Point's top winners included: Delphi, El Paso, Short A, Short B, and Aveta.

The hedge fund's top losing positions for the month included: NXP Semiconductor (NXPI), NewPage, Williams Companies (WMB), Big Lots (BIG), and gold.

For rationale behind some of their investments, check out Third Point's investor letter.

Tepper's Appaloosa Boosts CVR Energy (CVI) Position

David Tepper's hedge fund Appaloosa Management recently disclosed an updated position in CVR Energy (CVI). Due to a 13G filed with the SEC, Appaloosa now shows a 8.26% ownership stake in CVI with 7,141,434 shares. This latest disclosure reflects trading as of May 23rd, 2011.

This marks an increase in their position size to the tune of almost 360% as they owned only 1,556,374 shares at the end of the first quarter. Interestingly enough, a selling stockholder affiliated with Kelso & Company LP shed 7,988,179 shares of CVI to Goldman Sachs on May 23rd.

Spin-Out of Fertilizer Business

The company had a secondary offering in February and numerous hedge funds were involved. Dan Loeb's Third Point, in particular, bought CVI under the spin-out thesis.

CVR Energy filed an IPO for its fertilizer business and will pursue an MLP structure for this offering. Hedge funds invested in the stock believe this new offering will garner a high valuation due to high demand for yield in the current low interest rate environment. You can see the full rationale for buying CVR Energy here.

Per Google Finance, CVR Energy is "an independent petroleum refiner and marketer of transportation fuels. In addition, the Company owns all of the interests (other than the managing general partner interest and associated incentive distribution rights (the IDRs)) in CVR Partners, LP (the Partnership), a limited partnership which produces nitrogen fertilizers in the form of ammonia, and a solution of urea and ammonium nitrate in water used as a fertilizer (UAN)."

To see the rest of David Tepper's investments, head to the brand new issue of our Hedge Fund Wisdom newsletter.

Steven Cohen's SAC Capital Builds OCZ Technology (OCZ) Stake

In a 13G filed with the SEC, Steven Cohen's prominent hedge fund SAC Capital disclosed an updated position in OCZ Technology Group, Inc (OCZ). Due to trading on May 26th, 2011, SAC has revealed a 5.1% ownership position in OCZ with 2,623,346 shares.

This is a massive increase in the hedge fund's position size as they only owned a measly 9,784 shares at the end of the first quarter.

Stock Down 30% Past 1.5 Months

OCZ traded down over 8% yesterday. Since the middle of April, shares are down over 30%. This is at least partially attributable to a negative research report published by Copperfield Research on April 20th, 2011. Also worth noting: over 24% of the float is short.

Our pal & trader @firstadopter on Twitter has been all over this saga. He rebutted the Copperfield report and then laid out why OCZ could be worth $28 per share based on rival Fusio-io's impending IPO. OCZ provides solid state drives (SSDs) and memory modules for computers and other systems.

Shares of OCZ have seen heightened volatility as of late, so it will be interesting to see how it trades after receiving a vote of confidence from SAC Capital.

David Einhorn's Greenlight Buys Playtech (LON: PTEC)

Greenlight Capital's David Einhorn has been on a buying spree as of late. While it's been widely reported that he's spending $200 million to buy a stake in the New York Mets, Einhorn has also been buying in another area of passion: poker.

Due to a disclosure filed with the London Stock Exchange, David Einhorn's Greenlight Capital disclosed an indirect new position in Playtech (LON: PTEC), owning 3.68% of outstanding shares. *Update: representatives of Einhorn's have let us know that this investment was made on the behalf of Greenlight. We had previously posed the question as to whether or not this was a personal investment because Einhorn was named on the filing, but Greenlight was not.

This investment has ties to Einhorn's passion of poker. In 2006, Einhorn finished 18th in the World Series of Poker and donated his winnings to charity. Per Google Finance, Playtech and its subsidiaries "develop unified software platforms for the online and land based gambling industry, targeting online and land based operators. Playtech's gaming applications include online casino, poker and other P2P games."

To see what else Einhorn has invested in, check out his hedge fund's updated portfolio here.

To learn to invest like this budding legend, head to David Einhorn's recommended reading list.

Kleinheinz Capital Starts Position in MWB Business Exchange

Hedge fund Kleinheinz Capital recently filed a disclosure with UK regulators. In it, they revealed a new position in MWB Business Exchange (LON: MBE). Due to trading on May 19th, Kleinheinz now owns 5.01% of MWB's outstanding shares.

In the past, we've also detailed how Kleinheinz thinks inflation is the biggest threat to emerging markets as well as some of their past portfolio commentary.

Per Google Finance, MWB Business Exchange is a "United Kingdom-based supplier of serviced offices. As at December 31, 2009, Business Exchange operated 73 centers providing over 14,000 workstations covering 1.2 million square feet of office space. The Company operates in two segments: four and five star serviced office accommodation under the Business Exchange brand, and three star serviced office accommodation under the City Executive Centres brand."

Strategist Jeff Saut on Efficient Markets

Market strategist Jeff Saut's latest commentary focuses on sideways markets and how you can still make money in them. He pulls a quote from Vitaliy Katsenelson, author of The Little Book of Sideways Markets (and e-book version here), who notes that, "one of the core reasons why markets are and will remain inefficient: because human beings are efficient."

In this regard, Vitaliy uses Cisco Systems (CSCO) as an example. The stock has fallen 80% from its highs and now investors who originally bought in 1999 have made no money. The company has guided below Wall Street expectations in recent quarters. Saut adds that, "to be sure, at downside and upside inflection points, stocks are anything but efficient."

Some hedge funds have dabbled in this name and you can see the value thesis rationale in a free sample of our newsletter. And as noted in the just-released new issue of Hedge Fund Wisdom, famed mutual fund manager Bruce Berkowitz started a position in CSCO last quarter.

While the stock market often churns sideways for years digesting large secular bull market moves, Saut points out that the trick to outperform during these periods is to "be more proactive (or tactical) in your investment approach, be sector and stock specific, and cut your losses quickly."

Embedded below is Saut's recent commentary:



You can download a .pdf copy here.

What We're Reading ~ 5/31/11

Must-read: The value of hedge fund stock picks [World Beta]

SAC Capital investors begin to eye the door [Fortune]

The top 5 U.S. cities seeking hedge fund talent [Absolute Return + Alpha]

FrontPoint founder tries again with new firm [Dealbook]

How to beat Wall Street [Business Insider]

EMC has been tearing it up [Reformed Broker]

Interview with the Ira Sohn contest winner [Santangel's Review]

Delphi Automotive Going Public, Hedge Funds Look to Cash In

Auto parts maker Delphi Automotive has been in bankruptcy purgatory for years. That's about to change. The company filed for an initial public offering on Wednesday and set an initial $100 million target. This is an important development mainly due to the high concentration of prominent hedge funds that own stakes.


Heavy Hedge Fund Involvement

David Tepper's Appaloosa Management was originally one of the main sponsors of Delphi's reorganization plan in 2005 but pulled out and things fell through. Fast forward four years later and new hedge fund owners Silver Point Capital and Elliott Management took control of the situation as the company finally looked to complete the cleansing process through reorganization.


Greenlight Capital Takes Stake

As far as other current hedge funds involved, David Einhorn's Greenlight Capital recently took a stake in Delphi as noted in their recent letter to investors. The hedge fund wrote,

"Delphi Automotive is an automotive supplier that produces a broad range of highly engineered products for powertrain, safety, electronic and thermal technology solutions. Delphi exited bankruptcy in October 2009 and has emerged in very good shape, following an aggressive restructuring in which it sold 11 businesses, closed 41 sites, reduced its U.S. workforce from 46,000 to 5,000 and moved its hourly pension plan and other post- employment benefits obligations to the Pension Benefit Guaranty Corporation (PBGC) and General Motors (GM). In addition, emerging markets have increased from 7% to 25% of sales.

The Partnerships established a position at an average price of $19,228 per share. To date, Delphi’s multiple class ownership structure has limited its ability to go public. However, on March 31, 2011, Delphi repurchased shares from both GM and the PBGC for $4.4 billion, thereby creating a one class structure. There has since been press speculation that Delphi will pursue a public offering later this year. As Delphi potentially re-enters the public market, we hope that the company will gain value recognition for the significant progress it has made through its restructuring. Delphi stock ended the quarter at $21,500 per share."


Dan Loeb's Third Point Owns Large Position

As noted in our recent post on Third Point's latest exposure levels, Delphi was one of their top positions as of the end of April. The hedge fund has owned a sizable stake for quite some time, so it will be interesting to see when they decide to eventually shed their stake.


Perry Capital Involved in the Past (Still Involved?)

Perry Capital originally purchased claims in Delphi late in the bankruptcy process. And in its fourth quarter 2010 letter to investors, the hedge fund had this to say about its stake in auto parts maker: "Our position in Delphi equity continued to march higher. The company has performed quite well since exiting bankruptcy and, despite significant appreciation, we continue to hold our position. Delphi is well positioned as an automotive supplier - diesel, power train, safety and infotainment - with the best balance sheet in the industry."


When Will They Cash In?

Given that Delphi is not yet publicly traded and that Perry hasn't mentioned it in other letters, it's hard to say if they still own a position two quarters later. Greenlight's commentary, on the other hand, makes it sound like they will hold through the IPO in hopes of further upside through market revaluation.

Regardless, there are a lot of other hedge funds involved that are glad to finally see Delphi emerge from its drawn-out bankruptcy process and go public. The question is, how many of them will be cashing in?

Howard Marks' Latest Commentary

Oaktree Capital's Howard Marks is out with his latest missive entitled, "How Quickly They Forget." Warren Buffett says that when Marks' letters hit his desk, it's the first thing he reads. If that's not a good enough endorsement, we don't know what is. You can download a .pdf copy here.

Marks also has a new book out entitled The Most Important Thing: Uncommon Sense for the Thoughtful Investor so check that out as well.

Bill Ackman Discloses Size of Family Dollar (FDO) Position

Two days ago at the Ira Sohn Conference, Pershing Square's Bill Ackman pitched shares of Family Dollar (FDO) as an attractive investment. At the time, however, no one knew the exact size of his wager. Now, we do.

In an amended 13F filed with the SEC, Pershing Square Capital Management disclosed ownership of 5,764,187 shares of FDO. At current prices of around $55.50, that translates into almost a $320 million investment. Compared to the rest of Pershing's disclosed holdings, this represents about a 5% position.

Keep in mind, though, that this only represents his ownership stake as of March 31st. Since then, Ackman has been buying more shares. At the Ira Sohn Conference on Wednesday, he even mentioned his hedge fund was out buying shares that day. So, it's tough to say exactly how much larger his position is, but it is at the very least slightly larger than what is reported above.

The hedge fund manager thinks shares of Family Dollar are worth up to $92 (including dividends) and sees it as an attractive target for a leveraged buyout. You can see see the rest of Bill Ackman's portfolio in the brand new issue of our Hedge Fund Wisdom newsletter that was just released.

And if you missed it, check out our notes from the Ira Sohn Conference as well as part 2 of our notes here for more hedge fund manager presentations.

What We're Reading ~ 5/25/11

Further notes from this week's Ira Sohn Conference [ReformedBroker]

How stock picks at last year's Ira Sohn fared [Absolute Return + Alpha]

Video: Debating the merits of the Ira Sohn Conference [Reuters]

Seasonality in the markets? [AbnormalReturns]

Bruce Berkowitz is beating hedge fund managers at their own game [Institutional Investor]

And some tech focused links:

Yes, price to earnings does matter [ValuePlays]

LinkedIn (LNKD) one of most costly stocks to short [Marketwatch]

LNKD IPO: party like it's 1999? [New Yorker]

Amazon (AMZN) tablet coming soon? [Techinsidr]

Why AMZN will enter the crowded tablet market [PCMagazine]

E-books causing seismic shift in publishing [Marketwatch]

Apple (AAPL) Mac sales growing faster than PC sales [Guardian]

When flash changed storage forever [EMC]

Why does Yahoo! (YHOO) fail? [Cenedella]

Ira Sohn Conference Notes Part 2: Ackman, Einhorn, Eisman, Icahn, Greenblatt

This is part 2 of our ongoing coverage of presentations given by top hedge fund managers at the Ira Sohn Conference today. Be sure to check out part 1 of our notes from Ira Sohn which includes presentations from Dinakar Singh, Jim Chanos, Phil Falcone and more.

Part 2:


Steve Eisman / FrontPoint Partners: Eisman was profiled in Michael Lewis' great book, The Big Short as one of the big winners in the subprime trade. Last year at Ira Sohn, he said to short for-profit education stocks and that trade paid off as many stocks were down anywhere from 25% to 72% over the past year.

This time around, Eisman focused on US financials, asking "are financials dead forever?" He notes that credit quality is improved but interest margins will most likely continue to contract.

Eisman likes property and casualty insurers, citing the potential for commercial policy pricing to improve. He noted that his year has been particularly hard hit with natural disasters, leading to large insurance losses. He thinks P&C insurers are a 'buy' even if there's another big disaster.

He says the least risky way to play this is via insurance brokers like Marsh & McLennan (MMC), Willis Group (WSH), and Aon (AON). You can read an in-depth analysis of AON in the free sample of our Hedge Fund Wisdom newsletter (direct .pdf download link).

For riskier plays, Eisman points to pure reinsurers based in Bermuda and pulled up a list of them, the most well-known of which is probably Ace (ACE).


Bill Ackman / Pershing Square Capital: Ackman said to buy Family Dollar (FDO). He likes the dollar-store chain because it is like Walmart, but there's room to grow. He also notes the company's solid return on capital as they can build plenty of new stores. Many of Ackman's plays are retail or real estate focused and this one is no different.

FDO actually received a bid to go private from Nelson Peltz's Trian Fund, who offered between $55 to $60 per share in February. They are one of the largest shareholders, owning almost 8% of FDO's shares. Ackman believes that FDO is an attractive target for a leveraged buyout.

Ackman notes that Family Dollar has fallen behind competitor Dollar General (DG) ever since KKR bought DG and now FDO has to improve. The Pershing Square manager thinks shares will trade as much as 70% higher (FDO currently trades around $55 and Ackman thinks it's worth up to $92 including dividends). He also mentioned that his hedge fund was even buying shares today.

We also covered that Ackman started an activist position in Alexander & Baldwin (ALEX).


Joel Greenblatt / Gotham Capital: The value investor talked about the advantage of having a long-term investment horizon. He emphasizes investments that fall under the 'time arbitrage' classification. Market Folly readers will recall that Blue Ridge Capital's founder and hedge fund manager John Griffin also uses this approach. He classifies investments as either time arbitrage or catalyst driven.

Greenblatt's picks included a myriad of names, including: WellPoint (WLP), GameStop (GME), Intel (INTC), Walgreens (WAG), Nordstrom (JWN), Bed Bath & Beyond (BBBY), and Humana (HUM).

He also has a new book out entitled, The Big Secret for the Small Investor: A New Route to Long-Term Investment Success. You can also check out his recommended reading list here.


David Einhorn / Greenlight Capital: Einhorn's presentation laid out the bull case for life insurer Delta Lloyd (AMS: DL), traded in the Netherlands. This is one of his hedge fund's largest positions.

His second pick was Microsoft (MSFT). The tech giant has attracted lots of value investors as of late and you can view fellow hedge fund T2 Partners' presentation on MSFT here. Einhorn says the company still has a shot at the smartphone market with its partnership with Nokia (NOK). He also notes that it is trading at a discount as the market isn't giving them credit for their solid position in cloud computing.

Einhorn also said that CEO Steve Ballmer doesn't care what Wall Street thinks and that could possibly be a good thing. However, he conceded that Ballmer is "stuck in the past" and said that Ballmer's "continued presence is the biggest overhang on Microsoft's stock." It's very clear Einhorn wants Ballmer fired.

We've also detailed Greenlight Capital's recent letter to investors for insight into their new positions in Yahoo! (YHOO) and Best Buy (BBY).


Carl Icahn / Icahn Partners: The legendary rabblerouser began his presentation by saying he's made a fortune by studying natural stupidity. Icahn said that "activism" in the old-school sense of the word is dead; there aren't anymore true corporate raiders anymore. He says that there's tons of money to be made by shaking things up at a company.

He went on to talk about why he returned outside investor capital in his funds. He simply didn't want to be responsible for the losses of others like he was during the 2008 crisis. Icahn fears further problems will arise in the markets in a year or two. His pitch at the conference? His holding company: Icahn Enterprises (IEP).


Mark Hart III / Corriente Advisors: If you're unfamiliar with Hart, then all you need to know is that he created subprime mortgage and sovereign debt funds well before the crises happened, profiting handsomely from the events that followed.

In his speech, Hart said to short China and this isn't the first time he's made this case. He argues that it is a credit fueled bubble and there are many misconceptions out there. It seems his conviction is high here as he says that China's bust will be much larger than the Asian crisis in the 90's.

Hart argues that inflation will end China's credit growth. This isn't the first time we've seen this argument. Hedge fund Kleinheinz Capital has in the past said that inflation is the biggest threat to emerging markets. Coincidentally, both Kleinheinz and Corriente operate out of Fort Worth, TX. Lastly, Hart mentioned he was buying puts on the renminbi.


Jeffrey Gundlach / DoubleLine: He used an Andy Warhol car crash painting as an illustration for the housing market. He said that Bank of America $BAC is a proxy for the ABX and says it's going lower. Gundlach likes natural gas.

Interestingly enough, Gundlach said that gold is too heavy to carry around to use as a form of currency to pay for things. Instead, he said to use gems to protect against a crash and uncertainty because they are more portable, noting that you can carry a ruby in your shoe. Gundlach prefers holding cash or gems instead of gold or silver.

As an aside, it's worth noting that diamond prices have been heading higher in recent months. They are not a publicly traded commodity and high demand from India and China seems to be driving prices there.


Marc Faber / Gloom Boom & Doom Report: Faber is very clearly not a fan of Ben Bernanke. He says that the Federal Reserve Chairman is a student of history regarding the Depression, but that Bernanke unfortunately doesn't know what caused it. Faber notes that as the Fed prints more money, cash and bonds obviously aren't good investments. He also joked that if everyone at Ira Sohn complained, Bernanke would come in and drop a trillion dollars right there.

Faber said not to own US government debt, even if the deflationists end up being right. He is also an advocate of owning gold but not storing it in one place. Faber says you need to store gold all over the world in Australia, Switzerland, etc. He also disputed Gundlach's notion to own gems over gold and said people will always value gold, even if you're in a jungle or desert because everyone knows what it is.


Steve Feinberg / Cerberus: He pitched residential mortgage backed securities (RMBS) as a compelling opportunity and labeled them 'cheap,' given the high amount of underwater loans and depressed home prices.


Peter May / Trian Fund Management: Peter May of Nelson Peltz's Trian Fund pitched upscale jeweler Tiffany & Co (TIF), citing "enormous price appreciation" ahead. Catalysts for TIF include new store openings, vertical integration, new watches, and increased analyst coverage and he said shares could see $100 (they currently trade around $70.)


If you missed it, be sure to also check out part 1 of our notes from Ira Sohn featuring investment ideas from Jim Chanos, Phil Falcone, Dinakar Singh and more.

Ira Sohn Conference Notes: Hedge Fund Manager Presentations

The Ira Sohn Conference is taking place today in New York and features an all-star line-up of hedge fund managers. This post features part 1 of our notes from their presentations. ***Update: We've also posted up part 2 of our notes from Ira Sohn as well.

Part 1:


Erez Kalir / Sabretooth Capital: His pick was a long of MBIA (MBI) as a 'favorably asymmetric' play. His presentation was entitled, "Economic Death as a Special Situation." He feels that MBIA has 100%-200% upside with only 30% downside at worst, so the risk/reward skew is favorable.

He also likes Argentina as a compelling investment arena since its default in the early 2000's. In particular, he's looking at energy exploration & production names. He points to stocks like YPF SA (YPF) and Crown Point Ventures (CWV).

On the topic of inflation hedging, Kalir doesn't like gold. In fact, he warned against owning it. He also dislikes shorting treasuries. Instead, he prefers to buy farmland. This stance no doubt echoes the sentiment of Jim Rogers, the ex-Quantum fund manager who has also been a staunch advocate of owning farmland. Additionally, we've detailed how subprime profiteer Michael Burry also bought farmland.


Dinakar Singh / TPG-Axon Capital: Singh thinks the current market is a great environment for stockpicking and fancies shares of wireless provider Sprint (S), which David Einhorn's Greenlight Capital also likes (see Einhorn's thoughts here). Singh cites the company's low valuation and it's his favorite turnaround story.

He says S needs to consolidate its two networks starting now with the next generation phones. Singh actually feels like the T-Mobile / AT&T (T) merger is good for Sprint because it removes their largest competitor. Singh notes that the US wireless market could offer defensiveness like utility stocks, but with the added benefit of growth. He thinks S could have 40-70% upside, saying its worth $8-14 per share (currently trading around $6).

TPG-Axon's leading man cited Zhongpin (HOGS) as a compelling investment due to its top line growth and the fact that it's trading at 7x earnings.

Singh also mentioned he thinks that Orkla (OSL: ORK) has a fair value of $65 to $80 as the company was mismanaged and restructuring could unlock value.


Jeff Aronson / Centerbridge Partners: His pick was to go long shares of CIT Group (CIT). This has been a hedge-fund-favorite as some of the largest owners also include Bruce Berkowitz's Fairholme Capital, Howard Marks' Oaktree Capital, David Einhorn's Greenlight Capital, Marc Lasry's Avenue Capital, and Dan Loeb's Third Point. Before Chapter 11, Centerbridge was buying CIT debt. Since then, they've been buying the equity.

Aronson says that the company's intrinsic book value is $59 per share and notes that they have $12 billion in cash on their balance sheet. He highlights that CIT has publicly stated it could buy a retail bank (whose deposits would boost earnings). As a takeout candidate, Centerbridge thinks CIT could be worth as much as $65 (shares trade around $41 currently.)


Robert Howard / KKR: Howard (representing KKR's new equity team) pitched shares of Wabco (WBC), a company that produces anti-lock braking systems among other things. He cites three major trends that WBC can benefit from: cyclical recovery (US & Europe trucking recovery), emerging market growth, as well as tighter safety rules. Howard mentions the company is often overlooked by investors too.

KKR's man also pitched HSN, Inc (HSNI), otherwise known as the Home Shopping Network. He likes their demographic of 30-55 year old women with solid annual income to spend. Howard thinks that John Malone's Liberty Media could make a play for the company too, as he points out that Liberty owns 30% of HSNI and all of QVC, the other major player in the shopping-via-television arena.


Phil Falcone / Harbinger Capital Partners: Falcone talked about his wireless venture, LightSquared. We've covered this play numerous times and while it's not publicly traded yet, Falcone says that it will be some day. Essentially, this is Harbinger's concentrated bet on a 4G network.

Numerous hedge funds have invested in the 'more mobile data usage' theme via various plays. Some have elected to buy the wireless tower operators like American Tower, (AMT), Crown Castle (CCI), and SBA Communications (SBAC). Falcone, on the other hand, has elected to straight up build out his own network as his hedge fund has morphed into a semi-private equity-like fund. He noted that they've accumulated spectrum and are looking at a 4G terrestrial network.

Falcone also likes Crosstex Energy (XTXI). We covered his investment in XTXI back in December and the Harbinger manager likes it due to its complex financial structure. A master limited partnership owns the assets and then XTXI owns that partnership. He drew attention to the fact that this isn't a company that pulls gas out of the ground, but rather a play on gas processing and transmission. Falcone thinks XTXI is worth double what it's trading at now or more (around $9.50 currently).


Jim Chanos / Kynikos Associates: The well-known short-seller attacked alternative energy 'green' plays with a presentation entitled, "Does Solar and Wind = Hot Air?" Chanos said that, "wind is 50% more expensive than natural gas, and solar is 4 times more expensive" and that natural gas prices have essentially shot an "economic arrow" into alternative energy.

In particular, Chanos mentioned Denmark-based Vestas (CPH:VWS or PINK: VWDRY), a company focused on wind power that might be worth looking at for a short.

However, he is most excited about shorting solar power via First Solar (FSLR), a company he believes has outdated technology. Chanos was recently on television talking negatively about this name as well. He points out that Spain and Italy utilize solar power the most. But, the problem there is that the demand is highly subsidized. Also, he points to the management exodus at FSLR as a warning sign for investors to exit shares.


Sunjay Gorawara / Investment Idea Contest Winner: This year's Ira Sohn featured an investment idea contest where the winner was able to present their idea to all attendees. Michael Price introduced the contest winner but while he was talking, he mentioned that Goldman Sachs (GS) could be a buy as it should be worth $100 more than where it currently trades. And in general, he was bullish on financials.

Judges Bill Ackman, David Einhorn, Michael Price, and Joel Greenblatt selected the winning entry of Bridgepoint Education (BPI) from an undergraduate student at Indiana University who will be interning at JP Morgan this summer.

For more hedge fund coverage: Be sure to receive our free updates via email or free updates via RSS reader.


This concludes part 1. Please head to part 2 of our notes from Ira Sohn for coverage of presentations from David Einhorn, Bill Ackman, Carl Icahn and more.

Free Sample of Our Hedge Fund Wisdom Newsletter

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The free sample issue includes quick investment thesis pitches on Sirius XM Radio (SIRI), Express Scripts (ESRX), Alcon (has since been bought out), and Cisco Systems (CSCO).

It also features in-depth analysis of Aon (AON) and CareFusion (CFN). And of course, it highlights the portfolios of 25 top hedge funds.


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John Thaler's JAT Capital Bets on Social Media with Sina (SINA) Position

John Thaler's hedge fund JAT Capital has been buying shares of Sina Corp (SINA) hand over fist. Per a 13G filed with the SEC, the hedge fund has disclosed a 5.6% ownership stake in SINA with 3,384,385 shares.

JAT has doubled its position and then some in the past few weeks as they only owned 1,455,995 shares at the end of March. And before that at the end of December, they only held 513,920 shares. Over the past six months, JAT Capital has ramped up its position by almost 560%.

Social Media Investing Boom

Sina Corp is at the crossroads of two hot investing trends: social media and China. SINA is essentially the 'Twitter of China' and with the recent LinkedIn (LNKD) IPO, the social media investing boom is here. By the way, don't forget to follow @marketfolly on Twitter for intra-day commentary and further hedge fund coverage.

Per Google Finance, Sina Corp is "an online media company and MVAS provider in the People’s Republic of China (PRC) and the global Chinese communities. The Company provides services through five business lines, including SINA.com (online news and content), SINA Mobile (MVAS), SINA Community (Web 2.0 and social networking-based services and games), SINA.net (search and enterprise services), and SINA E-Commerce (online shopping)."

About John Thaler/JAT Capital

Before founding JAT Capital in 2007, Thaler worked at Shumway Capital Partners where he was responsible for covering technology, media and telecom and he managed the internal Omni fund. Prior to that, he worked in private equity at Spectrum Equity Investors.

Due to this experience, it should come as no surprise that Thaler employs a fundamental research process and private equity-like approach to investing with an emphasis on tech. Thaler earned his BA in Economics from the University of Chicago.

In 2008, JAT returned -5.9% (compared to -37% for the S&P) and in 2009, Thaler's fund returned 23.2% gross.

Scout Capital Discloses Sensata Technologies (ST) Stake

James Crichton and Adam Weiss' hedge fund Scout Capital just filed a 13G with the SEC on shares of Sensata Technologies (ST). Based on portfolio activity on May 13th, 2011, Scout has disclosed a 5.02% ownership stake in ST with 8,750,000 shares.

At the end of the first quarter (March 31st), Crichton and Weiss' hedge fund owned 8,200,000 shares so this marks only a 6.7% increase in their position size.

However, Scout just revealed their position in Sensata equity as a new holding in the first quarter. As such, all of their buying in the name has been within the past five months. They also recently started an Arcos Dorados stake (ARCO).

Scout isn't the only hedge fund that has recently disclosed a position in Sensata equity. As noted in the brand new issue of our newsletter, John Griffin's Blue Ridge Capital started a new stake in the quarter and Alan Fournier's Pennant Capital was adding to its position as well.

Per Google Finance, Sensata Technologies is "The Company is engaged in the development, manufacture and sale of sensors and controls. It produces a range of sensors and controls for mission-critical applications, such as thermal circuit breakers in aircraft, pressure sensors in automotive systems, and bimetal current and temperature control devices in electric motors."

John Griffin's Blue Ridge Loads Up on Level 3 Communications (LVLT)

John Griffin's hedge fund Blue Ridge Capital has filed a 13G with the SEC on shares of Level 3 Communications (LVLT). Due to portfolio activity on May 13th, Blue Ridge has disclosed a 5.74% ownership stake in LVLT with 97,805,000 shares.

This marks a whopping 434% increase in their position size. Griffin's firm owned 18,305,000 shares back on March 31st, so the recent addition took place somewhere within the past two months. We've just detailed the rest of Blue Ridge's updated portfolio in the new issue of our newsletter: Hedge Fund Wisdom.

Per Google Finance, Level 3 Communications is "is engaged in the communications business. The Company is a facilities based provider of a range of integrated communications services."

To learn to invest like Griffin, check out Blue Ridge's recommended reading lists.

Soros Fund Management Buys More Microstrategy (MSTR)

Soros Fund Management just filed a 13G with the SEC regarding shares of Microstrategy (MSTR). Per portfolio activity on May 10th, George Soros' firm has disclosed a 5.67% ownership stake in MSTR with 454,595 shares.

This marks a 34% increase in their position size. Back on March 31st, they owned only 338,384 shares. Per Google Finance, Microstrategy "is a worldwide provider of business intelligence software that enables companies to report, analyze and monitor the data stored across their enterprise."

We just detailed George Soros' updated portfolio and you can view the rest of his investments in our new issue of Hedge Fund Wisdom that was just released yesterday.

Jeff Saut's Favorite Investment Ideas

Market strategist Jeff Saut's latest commentary is out and he focuses on some of his favorite investment ideas. They are:

Wiliams Companies (WMB): He writes that, "Our bullish thesis on Williams is supported by three main points: (1) we believe the company's E&P assets will garner a higher valuation in the market place as a stand-alone entity when the company splits itself into two parts; (2) we believe the market is undervaluing Williams' ownership of the Williams Partner GP, and (3) we expect strong growth from the Canadian midstream assets."

Market Folly readers will recall that Dan Loeb's Third Point outlined this exact WMB thesis as well, as the stock seems to be a hedge-fund-favorite.


Clayton Williams (CWEI): Saut notes, "What does set Clayton Williams apart from the rest of the group is its highly oil-weighted production profile (74%), growing position in high-return oil plays (namely the Permian and Delaware Basin), and cheap valuation. Raymond James Analyst John Freeman last week reiterated his Outperform rating on Clayton Williams and stated that he viewed any pressure in the stock as a buying opportunity."

In his commentary, Saut also explains the rationale behind bullishness on shares of Iberiabank (IBKC), and Equinix (EQIX).

He also points out some of the latest hedge fund moves from 13F filings. While he notes that HCA Holdings (HCA) was one of the largest new buys in the past quarter, he fails to mention that it was because the company had its initial public offering. To see what hedge funds have been buying, we of course point you the new 91-page issue of our Hedge Fund Wisdom newsletter.

For Saut's favorite stocks, you can download a .pdf copy here.

What We're Reading ~ 5/23/11

The new issue of our newsletter: Hedge Fund Wisdom [Market Folly]

Hedge fund panel with Jamie Dinan, Izzy Englander & Lee Ainslie [Dealbreaker]

Three things that are bottoming [Reformed Broker]

The scuttlebutt method of stock research [Bronte Capital]

15 fundamentals to win the battle with the market [Kirk Report]

UltraShort 20 year treasury ETF performance simulator (TBT) [Symmetric Info]

Why a pair of Crox cost me $1 million [Leigh Drogen]

Eddie Lampert's Sears cult supporters [GLGroup]

Audio of S&P futures pit during flash crash [Big Picture]

Five disciplines of great investors [WashingtonPost]

Real median incomes versus supermarket stocks? [Barbarian Capital]

Kyle Bass: elite hedge funds getting special treatment [BusinessInsider]

SAC Capital readies quant fund; first new offering in six years [FINalternatives]

How Bruce Berkowitz stumbled with AIG [Fortune]

Berkowitz: "I was wrong" [WSJ]

Jim Cramer hits an all-time high [NYTimes]

Poker players nearly as skilled as baseball players [HuffPo]

Burger Wars: In-N-Out vs Five Guys vs Shake Shack [SeriousEats]

New Issue of Our Hedge Fund Wisdom Newsletter Just Released!

The Q1 2011 issue of MarketFolly's premium Hedge Fund Wisdom newsletter has just been released! Current subscribers please login at hedgefundwisdom.com to download it.

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On June 30th, 2011 our prices are going up to $299.99 for a 1-year subscription and $89.99 for a quarterly subscription. (Current subscribers: don't worry, your current prices are locked in and you'll be grandfathered in at the old rate).

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Third Point Adds To Xerium Technologies (XRM) Position

Dan Loeb's Third Point LLC just filed an amended 13G with the SEC regarding shares of Xerium Technologies (XRM). Due to portfolio activity on May 5th, Third Point has revealed a 11.3% ownership stake in XRM with 1,700,000 shares.

This marks an increase in their position size of 18%. Loeb's fund held 1,436,405 shares at the end of 2010. The company recently announced a plan to refinance its credit facilities. For more on Third Point, check out our post on their latest exposure levels as well as their focus on spin-outs.

Per Google Finance, Xerium Technologies is "a global manufacturer and supplier of two types of consumable products used primarily in the production of paper: clothing and roll covers."

To learn to invest like this manager, head to Dan Loeb's recommended reading list.

Baupost Group Doubles Aveo Pharmaceuticals Stake, Trims BreitBurn Energy Partners

Seth Klarman's Baupost Group recently filed two 13G's with the SEC. Baupost's equity activity is pretty minimal so it's always an interesting treat when they have some activity. We also covered some of Klarman's thoughts in Baupost's year-end letter.

Aveo Pharmaceuticals (AVEO)

First, due to trading on April 30th, Baupost has disclosed a 11.77% stake in Aveo Pharmaceuticals (AVEO) with 4,221,010 shares. Baupost has doubled its stake in the company. They originally started a brand new position in the name back in the fourth quarter with 2,000,000 shares.

BreitBurn Energy Partners (BBEP)

Second, due to trading on the same day, Klarman's firm has also revealed a 4.23% stake in BreitBurn Energy Partners (BBEP) with 2,500,000 shares. This marks a decrease in their position size of 42.5% as they owned 4,350,000 shares at the end of 2010.

To see the rest of Klarman's recent equity activity, be sure to subscribe to our Hedge Fund Wisdom newsletter as a new issue is just around the corner.

Per Google Finance, Aveo Biopharmaceuticals is "a biopharmaceutical company focused on discovering, developing and commercializing cancer therapeutics. Its product candidates are directed against mechanisms known to be involved in cancer."

BreitBurn Energy Partners is "an independent oil and gas partnership focused on the acquisition, exploitation and development of oil and gas properties in the United States."

For from this manager, be sure to read through a collection of Seth Klarman's Baupost Group letters.

Eminence Capital Adds to Novellus Systems (NVLS)

Ricky Sandler's hedge fund Eminence Capital just filed a 13G with the SEC regarding shares of Novellus Systems (NVLS). Per trading activity on April 29th, the hedge fund has disclosed a 6.3% ownership stake in NVLS with 5,623,442 shares.

This marks almost a 66% increase in their position size. At the end of 2010, they owned 3,390,000 shares of NVLS. It looks as though Eminence added to their stake on the recent sell-off after the company's guidance missed analyst estimates. Novellus recently announced the pricing of $600 million senor convertible notes due 2041.

Sandler started Eminence after previously being an analyst at Mark Asset Management. In the past, he also started Fusion Partners at 25 with Wayne Cooperman. As their investment styles differed, Sandler started Eminence.

He employs a 'quality value' approach by spending equal amounts of time on the long and short side of the portfolio. Eminence employs gross leverage and typically runs 120% long and 70% short. Last year we saw that Eminence favored high quality large caps.

Per Google Finance, Novellus Systems "together with its subsidiaries, develops, manufactures, sells and supports equipment used in the fabrication of integrated circuits, commonly called chips or semiconductors."

Market Folly's 3rd Anniversary

Things have been so hectic we missed our own anniversary a few weeks ago. Founded in April 2008 in the midst of the worst financial crisis since the great depression, MarketFolly.com has come a long way.

Milestones In 2010

Last year the site received over 2.1 million unique visitors and over 3.3 million hits. Market Folly now has over 13,900 subscribers, a 56% increase over last year. If you don't already, be sure to receive our free updates via email or via RSS reader.

We also started a premium quarterly newsletter, Hedge Fund Wisdom. It tracks the portfolios of 25 top hedge funds and provides in-depth analysis of their latest investments, telling you what they bought and why. Our new issue is only a few weeks away so check out a free sample in the mean time.

A Thank You & Request

Thank you for reading, sharing, and interacting. We're always trying to improve the site so please feel free to send feedback, suggestions, and criticism (brutal honesty always welcome).

Want to see a particular hedge fund tracked? Let us know! Have access to hedge fund letters? Send them over! Rest assured, contributions are always treated as anonymous and confidential.

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Thank you again for your readership and we'll leave you with the quote that inspired the site's name:

"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it." ~ Warren Buffett

Corsair Capital Anticipates Increased M&A Activity: Investor Letter

Jay Petschek's Corsair Capital Management is one of our favorite funds to track. Corsair returned 6.0% net in the first quarter and has seen 15.5% annualized returns since inception in 1991. Their latest investor letter updates us on their market view and some of their positions.

They write, "The global economy’s strength leads us to believe companies will exit the sidelines with renewed confidence and deploy cash for strategic acquisitions. Market multiples remain below historic averages and the capital markets are open; companies can now afford to strategically position themselves to benefit from higher growth in emerging markets, gain access to resources, improve cost structures, and so forth."

Post Reorganization Companies

In the past, we've highlighted how John Paulson is betting on restructured equities. We've also detailed that Dan Loeb's portfolio holds post-reorg equities. Corsair also likes this play, but they've invested in names we haven't seen discussed in manager commentaries before.

In particular, Corsair owns Six Flags (SIX), which emerged from bankruptcy in May of last year. Their thesis is predicated on management's ability to reinvent the business model and improve profitability. They also point to large insider buying.

They also own Reader's Digest, another company recently emerged from bankruptcy. While some have left the publishing industry for dead, investors should be cognizant that the company "derives less than 8% of its earnings from the Reader's Digest Magazine."

Corsair's letter also details updates on their positions in Globe Specialty Metals (GSM), Innophos (IPHS), Keystone (KYCN), and Schweitzer-Mauduit (SWM). It also contains a detailed write-up on their new investment in IDT Corp (IDT), which they believe is worth $38-57 on a sum-of-the-parts valuation (a 50-130% return).

Embedded below is Corsair Capital Management's first quarter letter (email readers come to the site to read it):



Be sure to check out other hedge fund letters we've posted up, including David Einhorn's Greenlight Capital and Lee Ainslie's Maverick Capital.