Jonathan Ruffer Worried About China, Says Reflation Trade Over

Jonathan Ruffer is out with Ruffer Investment Company's latest market commentary. Ruffer has returned approximately 16% per year since 2004 and is gaining respect as a top UK manager, following in the footsteps of Odey Asset Management and Lansdowne Partners.

Back in April, we presented Ruffer's commentary stating that the fund was overweight Japan. In their July missive, we see that the UK manager is worried about China as the country fought off deflationary forces by expanding its monetary base after the financial crisis.


China Concern

Ruffer writes (emphasis ours),

"China is overheating; a dislocative slowdown would disrupt the financial markets, and this, in turn, would likely compromise the global economy. This dynamic was very visible in 2008 in the West: the trade crisis was not predictable, though the soundings of industrialists - trade responded to the mayhem in the financial world ... China has the capacity to derail the whole world, and they don't publish their railway timetable."

This isn't the first time we've heard managers sound the alarm regarding China. Grandmaster Capital's Peter Wolff says China is a debt-fueled investment bubble.

Yet on the other side of the table, the legendary Warren Buffett has said China will be a big driver of growth for the next 10-20 years.

The question Ruffer is asking though, is what exactly is this growth costing and what happens if it stalls? That's certainly something worth pondering. Ruffer concludes that, "It looks reasonable to acknowledge that if China needs to slow its economy, then most of the developed world will need to maintain very low policy rates to support growth and the banking system."


The Reflation Trade: Over?

The UK manager also goes on to declare that the reflation trade is 'no longer wholly appropriate.' While selling US dollars and buying commodities was *the* trade much of the past two years, Ruffer notes that "zero interest rates in America mean that the monetary policy of the entire world follows in its wake."

Ruffer argues that the performance of financial assets has been largely (if not completely) driven by dollar debasement via quantitative easing. Yet now that Ben Bernanke has signaled that QE3 is not the preferred choice of action, what happens to all the money chasing returns in a low interest rate environment?

The insurance policy that backstopped risk-taking is no longer there. Thus, the reflation trade is over.

Embedded below is Ruffer Investment Company's latest market commentary (email readers come to the site to read it):



For related reading on these topics, check out hedge fund Kleinheinz Capital's thoughts on how inflation is the biggest threat to emerging markets.

Scout Capital's Adam Weiss & James Crichton Presenting at Value Investing Congress

It's just been announced that the founders of hedge fund Scout Capital will be speaking at the Value Investing Congress in New York City on October 17th & 18th. We've featured Weiss and Crichton's fund on the site numerous times before as they manage over $4 billion.


42% Discount to the Event: Market Folly readers receive a 42% discount by clicking here and using code: N11MF4. Take advantage of this ASAP because it expires July 29th!

Other Speakers:

- Bill Ackman (Pershing Square)
- Leon Cooperman (Omega Advisors)
- Jim Chanos (Kynikos Associates)
- Joel Greenblatt (Gotham Capital)
- Alexander Roepers (Atlantic Investment Mgmt)
- Guy Gottfried (Rational Investment Group)
- Michael Kao (Akanthos Capital)
- Whitney Tilson & Glenn Tongue (T2 Partners)

As you can see, the Value Investing Congress is loaded with prominent hedge fund managers. Get a peak inside their portfolios by hearing their latest investment ideas in New York this coming October.

The big discount for our readers expires in one week, so act now. Click here to save 42% off admission.

ValueAct Capital Goes Activist on Moody's (MCO), Buys More Motorola Solutions (MSI)

Jeff Ubben's ValueAct Capital has been quite active recently as evidenced by two 13D filings submitted to the SEC. As Ubben has explained in a previous interview, his fund employs an activist value investing strategy.

Going Activist on Moody's (MCO)

First, ValueAct has gone activist on Moody's (MCO) according to a 13D just filed. Per the filing, we learn that ValueAct has a 6.1% ownership stake in MCO with 13,866,970 shares.

At the end of the first quarter they only owned 8.2 million shares. The hedge fund firm has purchased over 5.5 million shares over the past 3 months, increasing their position size by over 67%. ValueAct were buying as recently as July 12th through 19th, adding at prices between $35-37, right where shares currently trade.

While Ubben's firm has filed a 13D signifying their activist intent with the position, the filing contains standard boilerplate about monitoring their investment and does not lay out any specific plans.

Moody's stock is interesting mainly because you have prominent investors on both sides of the table. Warren Buffett's Berkshire Hathaway owns a significant stake in MCO but was selling some shares last year.

David Einhorn's Greenlight Capital, on the other hand, has been short MCO and laid out their short thesis here. With ValueAct now coming to the table, it's clear they intend to apply their trademark activist style. We'll see what happens.


Buying More Motorola Solutions (MSI)

Ubben's hedge fund also just filed an amended 13D with the SEC regarding shares of Motorola Solutions (MSI). They now show a 7.0% ownership stake in MSI with 23,601,000 shares.

ValueAct recently purchased over $161 million worth of MSI shares, buying in late June and early July at prices ranging from $43.95 to $45.50 per share.

As we outlined in Ubben's previous pitch on MSI, ValueAct likes Motorola Solutions due to its improving margins and the fact that it is still growing despite a downcycle. MSI came to be as a result of Motorola splitting into two separately traded entities: MSI and Motorola Mobility (MMI).


For more on ValueAct Capital, head to Ubben's interview about his fund.

Lone Pine Capital Buys More VanceInfo Technologies (VIT)

Stephen Mandel's hedge fund firm Lone Pine Capital just filed an amended 13G with the SEC regarding shares of VanceInfo Technologies (VIT). Lone Pine now owns 10.1% of VanceInfo with 4,507,146 shares.

This marks a 7% increase in their share count as they owned 4,192,821 shares back at the end of the first quarter. In the past three and a half months, Lone Pine has purchased 314,325 additional VIT shares.

Back in late 2010, we detailed how Lone Pine added to its VIT stake and we noted then that the majority of this position was contained in their Lone Dragon Pine fund, their emerging markets investment vehicle. That continues to remain the case.

In additional recent portfolio activity from the hedge fund, we covered how Lone Pine bought more iSoftStone (ISS) and added to its WABCO (WBC) stake as well.

Per Google Finance, VanceInfo "is an information technology (IT) service provider and an offshore software development company in China. The Company’s range of IT services includes research and development services, enterprise solutions, application development and maintenance (ADM), testing, as well as globalization and localization."

Carl Icahn Talks Raised Clorox (CLX) Bid, Potential Breakup

Legendary investor and 'corporate raider' Carl Icahn recently made a bid for Clorox (CLX). After being rejected by the company, just yesterday he raised his bid to $80 per share, more than the current trading price of $74.

He sat down to chat with Bloomberg TV about his thought process. Icahn thinks that shares aren't trading up to his offer because the company still has yet to say they're for sale. Icahn also made it clear he wants to avoid a proxy fight.

If he was successful in a purchase, he would consider splitting it up, possibly keeping one of the divisions (though he refused to mention which). As far as antitrust concerns go, Icahn says that he doesn't think it would be a problem for CLX to be acquired by another company. At $80 per share, he thinks CLX is great value and that a large buyer looking for synergies could pay $100 per share.

That last point is why many investors seem to think that Icahn's 'bid' is merely posturing to ignite a bid from another company. The scenario plays on. As far as other recent investment ideas from Icahn, at the Ira Sohn Conference he pitched his own company: Icahn Enterprises (IEP).

Embedded below is Icahn's interview with Bloomberg TV (email readers come to the site to view):



Bloomberg TV also recently profiled Scion Capital's Michael Burry which we recommend watching as well.

Michael Burry of Scion Capital on Bloomberg's Risk Takers

Last night on Bloomberg TV's "Risk Takers", Michael Burry was profiled for his extraordinary subprime short. The former Scion Capital hedge fund manager is featured in Michael Lewis' excellent book, The Big Short.

While Burry is a value investor by nature, when he saw the warning signs of the impending housing bubble, he had to act. Bloomberg takes us through Burry's thinking and the pushback he received from investors upon straying from his equity value investing ways.

Embedded below is the profile on Burry from Risk Takers:



The video showcases blurbs from some of the letters Burry sent to clients before the crisis. We've posted up Burry's primer on credit default swaps & the subprime mortgage short for those interested.

At the end of the video, he mentions he's investing his own money now and doesn't have to deal with investors. Where exactly is he investing? We've posted up before that he's been buying farmland and gold.

For more great resources on Burry, we've posted up his recent subprime speech at Vanderbilt: Inside the Doomsday Machine.

East Coast Asset Management Sees Heightened & Prolonged Inflation Ahead

Christopher Begg is out with East Coast Asset Management's second quarter letter and in it takes a look at markets from a top-down perspective. While East Coast's investment principles are guided by value, they, like many other value investors such as David Einhorn (Greenlight Capital) have incorporated a top-down view into their thought process.

At present, East Coast takes the following notes:

- Developed countries continue to print money.

- Developed world currencies depreciate against emerging currencies.

- "Inflation will be heightened globally and accumulated wealth is at risk of losing purchasing power, therefore we will limit intermediate and long-term fixed-dollar investments."

- As paper currencies lose value, global equities will provide the alternative.

- Businesses with pricing power will outshine those without. (In the past, Market Folly highlighted how Berkshire Hathaway bought Lubrizol due to pricing power.)


Begg has also spent this summer teaching security analysis at Columbia Business School. The letter embedded below introduces his concept of 'finding longitude' which focuses on refining each investment to specific datasets that gauge how a business is truly performing:

(Email readers come to the site to read the letter)



East Coast's letters are always packed with insight, theory, and practical applications of investing so if you haven't read them, we'd highly recommend viewing East Coast's thoughts on:

- Competitive advantage
- On the topic of compounding
- Gaining an investment edge
- Variant perception

Tiger Global Adds to BitAuto Stake, Discloses HomeAway Position

We wanted to highlight some of the latest SEC filings from Chase Coleman's tech-focused hedge fund Tiger Global. Last year we focused on how Tiger was buying stakes in internet companies in emerging markets. That trend remains unchanged.

Coleman's firm has found great success by morphing into a venture capital fund, investing in private early stage tech companies. While these investments typically represent only a small portion of their funds (~10%), they've made a significant impact. According to II, Tiger is up a whopping 34.5% in 2011.

A perfect example of such success is social networking site Linked In (LNKD). The company went public in June and Tiger already owned a stake back when the company was private.

HomeAway Inc (AWAY)

Turning to recent portfolio activity, Tiger Global now has a 5.88% ownership stake in HomeAway Inc (AWAY) with 4,691,881 shares according to a 13G filed with the SEC.

This is yet another investment that they made pre-IPO. The company's initial public offering was on June 29th.

Per Google Finance, HomeAway is "an early-stage company. HomeAway operates the online marketplace for the vacation rental industry. As of March 31, 2011, HomeAway operated its online marketplace through 31 Websites in 11 languages and provided listings for vacation rentals located in over 145 countries."


BitAuto (BITA)

Tiger Global also filed a 13G with the SEC regarding shares of BitAuto (BITA). They disclosed a 7.3% ownership stake in BITA with 3,020,745 shares due to portfolio activity on June 20th. This marks almost a 47% increase in their position size as they only owned 2,055,500 shares at the end of the first quarter.

Per Google Finance, BitAuto "is a provider of Internet content and marketing services for People’s Republic of China’s automotive industry. Its bitauto.com and ucar.cn Websites provide consumers with up-to-date new and used automobile pricing information, specifications, reviews and consumer feedback."

To see what other equity investments Tiger Global has made, head to our premium newsletter.

What We're Reading ~ 7/20/11

Black swan fund hedges against extreme events [Forbes]

John Paulson: behind the backlash [Fortune]

Backlash against Harbinger's LightSquared plan [Dealbreaker]

The perfect hedge for this crisis [Marketwatch]

Notes from John Paulson's latest conference call [BusinessInsider]

Bulls see consolidation, bears see market top [Market Anthropology]

Piece on Raj Rajaratnam & Galleon's insider trading [New Yorker]

Profile of Bridgewater's Ray Dalio [New Yorker]

On the changing dynamic between hedge funds & prime brokers [All About Alpha]

Short-sellers are betting against these stocks [WSJ]

Barron's mid-year roundtable [Barron's]

Start-up hedge funds turn to seeders [Dealbook]

On redemptions at FrontPoint Partners [WSJ]

Why Bruce Berkowitz doesn't want to be Carl Icahn [Investment News]

Cash doesn't lie [Forbes]

More to come? Tweets land broker in trouble [Dealbook]

Corsair Capital Sees Increased Market Volatility Ahead (Q2 Letter)

Jay Petschek's hedge fund firm Corsair Capital Management finished the second quarter up 0.2% net, bringing them to up 6.2% for the year. They've turned in a solid 15.3% annualized return since 1991 and are one of our favorite funds to track.

Last quarter, we highlighted that Corsair anticipated increased M&A activity. Their second quarter letter focuses on the 2011 market landscape thus far and macro concerns.

They write, "there seems to be a delicate balance worldwide between stimulating economic growth and keeping prices of basic necessities within an affordable range ... we believe this uncertainty only increases general investor skittishness and market volatility."

Portfolio Updates

They also update their various positions by noting that they continue to expect Innophos (IPHS) to earn $5.00 of adjusted EPS in 2012, surpass market expectations, and trade at a 15x multiple. We've previously covered Corsair's bullish case on Innophos.

They continue to like their stake in Expedia (EXPE) as the company announced the impending spin-off of its TripAdvisor segment. The current issue of our Hedge Fund Wisdom newsletter lays out the investment thesis on EXPE in detail for those interested.

Corsair also updated their stakes in Maiden Holdings (MHLD), KAR Auction Services (KAR), and Pace Oil & Gas (PCE). Their letter also includes a write-up on their new investment in TNS Inc (TNS).

Embedded below is Corsair's Q2 letter (email readers come to the site to view it):

Larry Robbins' Glenview Capital Adds To Flextronics Stake (FLEX)

Larry Robbins' hedge fund Glenview Capital has disclosed a 5.45% ownership stake in Flextronics with 40,305,334 shares per a 13G just filed with the SEC.

This represents a 46% increase in their position size as they've purchased 12,757,291 shares since March 31st. To see the rest of Glenview's positions, you can of course head to our Hedge Fund Wisdom newsletter.

The filing was made due to portfolio activity on July 15th. While they bought shares last week, keep in mind that SEC regulatory rules only requires disclosure of such positions on a delayed basis.

For recent market thoughts from this hedge fund manager, we also detailed notes from Robbins' presentation at the Leaders In Investing Summit.

Per Google Finance, Flextronics is "a global provider of vertically integrated advanced design and electronics manufacturing services (EMS) to original equipment manufacturers (OEMs). The Company designs, builds, ships and services electronics products for its customers through a network of facilities in 30 countries across four continents. Its portfolio of customers consist of Alcatel-Lucent, Applied Materials, Cisco Systems, Dell, Ericsson, Hewlett-Packard, Huawei, Johnson and Johnson, Lenovo, Microsoft, Research in Motion and Xerox."

What We're Reading ~ 7/19/11

Recent surge in stock spin-offs [Abnormal Returns]

Sell in May and come back when? [FT Alphaville]

Ten ways to improve your investment process [Greg Speicher]

Ten Year Treasury during and after QE2 [Bespoke]

Italy is like Lehman Brothers [Reformed Broker]

Boring is good, buy Chemtura (CHMT) [Economic Musings]

Comparing junk bond ETFs [IndexUniverse]

Don't call the next tech bubble yet [Fortune]

History suggests big tech discount could linger [Reuters]

James Montier on tail risk hedging [Surly Trader]

Common attributes of individual investors [CXO Advisory]

Carl Icahn is still looking for trouble [CNNMoney]

Treasury printing less dollars as use of cash is down [NYTimes]

Strategist Jeff Saut Worried About Current Market Action

According to his weekly commentary, market strategist Jeff Saut is worried about recent market action. His worry, it seems, largely stems from the 1320 level on the S&P 500 which he sees as an important "attractor/repellor" level. Since the market has fallen below 1320, it has tried (and failed) three times to recapture it.

Just last week, Saut highlighted the biggest fears of 15 European portfolio managers. There is no doubt that caution seems to be the word of the summer. While Saut has not given up on the notion that the economic backdrop is set to improve, he does not like the current market action.

In order for him to give up on his optimistic/bullish call, he says he would need to see the S&P fall below 1295; a level that can easily be reached with one more sour day of market action.

Embedded below is Jeff Saut's latest weekly commentary:



You can download a .pdf copy here.

Saut mentions a few stocks in the missive above, but you can also see his current list of favorite stocks as well.

Request For Hedge Fund Letters

Now that Q2 hedge fund letters are starting to be released, we want to remind readers to please feel free to send in any hedgie letters you might have access to. Email us or add us to your distribution list: marketfolly@gmail.com

All submissions are treated as confidential and anonymous; your privacy is our top priority. We'll do whatever makes you most comfortable and can remove watermarks, summarize the letter, etc. The more people that share, the more manager updates we'll be able to cover.

Thanks for contributing!

Seth Klarman's Baupost Group Doubles Syneron Medical (ELOS) Stake

Seth Klarman's Baupost Group recently filed an amended 13G with the SEC regarding shares of Syneron Medical (ELOS). Per portfolio activity on June 30th, Baupost Group has disclosed a 11.06% ownership stake in ELOS with 3,836,071 shares.

This marks a 155% increase in their position size as they only owned 1,500,000 shares back on March 31st. So while Baupost added to this position significantly, keep in mind that it's still a relatively small equity position for them. Not to mention, Baupost has under 10% of its assets under management allocated long US equities.

In other disclosures from the hedge fund, we saw that Baupost trimmed its Audiovox stake (VOXX) and we also detailed their position in Gabriel Resources (TSE:GBU) as well.

Per Google Finance, Syneron Medical "designs, develops and markets aesthetic medical products based on its various technologies including its Electro-Optical Synergy (ELOS), technology, which uses the synergy between electrical energy, including radiofrequency (RF) energy, and optical energy to provide aesthetic medical treatments. The Company’s products, which it sells primarily to physicians and other practitioners, target a range of non-invasive aesthetic medical procedures, including hair removal, wrinkle reduction, rejuvenation of the skin’s appearance through the treatment of superficial benign vascular and pigmented lesions, acne treatment treatment of leg veins and treatment for the temporary reduction in the appearance of cellulite."

David Einhorn Buys Seagate Technology (STX), Sells Various Stocks

ZeroHedge posted up David Einhorn & Greenlight Capital's Q2 investor letter which reveals that the hedge fund was down 2.5% for the quarter and is now down 5% for the year.

Greenlight noted that the US economy has continued to soften as energy and food prices eroded consumer purchasing power. At the same time, Greenlight points to strong corporate earnings as a positive.

Bought Seagate Technology (STX)

During the quarter, Einhorn's hedge fund saw notable portfolio turnover. Greenlight built a "medium sized long position" in Seagate Technology (STX) with an average purchase price of $16.06 a share (STX currently trades around $16.90). The current issue of our Hedge Fund Wisdom newsletter features an analysis of STX for those interested.

Sold Positions

Greenlight also sold completely out of its position in Cardinal Health (CAH). At the same time, they continue to hold a large position in CAH's spin-off, CareFusion (CFN). You can also see the investment thesis on CFN in a free sample of our newsletter.

Einhorn's fund also sold out of CIT Group (CIT), Yahoo! (YHOO), Vicat SA (France: VCT), MI Developments (MIM), MDC Holdings (MDC), and Xerox (XRX). They also covered their short position in LED-maker Cree (CREE).

While Einhorn sold out of CIT Group, we noted last week that Dan Loeb's Third Point continues to hold CIT as one of their largest positions.

Given that Greenlight sold so many positions, it will be interested to see if they've put that capital to work elsewhere or have merely raised cash levels as a form of protection. We've highlighted one buy as Greenlight purchased Playtech (LON:PTEC) shares. Embedded below is Greenlight's Q2 letter:



If the embedded doc doesn't work, you can view/download it here.

For more from Einhorn, be sure to check out his presentation from the Ira Sohn Conference.

The Biggest Fears of 15 European Portfolio Managers

Market strategist Jeff Saut just concluded his visit with numerous European portfolio managers and his latest commentary summarizes their viewpoints. While he spoke with roughly 200 portfolio managers, it's interesting that most were bearish or very bearish on US equities due to fear of the debt situation, the dollar, and the debt ceiling.

While many PM's shared this view, Saut asked what their biggest fear was and here were their responses:

1. Fund managers that only use mutual funds & exchange traded funds (ETFs)

2. Investing is practiced in too complicated a fashion when it should be easy

3. A military coup in Greece

4. Inflation goes down instead of up

5. China sells half of its Treasury Bonds

6. Europe and the U.K. don't tackle their pension problems

7. There is blood in the street, but the markets trade higher

8. Most of the unemployed are un-hirable

9. The EU doesn't stay together

10. Water

11. Used to worry about Ireland, but don't anymore

12. Over-regulation

13. If the EU breaks up, what happens to the boom in German exports

14. The fact that only 11 residents in Greece declared annual incomes of one million Euros or more

15. Everyone is so negative that when the blue skies arrive they will be ignored


You can then compare and contrast the above viewpoints with that of UK hedge fund manager Crispin Odey who says that stockpicking is still working in his latest commentary.

Turning back to the US, Saut's recent missive also notes his skepticism around recent soft economic numbers as he thinks they are largely attributed to high commodity prices and the tragedy in Japan. Embedded below is Jeff Saut's full commentary:



You can download a .pdf copy here.

Be sure to also check out Saut's thoughts from mid-June that a trading bottom was near as well as some of his current favorite stocks.

What We're Reading ~ 7/11/2011

Richard Russell: #1 reason to be underweight equities [PragCap]

Can investors make money following hedge funds? [Institutional Investor]

Review of a great book on short selling [Davian Letter]

Highly recommended: The Art of Short Selling [Kathryn Staley]

How well does your hedge fund hedge? [All About Alpha]

How likely is a hard landing in China? [WSJ]

China's boom is more investment than consumption [AR+Alpha]

Stop fooling yourself, you're not Warren Buffett [Old School Value]

ZAGG: A thin film between love and hate [Financial Investigator]

Hedge fund giants are coming up small this year [Reuters]

Paulson & Co enjoys $550 million Lehman boost [CNBC]

Hedge fund bosses sound alarm on super-sized funds [Reuters]

Third Point Reduces Equity Exposure Further in June

For the month of June, Dan Loeb's Third Point Offshore Fund returned -2.6% but is still up 6.8% for the year and has seen 18.5% annualized returns. The Offshore fund manages just under $4 billion and Third Point recently closed to new investors.

Equity Exposure

At the end of June, Third Point's total equity exposure was 56.3% long and -25.6% short, resulting in 30.7% net long exposure. Their largest net long exposure comes in the consumer sector at 7.1% net long and the energy sector at 6.5% net long. The only sector they were net short was technology.

This marks a reduction in Third Point's equity exposure for the second consecutive month. At the end of May, they were 42.6% net long equities and so they've decreased exposure by almost 12% month over month.

Credit Exposure

Dan Loeb's firm also reduced credit exposure during the quarter down to 21.7% net long (down from 34.4% net long at the end of May). Their largest exposure this time around was 18.1% net long asset backed securities and 10.2% net long distressed debt. On the other side of things, they continue to be -10.1% net short government securities.

Top Positions

1. Delphi
2. El Paso (EP)
3. Gold
4. CIT Group (multiple securities held)
5. Technicolor (multiple securities held)

While at the end of May gold was Third Point's largest position, the slide in the precious metal caused it to slip to their third largest position a month later. CIT Group moves into their top 5 holdings this month, replacing CVR Energy (CVI).

Delphi is Loeb's largest holding and David Einhorn's Greenlight Capital also recently took a stake. In fact, Third Point and Greenlight share a few other common positions such as gold and CIT Group.

Top Winners & Losers

In the month of June, Third Point's positions in CVR Energy, Volkswagen, and various asset backed securities were their top winners. Their top losers in the month included Delphi, LyondellBasell (LYB), El Paso (EP), gold, and Technicolor.

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Eton Park Capital Opens Position in 3Legs Resources

Eric Mindich's hedge fund firm Eton Park Capital has opened a brand new position in 3Leg Resources. According to a UK regulatory filing made on June 28th, Eton Park now own 3.49% of 3Legs' outstanding shares.

3Legs Resources is involved in the exploration and development of unconventional oil and gas resources with a particular focus on shale gas in Europe. Poland is the group's main country of operation.

The company was admitted to trading on London's AIM market on June 14th, so it seems likely that Eton Park acquired their shares via the placement.

For other activity from Eton Park, we've covered the reduction in their Airgas (ARG) position.

What We're Reading ~ 6/30/11

Top ten perks of the 2011 proxy season [Footnoted]

Hedge fund setups: small teams versus sector heads [Bronte Capital]

Gold's investment attributes [AAII]

PIMCO loads up on muni-bonds backed by tobacco companies [Barron's]

Seahawk Drilling: value in bankruptcy? [Oddball Stocks]

Some hedge funds picked up Seahawk shares in the past [Market Folly]

Hedge fund persistence (.pdf download) [Financial Analysts Journal]

Investors' new worry: is there Greek debt in money market funds? [WSJ]

Why some pros still believe a big stock rally is coming [CNBC]

Direct hedge fund investments boosting consulting business [Pensions & Investments]

The $100 million ATM receipt [Dealbreaker]

Audio: angry shareholder confronts Carol Bartz @ Yahoo meeting [Techcrunch]

Nelson Peltz's Trian Fund Reveals Kraft (KFT) Stake

Nelson Peltz's Trian Fund Management just filed an amended 13F with the SEC and in it they reveal a stake in Kraft (KFT).

The new disclosure shows Trian owning 12,176,335 shares of KFT as of March 31st, 2011. Adding this data to their original filing, Trian's KFT position represented 18.3% of their reported assets at the time.

Bill Ackman's Pershing Square Capital also owns a sizable stake in KFT and likes the opportunity for organic growth and margin expansion. You can view Pershing's presentation on Kraft here.

Nelson Peltz's business partner Peter May recently laid out Trian's bullish case for Tiffany & Co (TIF) at the Ira Sohn Investment Conference as well. In the past, we've also detailed some of Trian's portfolio activity.

Omitting Positions From 13F Filings

Trian Fund Management omitted the Kraft position in their original 13F filed on May 16th which included a note that reads, "confidential information has been omitted from this Form 13F report and filed separately with the Commission."

Trian most likely arranged this treatment with the SEC because they were still in the midst of acquiring their position and felt public disclosure would boost prices. Other large investors have utilized this technique in the past, with the most notable being Warren Buffett.

Also, we recently detailed a scenario where Bill Ackman's Pershing Square Capital filed information on their Family Dollar (FDO) position confidentially with the SEC and released the info to the public at a later date. It seems more and more prominent funds are being granted this treatment by the SEC so we'll have to monitor a potential growing trend.

Jason Mitchell of GLG Partners on Investing in Sustainability

Jason Mitchell of GLG Partners was recently named one of Institutional Investor's 2011 rising hedge fund stars. He appeared on CNBC to talk about sustainable picks as well as how he approaches socially responsible investing.

He ponders, "What is sustainability? What is the opportunity set around that? And how we've defined it is: sustainability is the investment required to address demographic, environmental and social change."

He says there are around 8-10 sectors that reflect that, mentioning healthcare, education services, and agriculture.

Regarding healthcare specifically, Mitchell notes that "it's defensive, there's value, there's a lot of optionality, but even outside of the US, we're sitting on the cusp of a really interesting start of privatization in Germany ... probably two-thirds of German public hospitals are losing money and as a result, under investing. And the government is slowly, very deliberately and thoughtfully privatizing some of that and there are two companies out there. I mean, these are mid to large cap companies and they know how to run it. They reinvest, increase doctor count, and as a result get a more efficient balance sheet."

Embedded below is Mitchell's video interview with CNBC (email readers need to come to the site to watch the video):



We've also posted up an interview with another 2011 hedge fund rising star: Grandmaster Capital's Patrick Wolff who says that China is a debt-fueled investment bubble.

Crispin Odey's Latest Market Commentary: Stockpicking Is Still Working

Crispin Odey of UK hedge fund Odey Asset Management is out with his most recent market commentary, advocating that it is still a stockpicker's market.

Earlier this morning we posted that Odey started a stake in RSM Tenon and his missive below reveals additional purchases in shares of AXA and Zurich Financial.

His commentary also draws comparisons between the cost of home ownership in the US and UK and he implies that house builders are good value in the UK.

Crispin Odey writes,

"Over a month most of the macro-economic news has appeared to be disappointing. The unemployment rate in the USA has failed to fall, China has slowed down, the Japanese tsunami has turned out to have a greater influence on world industrial production than was hoped and banks have produced worse numbers than anticipated. The stockmarkets are down, government bonds are up and people are generally more nervous.

Equity markets have performed better than I could have expected in the face of these uncertainties, especially with Greece still being a problem. Stock picking is still working.

Our thesis of steamy convergence of third world to developed world incomes remains the template by which we measure recovery. The overheating of the emerging market economies, thanks to the rise in energy costs, has now been followed by a slow down but we still remain happy that the 20% wage increases in emerging markets against the flat wage growth in the west will continue to power world growth. The 5% cost inflation in the west that we suffer for now, will ultimately rebalance the world economy.

I continue to find companies to invest in. This quarter saw Henri de Castries of Axa approve the sale of their Canadian life business, and pull out of the life business in the UK, too. With such a new commitment to a 12% return on capital across all business lines so evident in management's mind, a discount to book value of 25% seems harsh. Meanwhile Zurich Financial, who have long practiced virtue, yields 8% in Swiss Francs.

Banks are as yet not allowed to have a business model but they are certainly cheap enough if a business model evolves in the future. House price moves in the USA which have ensured that the average house sells on only 2.4 times disposable incomes makes this an interesting market for bottom feeding. The ending of Fannie Mae / Freddie Mac's reign in the third quarter of this year should allow commercial banks to re-enter this market. Even if net interest margins rose to 400bp, buyers would still be paying less than they would be if they were renting, and that after paying a 4% redemption yield!

In the UK, affordability is still a problem with house prices 4.4 times disposable income vs. USA's 2.4 times, but interestingly prices only reflect the fact that in the USA, mortgage repayments include a 4% repayment of principal and so average cash costs are 7% of 240 or 16.8% of disposable incomes. In the UK, interest only mortgages are around 4%, and 4% of 440 =17.6% of disposable incomes. Rent typically costs around 22% of disposable incomes. So in both countries it is cheaper to own than to rent, provided that interest rates do not rise before wages rise. Since this is our view it makes sense to investigate further.

House building is running at around 110,000 down from 220,000 three years ago. Supply is running far behind national demand. House prices are no longer at a premium to old house prices, despite much lower running costs. With the house builders you are seeing 27% profit margins of 2007 now down to 7%, thanks to the need to swallow a 10% loss on 3 year old land banks. The shares are typically trading on 70% of sales, 10 times pre-tax profit. New land purchases at lower prices, should allow margins to rise to 17%. To find a business which is doing okay now, when real wages are falling, and not having to overpay, makes me excited. The day that we become competitive globally, these house builders should benefit from rising wages.

Meanwhile, the good news with the fund is that companies in our portfolio continue to be bid for. News of Avis, the American 'parent', bidding 60% more than the last share price for its European 'child', was welcome news for a holding that was worth just over 1.3% of the fund. No hooks, no fish. 31st May 2011."

For more insight from this hedge fund manager, we've also previously posted up Odey's thoughts on agricultural commodities and farming.

Odey Asset Management Open RSM Tenon Group Position

Crispin Odey's UK hedge fund Odey Asset Management has opened up a position in RSM Tenon Group (LON: TNO). Per trading on June 23rd, this brand new position is equivalent to 5% of RSM's outstanding shares.

The disclosure was made on June 27th and indicates the position was acquired via the contract for difference (CFD) market. We've also just posted up Odey's latest market commentary where he says it's still a stockpicker's market.

UK-based hedge funds have been busy as of late as Lansdowne Partners was out buying Mwana Africa as we detailed last week.

Per Google Finance, "RSM Tenon Group PLC, formerly Tenon Group PLC, provides a range of professional and business services. The Company has five segments: audit, taxation and advisory; turnaround and corporate recovery; risk management; financial management, and specialist tax. It provides solutions to clients that range from individuals and entrepreneurially-led owner-managed businesses to corporations and public sector organizations."

Stephen Mandel's Lone Pine Capital Buys More iSoftStone (ISS)

Stephen Mandel's Lone Pine Capital has been scooping up shares of certain companies in the recent market turmoil.

Per a 13G just filed with the SEC, the hedge fund has disclosed a 7.3% ownership stake in iSoftStone Holdings due to trading on June 13th. They now own 3,816,216 American depositary shares (ticker ISS on the NYSE). This represents 38,162,160 ordinary shares.

Lone Pine's recent purchases mean they've increased their position size in ISS by 50% since the end of the first quarter when they owned 2,542,436 shares. In other recent activity from the hedge fund, Lone Pine bought more WABCO Holdings (WBC) as well.

Per Google Finance, iSoftStone is "an information technology (IT) services provider. They are focused on serving clients in four industry verticals: technology; communications; banking, financial services and insurance (BFSI), and energy, transportation and public sector."

To see the rest of Lone Pine's portfolio, head over to our Hedge Fund Wisdom newsletter and save 33% instantly before prices go up.

Leon Cooperman's Omega Advisors Starts Arbor Realty Trust (ABR) Position

Leon Cooperman's hedge fund firm Omega Advisors recently filed a 13G with the SEC regarding Arbor Realty Trust (ABR). Per the filing, trading on June 13th means that Omega Advisors now has a 5.2% ownership stake in ABR with 1,311,300 shares.

This is a brand new equity position for the firm as they did not show a stake at the end of the first quarter. For more from this manager, yesterday we posted up Cooperman's thoughts on equities at a recent hedge fund conference.

Per Google Finance, Arbor Realty Trust is "a specialized real estate finance company. The Company invests in a diversified portfolio of structured finance assets in the multi-family and commercial real estate markets. It invests primarily in real estate-related bridge and mezzanine loans, including junior participating interests in first mortgages, preferred and direct equity, and in limited cases, discounted mortgage notes and other real estate-related assets (collectively, structured finance investments)."

If you want to hear investment ideas directly from this hedge fund legend, he'll be presenting at the upcoming Value Investing Congress and our readers receive a discount here.

Jeffrey Gendell's Tontine Capital Trims Innospec (IOSP) Stake

Jeffrey Gendell's hedge fund firm Tontine Capital recently filed a 13G with the SEC regarding shares of Innospec (IOSP). Due to trading on June 13th, Gendell's firm has disclosed a 10.9% ownership stake in the company with 2,578,651 shares.

This is a slight decrease in their position size as they've trimmed their stake by 14% since March 31st when they owned 3,008,651 shares.

It's been a long time since we've covered this hedge fund firm. Gendell takes large positions in companies he feels are poised to benefit from selective themes. He will also take an activist role if needed.


Tontine's Comeback?

Tontine returned over 100% in 2003 but then came back down to earth. In 2008, their Partners fund returned -91.5% as they were stuck holding concentrated positions in illiquid shares during the financial crisis as forced selling accelerated.

As such, two of their funds closed down and Tontine landed on the top hedge fund manager losers of 2008.

At the time, it seemed ironic that 'Tontine' was named after an older annuity created by Lorenzo de Tonti where investors desire to be 'the last one standing.' In this arrangement, investors pool their money and as they die off the remaining investors split the deceased's stake. The last investor standing then inherits the riches.

By naming his firm as such, Gendell obviously desires to be the last man standing. He almost went by the wayside in 2008 but quietly over the past few years has re-tooled and re-built his hedge fund firm.

Per Google Finance, Innospec "develops, manufactures, blends and markets fuel additives, personal care and fragrance products and other specialty chemicals."

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Notes From Leaders In Investing Summit: Leon Cooperman, Larry Robbins, Bill Ackman, Howard Marks & More

The CIO/CEO Leaders in Investing Summit took place on Tuesday at The Metropolitan Club of New York and featured presentations from numerous high-profile hedge fund managers.

The summit is a peer-only event only open to those investing third party capital. We're pleased to present notes from the event concerning specific investment ideas and/or commentary on the economy:


Leon Cooperman (Omega Advisors): The legendary hedge fund manager's talk centered on equities as the best house in the financial asset neighborhood. He argued that you need to believe four issues in order to have a positive view on today's market:

1. The U.S. is not another Japan and will not suffer a lost decade.
2. The European Central Bank (ECB) will act to stabilize Europe.
3. President Obama will move to the center.
4. The Middle East's turmoil leads to democracy and oil stays below $135.

Cooperman continued to voice his concern over employment. He also pointed out that the yield curve is quite steep and that the Federal Reserve is trying to inflate the country out of debt. Cooperman says inflation is not bad for stocks (see the best investments during inflation).

He argues that stocks are cheap trading at 13.6x relative to bonds and history. The Omega Advisors founder also thinks that bonds are 'screaming' to be shorted. Other hedge fund managers have also advocated shorting bonds. Don't forget that you can also hear Cooperman's latest investment ideas at the Value Investing Congress in October (click here for a discount).



Larry Robbins (Glenview Capital): Formerly of Cooperman's Omega Advisors, Robbins founded Glenview Capital. His presentation yet again focused on Life Technologies (LIFE). The company trades at a 11x P/E and is likely to grow EPS 20% over the next few years as they were able to grow EPS throughout the slowdown and 95% of their business grows with research spending.

Robbins highlighted free cashflow is 91% of EPS and that the company will have 80% market share versus competitor Illumina (ILMN). One could postulate that he's short ILMN as a hedge but when asked about it he said that he's "only here to discuss my longs."

And speaking of longs, he said some of his top holdings are Expedia (EXPE), Flextronics (FLEX), Xerox (XRX), and BMC Software (BMC) in technology. We've detailed the in-depth investment thesis on EXPE in the latest issue of our Hedge Fund Wisdom newsletter.

In general, Glenview looks for good businesses, low valuations, excess capital, a business that can succeed regardless of economic environment, and pricing power. Currently, Robbins thinks the economy will grow slowly and with heightened volatility due to excess government intervention.



Tom Russo (Gardner Russo & Gardner): The long-only manager is still bullish on China and pitched Nestle (NSRGY) at the event. His idea is simply to buy prominent international players and hold through the ups and downs. In the past, he's talked about how Nestle can invest large amounts of money in emerging markets and see high rates of return.

He is also still holding SAB Miller (LON: SAB) despite declining EBITDA margins as the company is now making acquisitions to make up for the lack of growth. Russo did not seem to like the Foster bid.



Howard Marks (Oaktree Capital): His presentation focused on the keys to success in a low return world. Marks focused on three key questions to ask yourself as an investor today:

1. Should we prepare for prosperity? He argued no because the economic recovery is faltering.

2. Should we worry about losing money or missing opportunity? For now, he says to be mindful of losing money.

3. What holds the key? Capital and nerve? Or discernment, discipline, risk control and selectivity? Marks argues the latter right now, saying that stocks are slightly cheap, but not by much.

Marks says that your choices today are as follows: invest for the long-term, go to cash, take more risk (chase yield), or find niches. Take your pick. Marks also brought up a good point that just because stocks are flat over a ten-year period doesn't mean they are a buy because the P/E was 30x ten years ago.

Oaktree recently filed for an initial public offering and Marks' recently released his new book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor which has received praise from legendary investors Warren Buffett and Seth Klarman.



Paul Singer (Elliott Associates): This hedgie's talk focused on the shape of the next crisis. He mentioned that all major banks are quite opaque and no one can truly analyze them, meaning the next crash could be even faster because the leverage is still there. He doesn't seem to be a fan of Bernanke.

Singer points out that the lesson was "sell first, move assets first, ask questions later." Those that took more time to do so got stuck and that is dangerous. He also believes that Dodd-Frank has made the system more brittle and thinks there should be NO financial institution that is too big to fail.

Lastly, he also mentioned that monetary policy has caused commodity inflation (Howard Marks also thinks this is the case).



Bill Ackman (Pershing Square Capital): Speaking on activist investing, Ackman said that you have to work *with* management. He cited his investment in J.C. Penney (JCP) as an example as the company has a new CEO who redesigned Target (TGT) then most recently headed Apple's (AAPL) wildly successful retail operation. He also says that the company has a big advantage by owning its own real estate and not paying rent. We've covered Ackman's JCP thesis here in-depth for more.

Concerning his recent investment in Family Dollar (FDO), Ackman said that Nelson Peltz's Trian Fund is driving the effort. The company has a bid on the table and is a prime leveraged buyout candidate. The vote is in January and management has to fix the company or sell it. We've also posted Ackman's presentation on FDO.

Ackman also talked about lessons he learned from his mistakes. He said that liquidity is very valuable and lack of it is a big opportunity cost. Also, he pointed out that as you get older, you further understand the opportunity cost of time. He likes to measure whether the potential return justifies the time and risk.

Citing his past failed investment in Borders (BGPIQ), Ackman said he underestimated the risk of technological change. He would rather invest in a good business than just good management. He said the limitation of his approach is that although the stocks he invests in are liquid, his concentrated stakes are not (Ackman also mentioned 27% of his fund was redeemed during the crisis).



Ron Gutfleish (Elm Ridge Capital): Gutfleish likes the defense sector and in particular, Lockheed Martin (LMT). He argues the company doesn't make bad acquisitions, pays a good dividend and does smart buybacks. While he admits to being "usually too early," the hedgie thinks that these stocks are very cheap no matter what you think about the defense sector.

The bear case there is very obvious, he notes, pointing to a budget under pressure. However, he argues that these companies generate huge cash flow during down cycles and deploy it in shareholder friendly ways.



Joel Greenblatt (Gotham Capital): Greenblatt's presentation focused on the 'big secret for value investors.' He was, of course, referring to his new value-weighted indexing method which is detailed in his new book, The Big Secret for the Small Investor: A New Route to Long-Term Investment Success.

He argues that indexes have the flaw of market cap weighting. Evenly weighted, the SPX outperforms by 3% per year over the last 20 years. A value weighted index of 800 stocks beats the SPX by 7% a year.

Right now, Greenblatt says his statistics point to stocks being at about average valuations. Some of the stocks on his list right now include: Gamestop (GME), Wellpoint (WLP), and Intel (INTC). He says that these companies are trading at bargain prices either due to uncertainty or because they are troubled.




That sums up notes from the summit. Keep in mind that many of these hedge fund managers will be presenting investment ideas at the upcoming Value Investing Congress in October and Market Folly readers can receive a discount to the event by clicking here.

Grandmaster Capital's Patrick Wolff Says China Is Debt-Fueled Investment Bubble

Patrick Wolff launched Grandmaster Capital this January and was recently named one of Institutional Investor's 'Hedge Fund Rising Stars.' Seeded with $50 million by Clarium Capital's Peter Thiel, Grandmaster pursues a long/short equity strategy with macro overlays.

Wolff previously worked at Clarium Capital and named his fund Grandmaster because that's exactly what he is (a US International Grandmaster and two-time US national champion in chess). He graduated from Harvard and recently sat down with CNBC where he revealed his take on the markets.


Wolff Wary of China

Wolff says that the US has its fair share of problems, some of which are priced in while others are not. On the other side of the world, he cautions that trouble awaits, arguing that China will hit the wall hard sometime in this decade.

Wolff says that, it's a "debt-fueled investment bubble and when it breaks, it's going to be the major macro event of the decade."

Other prominent hedge fund managers have voiced warnings about China. At the recent Ira Sohn Conference, Corriente Advisors' Mark Hart said to short China, arguing that inflation will end the country's credit growth.

Conversely, hedge fund Maverick Capital is focused on China's importance and Warren Buffett has said China will be a big driver of growth for the next 10-20 years.

Arguments aside, it's clear that China will be a main talking point for investors in the coming years.


A Stockpicker's Market

In terms of specific sectors he sees as attractive, the Grandmaster Capital founder points to the consumer staples and defensive names as places to be.

Additionally, Wolff sees opportunity in the property and casualty insurance names. He says they're trading at all-time lows in terms of valuation and have solid balance sheets.

Wolff thinks we could see a hard pricing market after all the natural disasters in the past year and he's not alone in his stance there. At the recent Ira Sohn Conference, famous fund manager Steve Eisman said to buy P&C insurers even if there's another big disaster.

Embedded below is the video of Patrick Wolff's interview with CNBC:

T2 Partners Goes Activist on Iridium Communications (IRDM)

Whitney Tilson and Glenn Tongue's hedge fund firm T2 Partners has filed an activist 13D with the SEC regarding shares of Iridium Communications (IRDM).

Per trading on June 20th, 2011, T2 has disclosed a 9.3% ownership stake in IRDM with 6,529,338 shares. In actuality, they own 862,576 shares of common stock and 5,666,762 warrants (IRDMW) which are exercisable into shares of common.

They've increased their position size by about 16%. At the end of the first quarter (March 31st), they owned 1,292,460 shares of common stock as well as two sets of warrants (collectively representing 4,340,678 shares). Since then, they've sold some common stock and added to their warrant positions.

Seeking Talks With Management

In the "purpose of transaction" section of the SEC filing, T2 outlines that they believe shares are an attractive investment and they intend to pursue conversations with management about the company's capital structure.

Additionally, the filing outlines T2's "current intentions to purchase up to 100% of the outstanding shares of certain warrants (trading as IRDMW)."

T2's Thesis on Iridium

We've posted up before how the hedge fund thinks IRDM is a triple in the next 3-5 years but they have to stomach the near-term volatility in the mean time. They believe the stock is largely undervalued and like the fact that the large overhang of a big seller (Syndicated Communications, a private equity fund) has now disappeared.

The hedge fund sees IRDM as attractive due to its positioning as one of only two major players in the global satellite communications industry. You can view T2's presentation on Iridium here.

Per Google Finance, Iridium is "a provider of mobile voice and data communications services via satellite. The Company offers voice and data communications services to businesses, the United States and foreign governments, non-governmental organizations and consumers via its constellation of 66 in-orbit satellites, in-orbit spares and related ground infrastructure, including a primary commercial gateway."

For analysis of their other investments, check out T2's presentation on JOE & HHC here.

Second Curve Capital Loads Up on Citizens Republic Bancorp (CRBC)

Thomas Brown's hedge fund firm Second Curve Capital has filed a 13G with the SEC regarding shares of Citizens Republic Bancorp (CRBC). Per trading on June 17th, 2011, Second Curve has disclosed a 5.34% ownership stake in CRBC with 21,236,157 shares.

They've increased their position size by a whopping 312% since the end of the first quarter when they owned only 5,150,000 shares. Since the end of March, shares are down almost 20% and Second Curve has stepped in to buy.

In other activity from the hedge fund, we last covered their sale of CompuCredit shares (CCRT). Before founding Second Curve, Tom Brown headed the financial services group at Julian Robertson's Tiger Management. As such, it should come as no surprise that his fund largely focuses on financials.

Per Google Finance, Citizens Republic Bancorp is "a diversified banking and financial services company that is a bank holding company. Citizens provides a range of banking and financial services to individuals and businesses through its subsidiaries Citizens Bank and F&M Bank, Iowa (F&M)."

For more investment ideas, check out our notes from top hedge fund presentations.

What We're Reading ~ 6/22/11

Howard Marks & Oaktree's IPO: should you buy? [Barbarian Capital]

Bill Ackman considers IPO in quest for permanent capital [AR + Alpha]

SEC to approve hedge fund registration rule today [FINalternatives]

Hedge funds invest in energy newcomer Vallares [Telegraph]

Is it time to talk a Research In Motion (RIMM) takeover? [WSJ]

7 life lessons from the very wealthy [Washington Post]

Bridgewater's Pure Alpha up 11% this year [Institutional Investor]

Profile on Oaktree's Howard Marks [Bloomberg]

Paulson & Co dumps entire Sino-Forest position [Globe & Mail]

Finding investment treasures in international markets [Vitaliy Katsenelson]

Would you buy this company? [Frank Voisin]

Stocks cheapest in 26 years [Bloomberg]

Technical Analysis: The bear is back & this time it will be much worse [Smart Money Tracker]

Get Investment Ideas From Bill Ackman, Jim Chanos & Leon Cooperman at the Value Investing Congress

The upcoming Value Investing Congress in New York City has an all-star line-up as usual. Jim Chanos of hedge fund Kynikos Associates was just announced as the latest speaker for the event on October 17th & 18th, 2011. The manager is famous for his Enron short and you can hear his latest short ideas at the event.

Discount: Market Folly readers can save 47% off admission by clicking here and using discount code: N11MF2.

Here's the list of managers presenting:

- Bill Ackman (Pershing Square Capital)
- Leon Cooperman (Omega Advisors)
- Jim Chanos (Kynikos Associates)
- Joel Greenblatt (Gotham Capital)
- Guy Gottfried (Rational Investment Group)
- Michael Kao (Akanthos Capital)
- Whitney Tilson & Glenn Tongue (T2 Partners)


This is *the* go-to event for the latest investment ideas from top hedge fund managers.

The discount for our readers expires in one week so take advantage ASAP. Click here to receive the discount.

Lone Pine Capital Adds to WABCO Holdings (WBC)

Stephen Mandel's prominent hedge fund Lone Pine Capital has disclosed a 6.0% ownership stake in WABCO Holdings (WBC) with 4,058,927 shares per a 13G just filed with the SEC.

This marks almost a 213% increase in their position size. At the end of the first quarter, they only owned 1,297,495 shares. To see the rest of Lone Pine's investments, head to a free sample of our Hedge Fund Wisdom newsletter.

This year, Mandel graced the esteemed Forbes billionaire list again. Prior to founding Lone Pine, Mandel worked at Julian Robertson's Tiger Management as a managing director and consumer analyst. The hedge fund manager named his fund after a historical 'lone pine' tree at Dartmouth College, his alma mater.

WABCO Holdings provides mechanical and electronic products for commercial manufacturers of trucks, trailers, buses and more. For more from this fund, we've also covered some of Lone Pine's other trades this year.

Carlson Capital Goes Activist on Ruby Tuesday (RT)

Clint Carlson's hedge fund firm Carlson Capital filed a 13D with the SEC signifying their activist investment in Ruby Tuesday (RT). Due to trading on June 7th, 2011, Carlson has disclosed a 5% ownership stake in RT with 3,250,000 shares.

This marks over a 10,800% increase in their position size (they only owned 29,800 shares at the end of the first quarter). Carlson's stake in total was purchased with $33.6 million.

Activist Investment

The 13D filing was made in conjunction with Becker Drapkin Management and for activist purposes the two have filed as a "group." Collectively, the group owns 4,143,900 shares of Ruby Tuesday (including 200,000 shares of underlying call options exercisable until October 22nd, 2011). In total, this represents 6.4% of outstanding shares.

While they originally purchased shares because they believed they were undervalued, the "purpose of transaction" section of the regulatory filing outlines that Becker Drapkin is seeking to nominate directors at the company's annual meeting.

Connection With Becker Drapkin Again

The interesting thing here is that this is not the first time that Carlson Capital and Becker Drapkin have filed together. In the past, we covered when the two managers got involved with Hot Topic (HOTT).

That situation seemed to work out well, as shares of HOTT are up over 31% since then and Carlson still held its entire position as of the end of the first quarter. We'll have to see if these two firms can work their magic again.

Per Google Finance, Ruby Tuesday "including its wholly owned subsidiaries (RTI) owns and operates Ruby Tuesday casual dining restaurants."