Keith Meister's Corvex Management Takes Activist Stake in Ralcorp

Keith Meister's Corvex Management just filed a 13D on shares of Ralcorp Holdings (RAH) with the SEC.  Per the filing, Corvex now owns a 5.13% stake in the company with 2,835,296 shares. 

Meister founded Corvex after working under Carl Icahn for years and obviously employs a similar activist/event-driven investment strategy. 

The filing was required due to portfolio activity on August 22nd.  This marks an increase of 367% in Meister's position size since the end of June when he owned just over 607,000 shares.


Corvex's Activist Plans For Ralcorp

Meister's firm explains why they've taken an activist stake in Ralcorp in their SEC filing, pointing to the company's strong competitive position in an industry with secular growth (but bad execution). 

Corvex believes Ralcorp should do one of three things:

1. Sell itself
2. Merge with another food company
3. Make changes on the board and implement a new strategy

It's worth pointing out that Ralcorp separated from its Post Cereals business in February of this year and acquired Petri Baking Products and Gelit in May and June, respectively.

In their 13D filing, Corvex writes:

"The Reporting Persons have had meetings and conversations with management of the Issuer to discuss the Issuer’s operations, strategy, and governance and will seek to have additional conversations with one or more of the Issuer’s management, members of the Issuer’s board, other stockholders of the Issuer and other persons to discuss the Issuer’s business, strategies, potential value enhancing actions or transactions and other matters related to the Issuer.

The Reporting Persons believe that the Issuer has a strong competitive position in an attractive industry with secular growth tailwinds but that poor execution has prevented the Issuer’s shares from reflecting full value. The Reporting Persons intend to discuss with one or more of the persons referenced above, among other topics, the Issuer’s performance since rejecting ConAgra’s acquisition offer last year.

Specifically, the Reporting Persons believe that the “status quo” is unacceptable and the Issuer should immediately pursue three alternatives to enhance stockholder value: 1) a sale of the company, 2) a merger with another food company to take advantage of economies of scale and cost synergies or 3) a “self-help” strategy with new investor board representation and a renewed focus on execution, accretive acquisitions and efficient capital allocation. The Reporting Persons intend to express their concern that the Issuer has had several serious execution issues since the Post separation including disappointing earnings, inability to file quarterly financials on a timely basis and poor communication with investors and analysts."


About Ralcorp

 Per Google Finance, Ralcorp is "engaged in manufacturing, distributing and marketing private-brand food products and other regional and value-brand food products in the grocery, mass merchandise, drugstore and foodservice channels. The Company’s products include nutritional bars; snack mixes, corn-based chips and extruded corn snack products; crackers and cookies; snack nuts; chocolate candy; salad dressings; mayonnaise; peanut butter; jams and jellies; syrups; sauces; frozen griddle products, including pancakes, waffles and French toast; frozen biscuits and other frozen pre-baked products, such as breads and rolls; frozen and refrigerated doughs, and dry pasta."


For more on this hedge fund, we've posted up about Corvex's activity in Corrections Corp of America as well.

Guy Gottfried's Presentation on Holloway Lodging & Trans World Entertainment: Value Investing Congress

At the Value Investing Congress this past May, Guy Gottfried of Rational Investment Group pitched two stocks.  We wanted to post up his presentation (we've also posted up notes & presentations from all other VIC speakers as well).

Gottfried presented the investment case on Holloway Lodging (TSX:HLR.un) and Trans World Entertainment (TWMC) in early May.  Since then, shares are up 30% and 47% respectively.  Gottfried will also be presenting investment ideas at the upcoming Value Investing Congress in New York City in October and MarketFolly readers can receive a discount here with code: N12MF7.


Thinking Small: Scouring for Bargains in a Hot Market

- Common traits: misunderstood businesses (changed but market hasn't yet caught on), demonstrably undervalued, insiders have a lot of skin in the game, catalysts.

First idea - Holloway Lodging (TSX:HLR.un)

-  Canadian hotel REIT based predominantly in Western Canada.  Was at $2.80 at the time of the presentation ($53mm market cap, $165mm EV).  12.5% cap rate and 5.5x FCF and NOI/FCF on the rise

- Multiple catalysts.  Forced to undergo debt recap to address upcoming debt maturity - recap completed in January, diluted equity by over 90%.  Despite dilution, recap greatly enhanced margin of safety: LTV fell from 79% to 56%, implied cap rate actually increased.

- Dilution mitigated by huge decline in stock price - fell 65% to 70% on news of recap, traded under $3.00 vs $150 (split-adjusted) before recession.

- Historically mismanaged but prior management forced out along with recap.  Massive insider buying: two industry insiders bought nearly 50% of stock on the open market immediately following recap as former bondholders dumped their shares.  Industry insiders: Geosam - successful activist/control investor in Canadian small caps.  Temple - fellow Canadian hotel REIT

- Serious takeover candidate, Temple most likely buyer given geographic fit in their portfolios.  Catalysts other than takeover - share buyback, dividend resumption (suspended dividends in 2009, could yield 5% at 43% payout ratio).



Second idea - Trans World Entertainment (TWMC)

- Retailer of music, video and related entertainment products.  At time of presentation, closed at $2.25, $74mm market cap, $34mm EV.  Profitable net-net: traded at just 53% of net-net working capital yet actually makes money.  1.7x EV/FCF.

- Average net cash in past 4 quarters equal to half the stock price, at most recent quarter-end cash actually exceeded stock price.

- CEO Higgins founded firm in 1972, owns 51%, has been big buyer of stock, tried to take it private in 2008 (couldn't after credit markets froze)

- Business in structural decline but Higgins has run it admirably - closed 60% of stores in past 5 years, returned company to profitability after string of losses.  Excellent fallback strategy: 80% of leases expire by 2013 and 97% by 2015;  if company fails to sustain profitability, can shut down nearly entire store base and monetize tremendous amount of working capital

- Hidden asset: owns Walgreens in South Beach, conservatively worth 61c per share (27% of stock price).  Significant NOLs: $175mm federal, $310mm state

- Main catalyst: company either becomes consistently profitable (which will be a major surprise to market) or continues aggressively closing down stores, freeing up a boatload of cash; either way shareholders win


Embedded below is Guy Gottfried's presentation from the Value Investing Congress:




His picks are up 30% and 47% respectively over the past 3 months.  To hear Gottfried's next investment ideas at the Value Investing Congress in New York City in October, you can take advantage of Market Folly's discount to the event by clicking here and using code: N12MF7.

What We're Reading ~ 8/23/12

New free weekly investment research [The Idea Farm]

Why doesn't Carl Icahn want CVR Energy anymore? [Dealbreaker]

Elliott Management: if you own US debt sell it now [ZeroHedge]

Pensions' fifty favorite hedge funds [aiCIO]

Influential adviser's "A-list" hedge funds [NYPost]

Matt Grossman's Plural Investments to liquidate [AR+Alpha]

Irving Kahn on how to play the market [BusinessWeek]

Lie detection for investment professionals [CFAInstitute]

The untold story of municipal bond defaults [NYFed]

Why AIG is still the market's scariest stock [Fortune]

The man who saved AIG [Barrons]

Tiger Asia to return client money [Bloomberg]

Vanguard's John Bogle is too worried to rest [NYTimes]

GameStop (GME) buyout? Not likely [ValuePlays]

Returns for brand-name venture capital funds [Fortune]

Naming Jon Corzine's hedge fund (see also how to name your hedge fund) [Fortune]

New Hedge Fund Wisdom Newsletter Now Available! Featuring Analysis Of AIG, VeriSign & Textron

The brand new Q2 2012 issue of our premium Hedge Fund Wisdom newsletter is now available!  Subscribers please head to www.hedgefundwisdom.com to login and download it.

The new 82-page Q2 issue features:

- Investment thesis summaries written by hedge fund analysts on: American International Group (AIG), VeriSign (VRSN), and Textron (TXT)

- Consensus buy & sell list of stocks hedge funds were active in

- Updated portfolios of 25 top hedge funds (see the full list of funds here)

- Expert commentary on each fund's moves


To Read The New Issue, Please Sign Up Below:


1-Year Subscription (4 issues ~ save 20% with this choice): $299.99 per year

Quarterly Subscription: $89.99 per quarter

Free Sample Of Our Premium Newsletter: New Issue Out Next Week!

Today we're providing readers with a special free past issue of our premium newsletter: Hedge Fund Wisdom.   You can download our Q1 issue which was released in May for free by clicking here.

Our brand new Q2 issue will be released early next week, so sign up below to see what hedge funds have been buying and selling.


Benefits of subscribing to Hedge Fund Wisdom:

- See the latest stock picks of 25 top hedge funds for Q2 2012

- Equity analysis written by hedge fund analysts

- List of consensus buys & sells from the quarter

- Aggregated information in 1 easy-to-read document

- Expert commentary & historical context on each manager's moves


Subscribe to receive next week's premium newsletter:

1-Year Subscription (4 issues ~ save 20% with this choice): $299.99 per year

Quarterly Subscription: $89.99 per quarter

How To Name Your Hedge Fund: Most Common Firm Names

Let's face it, many hedge funds follow a seemingly standard equation for naming their firm.  As such, we thought it would be fun to create an exercise: how to name your hedge fund.

Naming your hedge fund can be boiled down to a very simple formula:


Step 1.  Based on past precedent, your firm should be named after one of the following:

- Predatory animals. Real world examples: Tiger Management, Lion Fund. Suggested: Honey Badger Partners, because honey badgers don't give a shit.

- A tree (preferably a big one).  Ex: Oaktree, Lone Pine, Sequoia, Fir Tree.  Available: The Entire Rainforest LLC.

- Some type of rock or stone. Ex: BlackRock, BlackStone.  Options: F'n Massive Mountain Management, Tiny Pebble Partners 

- Character or place from books/stories/shows.  Ex. Atticus Capital, Valinor Management.  Suggestions: Cobra Commander Capital, Ninja Turtle Associates.  And for Seinfeld fans: Art Vandelay Capital Partners.

- Geographic Locations/Regions. Ex: Pershing Square Capital, Blue Ridge.  Possibilities: Egyptian Pyramind Scheme Partners, Arctic Circle Capital

- Bodies of water and bridges are also very popular. Ex: Pine River, SkyBridge.  OR you can combine them together for an uber-bonus: Bridgewater.  Unfortunately, WaterBridge is also taken.  Perhaps just combine them all: Stream Creek River Lake Ocean Bridge Associates.

- Historical figures/civilizations.  Ex: Argonaut Capital, Viking Global.  Available: Ming Dynasty Management, Honest Abe Advisors 

- Manager's name/initials.  The obvious: SAC Capital, Soros Management, Tudor Investment.  Possibilities: Stalin Securities, Not That Madoff Capital

- Greek Mythology/Greek Words.  Ex: Cerberus, Kynikos,  Suggested: Beard of Zeus Capital, Toga Partners

- Something that has no relevance to what you're doing (bonus points for words that people struggle to pronounce).  Options: Floccinaucinihilipilification Fund, Onomatopoeia Partners, Jai Alai Holdings

- Some type of castle or fort.  Ex: Citadel, Knight's Bridge.  Available: Hogwarts Holdings


Step 2.  Add one of the following to help describe what the firm does  (because let's face it, the name you just picked above has nothing to do with investing): Capital, Partners, Capital Partners, Advisors, Holdings, Capital Management, Asset Management, Investment Management, Funds, Associates, Securities, Trust, etc.


Step 3.  Tack on either LLC or LP at the end of the name, depending on whether it's the management company or the limited partnership.

And voila, you have a hedge fund name that will blend in seamlessly.   


If you have difficulty coming up with the perfect name, you can always turn to hedgefundnamegenerator.com.  Yes, that's a real thing.  It automatically spits out a random combination using the same formula outlined above.  Here are some of the names it generated for us:

- Solid Road Management: obviously to let investors know there will be NO bumps along the way

- Brown Tree Capital: not redundant at all

- Winter Field: no "Capital" or "Partners" at the end.  Just Winter Field.

- Yellow Brick Road Associates: OK, it actually was just Yellow Road Associates, but given the ridiculousness of some of the other names it generated, it might as well have been Yellow Brick Road.

This post has been all in good fun.  What are some of the ridiculous hedge fund names you've come across?  Let us know in the comments below!

TPG-Axon's Dinakar Singh Likes Sirius XM & Time Warner Cable: Interview

Dinakar Singh, CEO of $4 billion TPG-Axon Capital recently sat down with Bloomberg TV so we wanted to post up some of the highlights of his rare appearance.

It seems as though he is betting against telecom stocks and is also bearish on some financials (in particular US regional banks).  He's bullish on names like Sirius XM (SIRI), Time Warner Cable (TWC), and W.R. Grace (GRA).  He sees growth in the chemical, aerospace, and healthcare industries.

A graphic on screen showed TPG-Axon's key long exposures in tech & media: SIRI, TWC, Viacom (VIA.B), Kabel Deutschland, Equinix (EQIX), Expedia (EXPE), Priceline.com (PCLN), and Yandex (YNDX).


On the current environment:   “For us, we pick stocks. That is how we make money. More and more, everyone has become more emotional in markets. We get scared by headlines and we all start acting the same way whether you are a CEO or a consumer. Jobs do matter. I think when you look at the U.S. in the last number of months, our view coming in this year is that people got too excited. There was a bounce back from last year and some good weather but it was going to be a slow gradual sloppy messy restructuring without a big recovery. Things have reversed. I think people are getting too pessimistic…I think ultimately consumers and CEOs are reading the same headlines and scared. I think you are seeing a cyclical or temporary step down. We do not think there one should expect a big bounce, but there won’t be much of a plunge either. It feels like the numbers are crummy but they will probably stay this way for a while. The fiscal cliff is a real issue. I think you're seeing an impact right now.”  


On how to play this market:   “People have gotten scared and they’re paying a lot for safety. On the safety side, people like dividends in safe industries. So Verizon is trading 18 times earnings because people want safety and a good dividend. There are companies like Time Warner Cable that we think are just as defensive but they did not happen to pay a dividend, they have even better cash flow, but they traded as a result much less well last year. For us, big opportunity. So media and cable that’s very cash flow rich and where we think management is going to turn that spigot on and turn it into a dividend or buy back machine that makes sense. Sirius, Time Warner Cable, companies like that. On the cyclical side, not everything is terrible. There are some sectors where we think there is good structural growth and balance sheets will be put to work. Some chemical companies are very good restructuring candidates. Aerospace suppliers.  Aerospace is in the middle innings of a very long term upgrade cycle.”


On telecom services:   “In a hedge fund, this is called a funding short. It is not that you think it is terrible and going straight to 0, but it is priced fully and not going up much so not a very good risk reward. Within telecom services there are two categories. There are the Verizons, we get it, they trade here for a reason, but they are pretty fully priced. On the other side, there are other companies that are legacy telecom companies where the dividend is a very high, but business really is eroding. It is priced well today because of a high dividend, but it is not sustainable. When you look around the world, a lot of high dividend stocks in Europe are not trading well because people are looking at them and saying I get it. I have a dividend today but it might not be there tomorrow.”


On China:   “If you look at China specifically, multiples had really collapsed…You have two general types of companies. Big, state-owned companies that people don’t trust and private companies that people really don’t trust. There isn’t a lot that trades at big multiples anymore. I think if you can find cases where there is real growth and they can pay cash back to you, you’ll make money.”


Embedded below is the first part of the interview of Dinakar Singh's interview with Bloomberg TV:



And here's the second part:

What We're Reading ~ 8/8/2012

Best Buy founder looking for graceful, confusing exit [Dealbreaker]

Looks like JAT Capital is going back to its TMT roots [FINalternatives]

Mark Casella on future of the hedge fund industry [AllAboutAlpha]

Yale's David Swensen on asset allocation [Mutual Fund Observer]

Facebook's lock-up release problem [Business Insider]

Why Fidelity dumping Facebook is a bad sign for the market [LeighDrogen]

Joy Global: a misunderstood cyclical? [Rational Walk]

Some smaller hedge funds outshine their bigger rivals [Reuters]

The hot new mutual fund company you've never heard of [Forbes]

Hedge fund marketing implications from new survey [FINalternatives]

Do individual investors learn from their mistakes? [SSRN]

Profile on Five Guys Burgers [Forbes]

America's top colleges [Forbes]

Bill Ackman To Speak at the Value Investing Congress: Discount For Readers

It's just been announced that Pershing Square Capital Management's Bill Ackman will be presenting his next investment idea at the Value Investing Congress in New York City on October 1st and 2nd.  You can register here using MarketFolly's discount.

Ackman joins a list of big speakers including:

- David Einhorn (Greenlight Capital)
- Barry Rosenstein (JANA Partners)
- Alex Roepers (Atlantic Investment Management)
- Guy Gottfried (Rational Investment Group)
- Bob Robotti (Robotti & Co)
- Lloyd Khaner (Khaner Capital)
- Kian Ghazi (Hawkshaw Capital)
... and many more.


*** Discount:  As always, Market Folly readers can receive a 32% discount to the event by clicking here and using discount code: N12MF7.  Take advantage, because the offer expires in two weeks! ***

Dan Loeb's Third Point Buys Kraft, Various Healthcare Plays: July Exposure Report

Just yesterday we posted up Dan Loeb & Third Point's Q2 letter and now we have some more portfolio metrics in the form of their latest monthly exposure report.  In July, Third Point Offshore was up 1.6% and is up 5.5% for the year.

Here are a few new takeaways from their latest exposure report:


- Long Kraft (KFT): The biggest news is that Third Point has disclosed a new position in Kraft Foods (KFT) and it is now their fifth largest position.  The company of course will be splitting into two: a North American grocery business and an emerging snacks business.

Although Pershing Square Capital no longer owns KFT shares, you can see Ackman's presentation on Kraft from a few years ago.  Third Point is most likely playing the spin-off, though.  Nelson Peltz's Trian Fund has also been a large owner of KFT.


- Long Healthcare Plays: Loeb's hedge fund also appears to have started new positions in UnitedHealth Group (UNH), Humana (HUM), Wellpoint (WLP), and Cigna (CI).  All of these names were 'top losers' for the fund during the month.  This is worth highlighting because it is the first time these stakes have been disclosed.  We recently flagged why David Einhorn likes Cigna as he recently bought the name as well.


- Third Point is net long the Americas by 70%, but net short EMEA by -4% and net short Asia by -10%.


- In equities, Loeb's firm is 35.4% net long (67.6% long and -32.2% short).  This marks a decent increase from June, where they were net long 27.3%.  Their largest net long sector exposure comes in technology, media & telecom (largely due to sizable Yahoo and Apple stakes).


- Their credit exposure remains somewhat unchanged from last month at 29.3% net long (37.8% long and -8.5% short).  Their largest exposure there continues to be asset backed securities.


Third Point's Top 5 Positions as of the end of July:

1. Yahoo! (YHOO)
2. Gold
3. Apple (AAPL)
4. Delphi (DLPH)
5. Kraft Foods (KFT)


Third Point's just-released Q2 letter details why Dan Loeb still owns Delphi, among other position updates.  We've also flagged how Loeb recently added to his Yahoo stake.

What We're Reading ~ 8/1/12

The Family Office Book [Richard Wilson]

Blue Ridge Capital alum Rick Gerson launches fund [Dealbook]

Poison pen: a look at Dan Loeb's latest chapter [WSJ]

Louis Bacon plans to return $2 billion to investors [Dealbook]

On investing in insurers [Aleph Blog]

Hedge funds build on mortgage gains ]AR+Alpha]

A write-up on Amazon (AMZN) [Bigger Capital]

Another interesting take on Amazon [Kid Dynamite]

Why a fund manager changed his mind on Microsoft [Bronte Capital]

Selling strategy and psychological effects [Old School Value]

Average investors poised to bite into hedge funds [Reuters]

RadioShack as a net-net? [Oddball Stocks]

Explanation of rogue algorithm in trading today [PreMarketInfo]

The Investment Checklist [.PDF]

On lottery arbitrage [Mass.gov]

A beekeeper's perspective on risk [Harvard Biz Review]

Twitter launches clickable stock symbols [Techcrunch]

Manchester United IPO Q&A [ESPN]

Why Dan Loeb Still Owns Delphi: Third Point's Q2 Letter

Dan Loeb's hedge fund firm Third Point is out with its second quarter letter to investors.  In it, they talk about why they still own Delphi (DLPH), as well as touch on numerous other positions.

Loeb writes, "In July, we increased our net equity exposure, initiated several new positions, and added to some existing names."  We revealed that Third Point bought new positions in News Corp and Chesapeake Energy in June.  We also recently highlighted how Loeb has also added to his Yahoo stake.

One of the new names they took a position in is the European IG bond index iTraxx.  The letter also details their position in Progress Energy Resources (PRQ).


Why Third Point Still Owns Delphi (DLPH)

The most interesting part of Third Point's letter is the detail of why they still own Delphi.  They originally purchased the company's DIP loan facility in June 2009 and continue to hold after the company has completed its initial public offering.

Third Point writes,

"In our view, Delphi is a best-in-class supplier which still trades at the valuation of more commoditized and disadvantaged comparable companies.  Delphi has premium business lines, an excellent geographic customer base, no need for further deleveraging, virtually no North American unionized labor, and significantly smaller pension liabilities than almost all of its peers.  Using multiples closer to the upper quartile of suppliers - where we feel Delphi belongs and is headed - Delphi's stock should be worth between $35-$40 per share, or a 30-40% upside from current levels."

The list of large owners of Delphi stock is littered with prominent hedge funds (as of the end of the first quarter): Paulson & Co, Elliott Management, SIlver Point Capital, Oaktree Capital, Centerbridge Partners, Greenlight Capital, Perry Capital, Senator Investment Group, Owl Creek Asset Management, Monarch Alternative Capital, and many more.

Third Point highlights this ownership base in their letter and identifies it as one of the "biggest concern(s)" for Delphi owners.  They foresee a diversification of a currently concentrated shareholder base which will reduced volatility.

Also worth highlighting is the fact that numerous directors of Delphi have sold shares recently, combining for over $5.46 million in sales.

Third Point continues, saying:

"We expect Delphi to expedite its multiple expansion by returning a significant portion of its free cash flow - about 25% of the current market cap by year end 2013 - to shareholders through continued share repurchases and the initiation of a quarterly dividend."


Embedded below is Third Point's Q2 letter to investors:




For more on this hedge fund's portfolio, head to Third Point's latest exposure report.

And to read more hedge fund letters, check out the latest from David Einhorn's Greenlight Capital.

Bill Gross on the Death of Equities: PIMCO Investment Outlook

PIMCO's Bill Gross is out with his latest market commentary entitled "Cult Figures" where he essentially claims stocks are dead:  "The cult of equity is dying."

Before reading his latest missive, it's worth noting his inherent conflict of interest: he's at one of the largest fixed income managers out there (of course he would love it if equities were dead and billions in AUM flowed to fixed income managers).

While some may argue his call as a contrarian signal to buy equities, you have to consider that such a call would be a clearer signal if an *equity* investor was staking such a claim.  Capitulation, a shangri-la for contrarians, can't truly come to fruition until the most ardent defenders throw in the towel.

However, one other conclusion from his note is evident regarding inflation.  He writes, "Unfair though it may be, an investor should continue to expect an attempted inflationary solution in almost all developed countries over the next few years and even decades." 

Obviously, he argues investors need to prepare for such an environment and we've posted up the best investments for inflation before (as well as the best investments for deflation for those in the other camp).

At any rate, you can read Bill Gross' latest market commentary embedded below (and download a .pdf here):





For more commentary from the PIMCO man, check out his piece on how to generate returns in a low yield environment.

Chase Coleman's Tiger Global Sells Some LinkedIn (LNKD)

Chase Coleman's tech-oriented hedge fund Tiger Global Management has filed an amended 13D with the SEC regarding its stake in LinkedIn (LNKD).  Per the filing, Tiger Global has reported a 3.3% ownership stake in LNKD with 2,421,981 shares.

This marks a decrease in their position size and the footnotes reveal that Tiger disposed beneficial ownership of 1,620,947 class A shares.

Tiger sold shares on June 18th & 19th, as well as on various dates between July 20th and 27th.  The bulk of their sale came in blocks at $108.67 and $106.57, though they also sold shares as low as $100.99 (shares now trade around $104).

We previously detailed when Coleman's fund took a 1% stake in LinkedIn back in 2010 for $20 million (a $2 billion valuation).  Nowadays, LNKD trades at a $10.7 billion market cap.

The remaining reported shares are mainly held in their "Private Investment Partners" vehicle.  In the past, we've highlighted how Tiger has allocated capital to private investments in the tech sector and have done extremely well there.  LinkedIn completed its initial public offering a year ago.

Chase Coleman was named one of the top 25 highest earning hedge fund managers of 2011.

Per Google Finance, LinkedIn is "a professional network on the Internet with more than 90 million members in over 200 countries and territories. Through the Company’s platform, members are able to create, manage and share their professional identity online, build and engage with their professional network, access shared knowledge and insights, and find business opportunities. Its platform provides members with solutions, including applications and tools, to search, connect and communicate with business contacts, learn about career opportunities, join industry groups, research organizations and share information."

For more on this hedge fund, head to Tiger Global's Burger King stake.

David Einhorn Boosts Marvell Technology Position

David Einhorn's hedge fund Greenlight Capital filed a 13G with the SEC regarding its position in Marvell Technology (MRVL).  Per the filing, Einhorn has revealed a 5.3% ownership stake in the company with 29,595,179 shares.

This means he's boosted his holdings by 61% since the end of the first quarter.  The filing was made due to portfolio activity on July 16th.  Einhorn talked about his stake in MRVL in Greenlight's Q2 letter.

He likes that the company only trades at "roughly 5x next year's earnings net of the cash on the balance sheet."  Einhorn hopes the company's latest repurchase program will be aggressive and he used weakness in shares to add to his position.  Over the past three months, shares are down 24%.

Per Google Finance, Marvell Technology is "a fabless semiconductor provider of application-specific standard products.The Company develops complex System-on-a-Chip (SoC) devices. Its product portfolio includes devices for data storage, enterprise-class Ethernet data switching, Ethernet physical-layer transceivers (PHY), mobile handsets and other consumer electronics, wireless networking, personal area networking, Ethernet-based personal computer (PC) connectivity, control plane communications controllers, video-image processing and power management solutions. Its products serve diverse applications used in carrier, metropolitan, enterprise and PC-client data communications and storage systems."

For the latest on this hedgie, head to Einhorn on Apple, Green Mountain Coffee and Amazon (interview).

Larry Robbins' Glenview Capital Adds to Rovi Stake

Larry Robbins' hedge fund firm Glenview Capital just filed a 13G with the SEC regarding its position in Rovi Corp (ROVI).  Per the filing, Glenview has revealed a 7.09% ownership stake in Rovi with 7,866,100 shares.

This means they've increased their share count by over 1000% since the end of the first quarter.  Robbins' firm initiated a new position in the first quarter of this year, but only owned 711,000 shares at that time.

Glenview's original purchase in Q1 could have ranged from $25 to $37.  But the bulk of their stake seems to have been bought anywhere between $10 and $30.

However, given the drop in shares the past few weeks (from $18 down to $9), and the timing of this filing, they certainly took advantage of the recent volatility.  The 13G was required due to activity on July 18th.

Per Google Finance, Rovi is "focused on powering the discovery and enjoyment of digital entertainment by providing a set of integrated solutions that are embedded in its customers’ products and services and used by end consumers to simplify and guide their interaction with digital entertainment. The Company’s offerings include content discovery, video delivery and advertising."

For more on this hedge fund, we've posted Larry Robbins' Ira Sohn presentation on THC, HMA, HCA, LPNT and ITC.  We've also highlighted why Larry Robbins likes Life Technologies as well.

What We're Reading ~ 7/25/12

On hedge fund managers and publicity [Reformed Broker]

Dark pools and broken markets [Abnormal Returns]

Are investors just waiting for QE3? [Pragmatic Capitalism]

Profile of Seth Klarman, the oracle of Boston [Economist]

First year analyst dress codes [FINS]

Can John Paulson bounce back? [Pensions & Investments]

Why your brain is killing your portfolio [WSJ]

Is Johnson & Johnson cheap enough? [ValuePlays]

The book Hedge Fund Market Wizards: 19 notable quotes [Ivanoff] 

What were the 10 best & worst times to invest in equities [World Beta]

JANA shifts co-founder to advisory role [AR+Alpha]

Ackman's protege leaves to start fund [BusinessWeek]

Earnings surprises, price reaction & value [Aswath Damodaran]

Focusing on emerging hedge fund managers [FINalternatives]

Decline of Google (and the internet's) ad business [AtlanticWire]

Dan Loeb Adds to Yahoo! Stake

Dan Loeb's Third Point LLC filed a Form 4 with the SEC late yesterday indicating they'd increased their stake by 2.5 million shares.  Third Point bought 1.696 million shares at a weighted average price of $15.82 on July 20th and 804,000 shares at a weighted average of $15.67 on July 23rd.

After these purchases, Third Point now owns 73 million shares of YHOO.  Yahoo just recently named top Google executive Marissa Mayer as its new CEO in a move largely applauded by investors.  As we detailed in Third Point's latest exposure report, YHOO is their top holding.

And back in May, YHOO also made Goldman Sachs' VIP list of most important stocks to hedge funds.  While Loeb's activist campaign is moving along nicely, the core Yahoo business still faces one obstacle: getting more people to come back and use their services daily like most people use Google.

Corsair Capital's Investment Thesis on DigitalGlobe: Q2 Letter

Jay Petschek and Steve Major's Corsair Capital is out with its Q2 2012 investor letter.  In it, they outline their investment thesis on a core position: DigitalGlobe (DGI).  Additionally, they provide updates on Six Flags (SIX), Innophos (IPHS), Aperam (APAM), and TNS (TNS).

Corsair's DigitalGlobe Thesis

Note: the below was written before the announcement that Digital Globe would be merging with GeoEye (GEOY).  Under the terms, GeoEye shareholders will elect either 1.137 shares of DigitalGlobe and $4.10 per share in cash, or 100% of the consideration in cash ($20.27), or 100% of the consideration in stock (1.425 shares of DGI for each share of GEOY owned).  The transaction marks a 34% premium to to GEOY's previous closing price.

For those interested, here's Corsair's original DGI thesis:

One of the hedge fund's core positions is US satellite imaging company, DigitalGlobe (DGI), which provides real-time and archived images from 3 satellites.  DGI co-developed Google Earth as well as Apple's new Maps product.  The company received a takeover offer from competitor GeoEye (GEOY) for $17 per share but DGI rejected it.

Corsair sees strong leadership and expects the company to create value via dividends, share repurchases and "disciplined M&A."  The government effectively represents 50% of their revenue, so that is certainly a risk and is why the stock sold off so hard in February (government spending cuts).  Corsair's view was that the stock already reflected a worst-case scenario and 2012 is a transformational year.  You can read their full case in the letter below. 


Unrelated, but also worth highlighting from the letter: they cite Jim Grant of Grant's Interest Rate Observer, pointing out a potential contrarian signal for equities, noting that "this is the first time in 12 years that pension managers are putting more money into fixed income securities than equities, whereas, just a few years ago they were putting twice as much into equities than in bonds."

Embedded below is Corsair Capital's full Q2 letter:




For more on this hedge fund, head to Corsair's thesis on SunCoke Energy.

Ken Griffin's Citadel Reveals New Marriott Vacations Position

Ken Griffin's Citadel has started a brand new stake in Marriott Vacations (VAC).  Due to a 13G just filed with the SEC, Citadel has revealed a 5% ownership stake in VAC with 1,714,349 shares. 

The filing was made due to portfolio activity on July 18th.  We highlighted back in March how Steve Cohen's SAC Capital was buying VAC.  However, since they move in and out of positions faster than most of the other funds we track, it's hard to say if they still own a stake (and we won't know until mid-August when the latest 13F disclosures are released).  But for now, Citadel has started a new stake in the name.

Per Google Finance, Marriott Vacations is the worldwide developer, marketer, seller and manager of vacation ownership and related products under the Marriott Vacation Club and Grand Residences by Marriott brands. The Company is also the global developer, marketer and seller of vacation ownership and related products under the Ritz-Carlton Destination Club brand, and it has the right to develop, market and sell whole ownership residential products under the Ritz-Carlton Residences brand."

David Einhorn Sells Best Buy & Dell, Buys Cigna & Coventry Health: Q2 Letter

David Einhorn's Greenlight Capital is out with their Q2 2012 investor letter and Dealbreaker has it posted.  In it, they reveal that they no longer own Best Buy (BBY) or Dell (DELL).  Additionally, they started new stakes in Cigna (CI) and Coventry Health Care (CVH), playing the managed care sector.  Here are some excerpts from the letter:

On Best Buy:  "We thought that the core debate was whether or  not the company could compete with Amazon.  The answer at this point is that maybe it can and maybe it can’t.  (Despite the consensus view, our store surveys have repeatedly shown  that there is no price benefit for consumers to browse at BBY and then purchase at Amazon.)   There has been some deterioration in BBY’s domestic performance, which we attribute to a  lack of a “must have” consumer electronics  product, rather than  an erosion of BBY’s  competitive position.  While we held the shares, three unexpected problems emerged:  First,  BBY depleted $1.3 billion of its cash resources by paying a double-digit multiple for  Carphone Warehouse’s share of the Best Buy Mobile profit stream.  The market promptly revalued those earnings to BBY’s mid-single digit multiple.  Second, in the most recent quarter,  BBY’s international profits collapsed.  In particular, comparable sales in its Chinese business  fell 28% as the Chinese economy appears to have hit a wall.  Finally, the company dismissed  its CEO over his personal conduct, and also removed the Chairman for failing to respond  properly to the CEO’s misbehavior.  As a result, the company has an interim CEO and is  trying to come up with a strategy.  We worried  that this could lead to additional business  disruption so we exited with a loss."


On Dell:  "We had thought that the growth in the non-PC business would be enough to
offset the deterioration in the PC business.  The non-PC growth was smaller than we’d hoped
and the PC deterioration was worse than we’d anticipated.  While DELL has a good balance
sheet, it appears likely that management will try to use much of the cash to try to buy its way
into better businesses.  At a minimum, this will erode some of the value cushion that the cash
balance creates."


On Cigna:  "CI is a managed care company with three primary divisions:  Cigna HealthCare, Cigna Group  Disability and Life, and Cigna International.  Cigna HealthCare, which comprises about 70%  of CI’s profits, offers medium and large companies traditional risk-based insurance, in  addition to administering plans for those that prefer to self-insure.  Cigna HealthCare recently  bought HealthSpring to enter the fast-growing Medicare Advantage market.  Cigna Group  Disability and Life is a low-growth, stable  business. Cigna International, which provides  insurance policies for individuals, as well as insurance and administrative services for multinational companies and governments, is growing at more than 20% per year.  We believe that  CI deserves a higher multiple because the plan administration business is a service business  that doesn’t take risk, and the other divisions do not warrant discounted values.  Our purchase  price of $45.42 per share valued CI at less than 8x estimated 2012 EPS and approximately 6x  our forecast of post Obamacare 2014 EPS.  CI shares closed the quarter at $44.00 each."  Note: CI has since fallen further and you can currently buy it at cheaper prices than Greenlight.


On Coventry:  "CVH is a regional managed care company with operations in the mid-Atlantic, Midwest and  parts of the South.  The company offers commercial risk-based insurance and has an  expanding business in the government-sponsored Medicaid and Medicare programs.   Problems with a recently-acquired three-year contract to provide managed care services to the  Medicaid population in Kentucky caused the company to  significantly reduce earnings  guidance for 2012.  This led to a large drop in the stock price.  We believe the issues related  to the Kentucky contract are manageable and finite, and CVH will return to breakeven or a  profit on this contract in 2013 from a loss this year.  Our average purchase price of $31.22  represents 8x our forecast  for 2014 earnings net of $6 per share of cash and reflects our  estimate of the negative impact of Obamacare.  CVH closed the quarter at $31.79 per share."

We've also recently highlighted some of Einhorn's thoughts on Apple, Green Mountain and Amazon.

Einhorn's top five largest long positions at the end of the quarter (in alphabetical position) were: Apple (AAPL), General Motors (GM), gold, Marvell Technology (MRVL), and Seagate Technology (STX).  We highlighted how Greenlight was adding to their STX position last month.

Instead of waiting for a copy of the letter, we'll send you over to Dealbreaker who already has it posted here.

Howard Marks on His Current Favorite Idea & Investment Strategy

We've long posted commentary from Oaktree Capital's Howard Marks (see his recent letter here) due to the amount of wisdom he often shares.  Warren Buffett has even said Marks' letters are the first thing he reads when they come in.  So today we wanted to highlight a longer conversation with Marks on Bloomberg recently.


His Current Favorite Idea: "We think the current combination of good opportunities and good quantity of dealflow is in real estate and real estate related debt"  (both in the US and abroad, but but the US looks a bit better currently).

He thinks there's more of an aversion to real estate today than other areas.  Marks has bet on single family rental properties, believing that there will be a comeback in housing.  The key is to have patient capital, he says.  Numerous other prominent investors also liked this idea at this week's Delivering Alpha conference real estate panel.


On Investment Strategy:  "In order to get above average results, you have to think different and better.  It doesn't always work to do the opposite of what the herd is doing.  You have to know what they're doing, know why they're doing it, know what's wrong with it, and then do the opposite."

He says that everyone is looking at the macro and it's very hard to make calls like that.  He points to great investors like Warren Buffett not making macro calls and instead focusing on specific company fundamentals.


On Opportunities:  He says opportunities usually exist because the sellers are making a mistake (because they're forced to sell, or panicking or they get a margin call).  He penned his entire last memo on mistakes.


On Europe:  "It's a complex area, very murky, very uncertain."

Embedded below is the video of Marks' appearance on Bloomberg:



For more from the Oaktree manager, we've posted an excerpt from his book on contrarianism.

What We're Reading ~ 7/20/12

Muddy Waters negative report on New Oriental Education [Muddy Waters]

Great drought driving food prices higher [Big Picture]

Conversation on potential secular themes [Reddit]

Longleaf Partners Q2 shareholder letter [Longleaf]

The wisdom of crowds in financial markets [Resource Investor]

Tail risk and hedge fund returns [SSRN]

Tech debate between Peter Thiel and Eric Schmidt [Fortune]

A look at the company Square's future [NYTimes]

Profile of Yahoo's new CEO, Marissa Mayer [Spectrum]

Marissa Mayer is in over her head [Slate]

Tons of other great reads from this week [Abnormal Returns]

Whitney Tilson Becomes Sole Manager of T2 Partners, Glenn Tongue Starts Deerhaven Capital

Whitney Tilson recently sent out a letter detailing that his hedge fund T2 Partners will be losing its dual-portfolio manager structure.  Tilson will continue to manage the fund as its sole manager.  Glenn Tongue, the former co-manager, will takeover the former T2 SPAC Fund and rename it Deerhaven Fund, to be managed by his new firm, Deerhaven Capital Management.

As we tweeted out earlier today, in the letter Tilson says "I will adopt a much lower public profile and let my investment returns speak for themselves."  He will also be adopting a much more concentrated portfolio approach, targeting 15 longs and 25 (smaller) shorts.

Also worth noting is the fact that he sold all of T2's positions and will be re-building the portfolio (but will still buy old holdings like BRK).  Certainly there will be tax consequences for this decision.

Tongue, with his new firm, will be focusing on high quality businesses, special situations (mergers, workouts, SPACs), and mispriced options.  He'll also run a concentrated long book and diversified short book.

Embedded below is the T2 Partners letter detailing the changes:





It remains to be seen whether or not T2 will invest in AIG again, but we'd assume so given that they gave a presentation on AIG only two months ago.

Notes From Delivering Alpha Conference

Here's an index of notes from the various panels at CNBC & Institutional Investor's Delivering Alpha Conference:


- Best Ideas Panel featuring Omega's Leon Cooperman, Kynikos' Jim Chanos, BlueMountain's Andrew Feldstein, BlackRock's Robert Kapito, and Queen Anne's Gate Capital's Kathleen Kelley.

- Global Opportunities Panel featuring Richard Perry (Perry Capital), Fortress' Peter Briger, Harvard Management's Jane Mendillo, and JPMorgan's Mary Callahan Erdoes

- Less Than Zero Panel featuring Avenue's Marc Lasry, Marathon's Bruce Richards & Morgan Stanley's Gregory Fleming

- Real Estate Panel featuring Pershing Square's Bill Ackman, Starwood's Barry Sternlicht, and Blackstone's Johnathan Gray

- Commodities Panel featuring Ospraie's Dwight Anderson, Arbalet's Jennifer Fan, and Taylor Woods Capital's Beau Taylor

Delivering Alpha Real Estate Panel: Ackman, Sternlicht & Gray

Continuing coverage of CNBC & Institutional Investor's Delivering Alpha Conference, we're now shifting to the real estate panel featuring Pershing Square's Bill Ackman, Starwood Capital Group's Barry Sternlicht and Blackstone Group's Johnathan Gray.

If you missed it, we've also posted up notes from the other panels at the conference.

Bill Ackman (Pershing Square):  Ackman's been in the news recently regarding a new stake in Proctor & Gamble (PG) so naturally he addressed that first saying, "We think it's a great company ... it's a cheap stock, but it's cheap for a reason.  We own the stock, we like the company, we own about $1.8 billion in equity in options."

That's a lot when you frame it in the context of a $10 billion dollar fund.  Recently, Ackman was also saying his PG bet is the largest initial bet on a company he's ever made.  Many have postured that he'll look to shake-up management and examine splitting the business up.

Ackman also touched on his stake in J.C. Penney (JCP), whose shares have been in steady decline.  He argued that it's the only company that can make 15-20x return (seems awful high), attributing the sell-off to a PR problem versus fundamentals.

On the subject of real estate, he advocated buying single family homes, arguing that it's a good business and an "asset class where institutions are underrepresented."  For more from this investor, we just posted up Ackman's recommended reading list.


Barry Sternlicht (Starwood Capital):  He noted that there's enough debt financing and that spreads are tight.  He also pointed out that you don't really see foreign banks here.

Echoing Ackman, Sternlicht says they've been buying houses and thinks the market could even possibly be overbought.  On Europe, he thinks it's still the first inning there so if you get involved, you've got to buy and hold.  We've highlighted thoughts from Sternlicht before in investing lessons learned from Richard Rainwater.


Johnathan Gray (Blackstone):  They bought a lot of commercial real estate near the top of the market but said it's not painful because rents are improving (due to lack of new construction).  He believes there's some opportunity out there to buy things that others aren't interested in.  The caveat, is that financing is harder to obtain than in the past.

Blackstone obviously likes Ackman's notion of buying homes as that's what they've been doing.  Two thousand for $300 million, saying execution is key.  He especially seems to like European deals and thinks the continent is not going into an abyss.  In summary, he wants to buy hard assets at a discount to replacement cost.


Be sure to check out more insights from top investors from the conference:

- Best ideas panel

- Global opportunities panel

- Chase for yield panel

Delivering Alpha Commodities Panel: Dwight Anderson, Jennifer Fan & Beau Taylor

The last set of notes from CNBC & Institutional Investor's Delivering Alpha Conference comes from the commodities panel featuring Ospraie's Dwight Anderson, Arbalet Capital's Jennifer Fan, and Taylor Woods Capital's Beau Taylor.

Be sure to check out notes from the Delivering Alpha conference for all the other panels.

Dwight Anderson (Ospraie):  The legendary commodities man thinks there's risk in corn, wheat and grain markets (corn has spiked insanely higher, trading limit up on numerous occasions).  He argued more investors should look into farmland.  We've highlighted in the past how Michael Burry likes farmland (yes, the Michael Burry of subprime shorting fame).  Two months ago at the Ira Sohn Conference, we also highlighted how Anderson was long palladium, short platinum.


Jennifer Fan (Arbalet Capital):  She was named one of Institutional Investor's rising stars in 2011 and Arbalet was one of the biggest fund launches this year.  Her comments included that being a farmer is harder than being a hedgie.  She also echoed Anderson's sentiment that corn is risky.  She also pointed out that Chinese GDP numbers are volatile (much more-so than what's reported).


Beau Taylor (Taylor Woods Cap): He feels that crude oil could go much higher ($200 per barrel), citing violence in countries like Syria, Iraq, Iran and some African countries.  He likes Brent over WTI.  He also likes farmland, but says it's hard to scale.

Sources: Notes from readers, II's blog, @ldelevingne


Be sure to check out all the other notes from the Delivering Alpha Conference.

East Coast's Q2 Letter: What Defines A Great Business & A Look At IBM

Christopher Begg's is out with East Coast Asset Management's Q2 letter entitled, "The Beekeepers" where he makes an excellent analogy to investing.  In it, he also delves into what defines a great business and discusses IBM (IBM) as one of their new holdings in context of a larger theme.

Before diving into the IBM idea, we wanted to highlight a few of his salient points from the letter.  He makes a great analogy in the letter writing, "Bees also suffer from the biggest problem of most investors - the inability to sit in a room and do nothing."  Indeed, many great investors have extolled the virtues of patience in investing.

And on the topic of crowded trades, Begg writes,

"We observe that many investors appear to share similar behavior.  Too much demand chasing too little supply will eventually drive prices to extremes, diminishing the resources or future returns for a particular asset class.  We are witnessing this today with money markets and fixed-income securities where yields hover near all-time lows and the crowded hive has to swarm to find more resources."


Why East Coast Likes IBM

Begg highlights that Warren Buffett's Berkshire has become the largest shareholder of IBM (over $13 billion).  East Coast added the name to their books in the quarter and here's some of the rationale as to why:

- IBM has averaged unlevered returns on net tangible assets over the last five years of greater than 20%.

- Their durable competitive advantage exists in the sheer depth of their proprietary intellectual knowledge with which they can solve their customer's complex problems.

- They've targeted four key areas of market opportunity: developing markets, cloud and smarter computing, business analytics and optimization, and smarter planets/smarter cities.

- Perhaps one of the most important: pricing power.  As we all know, Buffett loves pricing power.

- Effective management.


Read their full thoughts in East Coast's Q2 letter embedded below:





For more from this firm, be sure to also check out their Q1 letter on mispricings as well as their thoughts on competitive advantage.

Delivering Alpha Less Than Zero Panel: Lasry, Richards & Fleming

Continuing coverage of CNBC and Institutional Investor's Delivering Alpha Conference, next up is the Less Than Zero Panel featuring Avenue Capital's Marc Lasry, Marathon Asset Management's Bruce Richards, and Morgan Stanley's Gregory Fleming in a talk on the hunt for yield.

If you missed previous posts from the conference, check out a summary of the best ideas panel as well as the global opportunities panel.


Marc Lasry (Avenue Capital):  He argued that 10 year Treasuries will be around 2.5% to 3% in 5 years.  He talked about investing in European debt, saying that you're getting (over)paid for the risk premium.  We've highlighted Lasry on European opportunities recently.  He said that he's buying bank debt in private markets (in Europe), saying that you want to be in regions where "everyone's nervous."  Lasry also argued that 10% plus annual returns are doable if there's a 7-year lockup.


Bruce Richards (Marathon Asset Management):  He said that government bonds = highest risk, lowest return.  He likes structured credit as he thinks the hunt for yield will get insane through 2014 as he made a Hunger Games reference.  He also says that everyone knows inflation is the way out for the US government.  Additionally, he argued he could make 12-14% in high yield.


Gregory Fleming (Morgan Stanley):  He highlighted the retail investor's demand for yield while still having major risk aversion.  It's difficult to combine the two, obviously.  Citing Jim Grant, he also called Treasuries "return free risk."


Sources: Notes from readers, II's blog, @iimag, @ldelevingne, @footnoted, @aarontask


For more from the Delivering Alpha Conference, head to a summary of the best ideas panel (including Leon Cooperman, Jim Chanos and more) as well as the global opportunities panel (featuring Richard Perry).

Delivering Alpha Global Opportunities Panel: Perry, Briger, Mendillo & Erdoes

Today we're posting up highlights from CNBC & Institutional Investor's Delivering Alpha Conference.  We've already posted up the best ideas panel and the chase for yield panel, now we're posting up the global opportunities panel featuring Perry Capital's Richard Perry, Fortress' Peter Briger, Harvard Management's Jane Mendillo, and JPMorgan's Mary Callahan Erdoes.


Richard Perry (Perry Capital):  The hedge fund founder thinks the ECB will keep pumping liquidity into the system, straight to banks rather than governments.  He actually feels the crisis in Europe has been blown out of proportion (at least the extent of it) and it will be a smoother recovery than expected.  Perry feels the euro will survive.

Perry said he likes Italy and Spain sovereign debt but emphasized that he's a trader and could change his mind as fast as tomorrow and also said that "at the end of the quarter, you can't have Spain and Italy on your books."  (Related: we've highlighted how Dan Loeb's Third Point has been long Portuguese sovereign debt.)  Perry noted they've been worried about Spain for three years now.  He also says that in Washington they need to focus on spurring mortgage lending and focusing on immigration reform.


Peter Briger (Fortress):  Briger disagrees with Perry and feels that European bank balance sheets have lots of risk assets that haven't been priced appropriately, saying there's still a lot to work through (debt).  He basically wants to get excited about these opportunities but says prices aren't intriguing enough (cash is still king right now for him).  He says we're in a "period of transitional finance."  His favorite play is financial services "garbage collection" over the next 5 years.  He also mentioned that if he was a long-only investor, he'd be intrigued by the US mortgage market.


Jane Mendillo (Harvard Management Co):  She noted how she's seeing a lot of investors looking for distressed credit in Europe, almost in a frenzy, as there's more dollars than opportunities.  They are not piling in now but are indeed looking at long-term opportunities.  Her favorite space right now is natural resources as she thinks there's still inefficiencies there: farmland, energy, water, timberland, infrastructure.


Mary Callahan Erdoes (JPMorgan):  The CEO of JPMorgan Chase Asset Management said her top pick is to short the Euro.  Coming off a trip to Asia, she notes that investors over there are still looking at US opportunities. She also said that "buy and hold" is definitely dead.  Erdoes made the case for European equities (with an emphasis on luxury), calling it a stock picker's market.


Sources: Notes from readers, II's blog, @iimag, @ldelevingne, @footnoted, @aarontask


For more from the Delivering Alpha Conference, head to a summary of the best ideas panel featuring Leon Cooperman, Jim Chanos as well as the hunt for yield panel featuring Marc Lasry.

Delivering Alpha Best Ideas Panel: Cooperman, Chanos, Feldstein & More

CNBC and Institutional Investor's Delivering Alpha Conference is going on today and we wanted to aggregate the highlights.  The "best ideas" panel included Omega Advisors' Leon Cooperman, Kynikos Associates' Jim Chanos, BlueMountain Capital's Andrew Feldstein, Queen Anne's Gate Capital's Kathleen Kelley, and BlackRock's Robert Kapito.

From the conference, we've also posted up the global opportunities panel as well as the chasing yield panel.


Leon Cooperman (Omega Advisors):  He pitched going long US stocks and called them the best house in the financial neighborhood, a tune he has been singing for well over a year.  However, he did make an excellent point that the maximum "pain trade" is going higher as tons of people are sitting on large sums of cash earning nothing. 

As for specific names he likes: Capital One (COF), Express Scripts (ESRX), Halliburton (HAL), Gannett (GCI), Kinder Morgan (KMI), MetLife (MET), Qualcomm (QCOM), Watson Pharma (WPI) and Western Union (WU).  He also likes AIA Group (1299.HK) traded in Hong Kong.

The Omega Advisors founder also continued to bash bonds, saying "buying US bonds right now is like walking in front of a steam roller and picking up dimes.  It's just not a good policy."

As far as the election goes, he thinks that if Romney wins, the market will spike by 150 points, but if Obama wins, it drifts lower. For more from the Omega man, we just posted up Leon Cooperman on 14 attributes that make a good portfolio manager.


Jim Chanos (Kynikos Associates):  The noted short-seller was out again negative on tech companies.  He mainly pitched the bear case on Hewlett Packard (HPQ), calling it a value trap.  We just recently highlighted Chanos' presentation on global value traps where HPQ was highlighted among other names.

He says that "when you lose the paradigm shift, you spend an awful lot of money defending what you have."  He compared HPQ to Eastman Kodak as the company is in declining businesses.

Chanos also touched on how instead of giving cash back to shareholders, companies will make value-destroying acquisitions.  He cited HPQ's buy of Autonomy last year.  The Kynikos man argues that HPQ has overspent on acquisitions and they're hiding research & development expenditures through them.

He's also negative on Dell (DELL) saying that the company finances its subprime customers (financing their revenue growth).  For more on Chanos we just recently posted up his thoughts on the psychology of short selling.


Andrew Feldstein (BlueMountain Capital):  He likes less liquid credit, angling for 8-12% returns over a 3-7 year time horizon.  He says you have to be patient as this opportunity is available due to everyone's obsession with liquidity (i.e. don't put your money here if you don't have an appropriate time horizon).  He mentioned bonds such as Prospect Medical if you can buy and hold.  Feldstein also mentioned he's less excited about legacy distressed assets in Europe.


Kathleen Kelley (Queen Anne's Gate Capital):  Formerly of Tudor and Kingdon, she pitched two ideas: short the British pound (against long US dollar) as well as short platinum, targeting 20-30% moves to the downside.  She wants to be long the USD against the sterling because the USD can be a commodity currency.

She also likes shorting platinum as there's an oversupply due to slowing Euro auto sales.  At the Ira Sohn conference two months ago, Ospraie's Dwight Anderson pitched going short platinum as well (in addition to going long palladium).


Robert Kapito (BlackRock):  He's going for the "income hog" approach by focusing on equity dividend funds, dividend stocks like AT&T (T), Verizon (VZ), Merck (MRK), Johnson & Johnson (JNJ), high yield bond funds (or individual issues from Sprint, Ally) and municipal bonds such as the San Francisco Airport, New Jersey Tolls.  He thinks that default worry surrounding munis is "overrated."


Sources: Notes sent by readers, II's blog, @iimag,  @ldelevingne, @footnoted, @aarontask

For more from Delivering Alpha, head to the global opportunities panel (featuring Richard Perry) as well as the hunt for yield panel (featuring Marc Lasry)

What We're Reading ~ 7/18/12

Jack Schwager's new book: Hedge Fund Market Wizards [Amazon]

Make or break time for China [Bespoke Investment Group]

Investors' 10 most common behavioral biases [Above the Market]

Don't let models doom your portfolio [Rick Ferri]

Mega cap stocks may be poised to outperform [Disciplined Investing]

Are there secrets in SEC filings? [footnoted]

Why Windows 8 made one investor sell Microsoft [Institutional Investor]

Lone Pine Asia Chief launches hedge fund [FINalternatives]

How to get a job at a hedge fund [Forbes]

Hedge funds: mastered by the universe [The Economist]

Passport Capital winds down materials hedge fund after loss [Bloomberg]

Harbinger Capital announces second permanent capital vehicle [FINalternatives]

4 reasons the hedge fund industry is structurally dead [Minyanville]

Value investors at Research in Motion annual meeting [Barel Karsan]

Jack Welch: Corporations are people [WSJ]

Strategist Jeff Saut: Same Recession "Head Fake" Third Year in a Row

Market strategist Jeff Saut is out with his weekly commentary entitled "Cognitive Dissonance."  He titled his piece as such due to certain economic readings softening while others strengthened.  Saut also addresses how it can often pay to go against the crowd, likening the current market action to that of the past two years.

He argues that just like the past two years, the markets have peaked in May/June and will decline for a few months before surging higher into year-end as no evidence of a recession emerges.

However, Saut isn't sure if the current decline is over yet.  He won't be completely comfortable until the S&P 500 breaks 1366 to the upside and holds it (it's currently around 1358).

In the mean time, he's been recommending slow accumulation of select stocks such as decent dividend payers like Allstate (ALL), Covanta (CVA), Johnson & Johnson (JNJ), Plum Creek Timber (PCL), Rayonier (RYN) and Stonemor (STON).

And on the topic of cognitive dissonance Saut writes, "in order to reduce the anxiety of decision making, people perceive things in ways that may or may not be logical.  Simply stated, people talk the way they bet.  From a stock market perspective this means that the interpretation of economic and market news varies in direct relationship to the investor's bullish, bearish, or cautious market position."

Embedded below is Jeff Saut's latest commentary where you can read why he thinks this year is just like the past two:



You can download a .pdf copy here.

For more from the strategist, we've also highlighted some of his rules for position sizing as well as profit-taking and loss prevention.

Trian Fund Sells Some Family Dollar (FDO)

Nelson Peltz's Trian Fund Management was the largest institutional holder of Family Dollar (FDO) shares at the end of the first quarter.  However, according to a recent Form 4 filed with the SEC, Trian has sold some shares.

Per the SEC filing, Trian's co-manager Ed Garden (who sits on FDO's board) sold 597,000 shares at prices between $69.75 and $70.71 on July 10th and 11th.  After these sales, Trian was left owning 9,369,201 shares.  We've posted up the firm's thoughts on FDO in Trian's Q1 letter.

Readers who have followed this name will recall that Trian actually made a bid to take the company private at $60 per share.  Many assumed this was posturing to induce other bids, which never materialized. 

A few months ago, we highlighted how Bill Ackman's Pershing Square sold out of FDO to allocate capital to more compelling opportunities.  While Trian has sold some shares, it could merely be profit taking as they're up on their position.

At the end of the first quarter, Family Dollar counted numerous institutional firms as top shareholders, including: Alan Fournier's Pennant Capital, Scout Capital, Dan Loeb's Third Point, Paulson & Co, and many more.  We'll have to wait and see who continues to own FDO when the second quarter filings are released in August.

Per Google Finance, Family Dollar is "operates a chain of more than 7,000 general merchandise retail discount stores in 44 states, providing primarily consumers with a selection of merchandise in neighborhood stores. The Company merchandise assortment includes Consumables, Home Products, Apparel and Accessories, and Seasonal and Electronics. A Family Dollar store is between 7,500 and 9,500 square feet, with an average of approximately 7,100 square feet of selling space."

For more from this investment firm, we've posted up Trian's recent presentation on Lazard.

John Griffin's Blue Ridge Capital Buys Colfax (CFX)

John Griffin's hedge fund firm Blue Ridge Capital filed a 13G with the SEC after market close yesterday disclosing a brand new position in Colfax (CFX).

Per the filing, Blue Ridge now owns 5.73% of the company with 5,370,000 shares due to portfolio activity on July 6th.  They did not own a position at the end of the first quarter, so they've built this position somewhere between April and July.

In other activity from this fund, we've detailed how Blue Ridge was buying Martin Marietta Materials as well.

Per Google Finance, Colfax is "a global industrial manufacturing and engineering company. The Company provides gas- and fluid-handling and fabrication technology products and services to commercial and governmental customers worldwide under the Howden and ESAB brand names and by Colfax Fluid Handling. Colfax’s products are marketed principally under the brand names Allweiler, Baric, Fairmount Automation, Houttuin, Imo, LSC, COT-Puritech, Portland Valve, Tushaco, Warren and Zenith."

For more from John Griffin's firm, check out Blue Ridge's recommended reading list.