Mark Yusko's Presentation on Japan From The Grant's Conference

Today we wanted to highlight a presentation that Mark Yusko of Morgan Creek Capital Management gave at the Spring 2013 Grant's Interest Rate Observer Conference.  Entitled "This Time For the Money", his presentation focused on Japan.

In it, he argued that the current rally in Japanese equities is just getting started and that there's a lot of room to run.  This, he points out, is largely affected by "Abenomics" where the government has unveiled a massive attempt to combat Japanese deflation via aggressive monetary easing.

Yusko points out that there will be winners and losers in Japan and offers some ideas.  As potential winners, he listed Toyota, Marubeni, Mitsui, Mitsubishi UFJ, Sumitomo Mitsui Financial, Mizuho, and Japan Securities Finance.

As far as potential losers go, he questioned whether or not the short squeeze is over in names such as Sharp, Panasonic, Sony, and Fujitsu.  Yusko also singled out airlines and food companies as they struggled during the last reflation.  Will it be different this time around?

Embedded below is Mark Yusko's presentation from the Grant's Conference:


 

For other investor thoughts on the country, head to Kyle Bass' thoughts on Japan.

Baupost Group Reduces Vivendi Stake

Seth Klarman’s Baupost Group has reduced its holding in Paris listed media conglomerate, Vivendi  (PAR: VIV). According to Vivendi’s 2012 Annual Report, Baupost trimmed their position from a year  earlier from 2.04% to 1.38% of voting rights or from 25.5 million shares down to 18.22 million shares. 

Per Google Finance – “Vivendi SA is a France-based company engaged in telecommunications  services and media entertainment. The Company operates six core subsidiaries: Activision Blizzard,  a publisher of online and console games; Universal Music Group, a recorded music company;  SFR, a French telecommunications operator; Maroc Telecom Group, a mobile and fixed-line and  Internet operator in Morocco, active also in Burkina Faso, Gabon, Mauritania and Mali; GVT, a  telecommunications operator in Brazil; and Groupe Canal+, a subsidiary which offers premium  and theme channel distribution and programming in France. In addition, it holds stakes in See  Tickets (the United Kingdom), Vivendi Mobile Entertainment (France), Wengo (France) and  Elektrim Telekomunikacja (Poland). In February 7, 2013, it announced a definitive agreement to sell  Parlophone Label Group, a unit of EMI Recorded Music, to Warner Music Group.”

For more on this hedge fund, we've detailed some of Baupost Group's recent portfolio activity here.

Nelson Peltz's Trian Fund Management Discloses Mondelez & PepsiCo Stakes

Nelson Peltz's investment firm Trian Fund Management today filed an amended 13F filing with the SEC for the fourth quarter of 2012.  This filing, detailing positions as of December 31st, 2012 now shows that Trian had positions in Mondelez International (MDLZ) and PepsiCo (PEP) at the end of the year.

According to the filing, Trian's position in MDLZ totaled 19,415,193 shares at the time.  Their stake in PEP consisted of 3,932,663 shares.


Mondelez (MDLZ) Stake

It is extremely likely that this is not a new position for Trian and here's why:  Mondelez is a product of the Kraft split up into Kraft Foods (KRFT) and MDLZ in Q4.  Peltz's firm had been an owner of the old Kraft entity (old ticker KFT) back in the third quarter of 2012 per their 13F from that quarter.  KFT split up into KRFT and MDLZ on October 1st, 2012.

Trian's original 13F filing from the end of December did not show a stake in either entity, so many assumed that Trian had sold completely out of anything Kraft related in the fourth quarter.  However, their 13F also indicated that "confidential information has been omitted" from the filing and was filed separately with the SEC.

Fast forward to today when they file an amended 13F and all of a sudden a stake in Mondelez shows up again.  It then becomes clear that MDLZ (as well as PEP) were the confidential positions.  

As such, Trian most likely never sold MDLZ after they received shares from the Kraft spin-off and we assume they just didn't disclose the stake in their public 13F, but filed the position separately with the SEC.  While there's a chance they could have just bought shares in the open market post-spin, that seems less likely given their past ownership of the old Kraft entity pre-spin.

This week, we also highlighted that Bill Ackman's Pershing Square also filed an amended 13F from Q4 and also revealed a Mondelez position.  Also, hedge fund Scout Capital reported a large MDLZ stake at that time as well.


New PepsiCo (PEP) Stake: Seeking to Merge Companies?

Trian's position in Pepsi, on the other hand, is a brand new stake as they previously did not own any shares.  The Daily Telegraph has speculated that Peltz might potentially have plans to attempt to merge the two companies together.

At the same time, the piece mentions that Peltz could pursue activism with PepsiCo alone, potentially pushing them to split-up just like the old Kraft entity did. 

At the time the Telegraph piece was originally published, it was rumored that Trian had taken stakes in the companies.  And today, we get confirmation of those rumors via SEC filing.  We'll have to wait and see if Peltz has any activist tricks up his sleeve.

Kyle Bass on MBS, Housing & Gold: Bloomberg Interview

We wanted to quickly highlight Kyle Bass' appearance on Bloomberg TV from last week for some of his comments on housing, the mortgage-backed securities market, gold and other topics.  The Hayman Capital founder also talked about Japan, his longstanding topic of interest.


On residential mortgage-backed securities: “That investment is working…The various concentric circles surrounding housing not getting worse, which is how we think about it. We are not expecting it to get materially better, just not to get worse. The services sectors, the new mortgage insurance companies, the things that are actually asymmetric investments you can make around the housing market not worsening are where the majority of our long side of our portfolio is.”

Just yesterday, we highlighted a piece from hedge fund Prologue Capital on MBS and the housing market which featured bullish comments on the industry as they see a recovery happening.

Bass mentioned playing mortgage servicers and these related bets have been popular amongst hedgies.  Our Hedge Fund Wisdom newsletter in the past has flagged that many funds have been active in shares of Ocwen Financial (OCN) and the like.

Turning to other positions Bass might potentially be involved with, Hayman disclosed an ownership stake in Realogy (RLGY) at the end of the fourth quarter.  The residential brokerage house completed its IPO during Q4.


On the future of Fannie and Freddie: “I have no clue…We decided to just exit, thinking about them when you meet with both sides of the aisle, they both want a bullet in their head. Typically when that happens you get a bullet in your head. The second thing we were thinking about, if you remember there was a proposal to start raising the g-fees. There is a way for the U.S. Treasury to get paid back all of the money they've pumped into Fannie and Freddie if they start raising g-fees."


On gold: “We have always had a position in gold. When you think about the largest central banks in the world, they have all moved to unlimited printing ideology. Monetary policy happens to be the only game in town. I am perplexed as to why gold is as low as it is. I don't have a great answer for you other then you should maintain a position.”


Embedded below is Bass' latest Bloomberg TV interview where he talks about many other topics:



For more on this hedge fund manager, we've also posted up Bass' short of Japanese Government Bonds.

What We're Reading ~ Hedge Fund Links 4/19/13

Summary of Viking Global's Q1 letter [Institutional Investor's Alpha]

Breaking into the hedge fund world is harder than before [The Economist]

SEC hedge fund ad rule no closer to finalization [Marketwatch]

Japan as hedge fund opportunity [AllAboutAlpha]

Dan Loeb simultaneously solicits, betrays pension funds [Rolling Stone]

Paulson's Advantage fund stung by plunge in gold [Reuters]

Scalable strategies should follow long only equities example and cut fees [COO Connect]

Global hedge fund assets top $2.2 trillion as big firms dominate [BCA Research]

Ranking the best sell-side stockpickers [WSJ]

Och-Ziff nets $2 billion trade [WSJ]

JANA Partners statement at Agrium annual meeting [Yahoo Finance]

Tiger Management partners with Delaware firm [Evestment]

Energy hedge funds caught out in the cold on natural gas bet [WSJ]

Onetime hedge fund giant Stark Investments winding down [JS Online]

Bloomberg integrates live Twitter feeds with its financial platform [Bloomberg]

Meet Britain's wealthiest hedge fund chiefs [The Guardian]

Global private equity report 2013 [Bain & Company]

Prologue Capital on the US Housing & MBS Markets

Today we present some interesting commentary on the mortgage backed security (MBS) and US housing markets from hedge fund Prologue Capital.  Prologue is a $2.1 billion global macro fixed income manager that focuses on inflation-linked investments. 

Their latest commentary features thoughts from portfolio manager Noah Estrin and Chief Economist Tomas Jelf and they believe that the housing market will shift from a headwind to a tailwind.


Prologue writes that,

"A modest increase in home prices from current levels will translate into a large swath of credit impaired borrowers being able to refinance, significantly increasing mortgage supply. However, the doves at the Fed will be reluctant to step away from the assistance they are providing the economy until they are 100% certain that the recovery can stand on its own."

Prologue sees housing starts "increasing by around 60% to 1.5 million in the next 2-3 years, which brings it in line with natural rate of household formation."  They also highlight a shift in housing-related employment which is growing at an accelerated pace.

You can read the entirety of their thoughts below, but suffice it to say that they feel the "positives outweigh the negatives" in the US housing market and that Spring has sprung.

Embedded below is Prologue Capital's commentary on the MBS market and US housing market:

East Coast's Q1 Letter: How an Idea Goes Through Their Investment Process

Christopher Begg's East Coast Asset Management is out with their first quarter letter for 2012.  Entitled "The Art of Fugue," the letter details how an opportunity goes through their investment process and they also provide an update on their portfolio.

Investment process is always a work in progress, so it's interesting to hear how other investors refine this and what they incorporate into their approach.  On East Coast's process, Begg writes,

"Once an investment idea is sourced, the idea is put through an initial checklist and if it has merit it will ultimately be categorized as a compounder, a transformation, or a workout. Next, the investment idea will go through two stages of due diligence – two individual fugues, both in six parts. In each six-part stage we always begin and resolve with our subject, or royal theme, which is a perspective on compounding."

We've highlighted East Coast's investment process before, but their latest letter breaks down the six things they look at (in search of quality of the business):

- Competitive advantage
- Pricing power
- Market opportunity
- Capital itensity
- Economics
- Management

Then eventually they look to answer 4 questions:

1. Does the investment have an attractive expected rate of return? (IRR)
2. Does the investment have a sufficient margin of safety?
3. Do we understand the critical data points that will drive the success and intrinsic value of the business?
4. Do we understand first cause, or why the investment may be mispriced?

Begg then applies the above to a new holding they initiated in the quarter so you can follow along with their investment process to see how they think about everything.  It's certainly a useful exercise and some of you may be able to guess the position.  Embedded below is East Coast's Q1 letter:




For more on investment process, be sure to head to East Coast's letter on transformation investments.

Blum Capital Partners Reduce Position in Career Education

Richard Blum's hedge fund firm Blum Capital Partners has filed an amended 13D and various Form 4's with the SEC over the past few days regarding their stake in Career Education Corp (CECO).  According to the filings, Blum has disclosed a 16.1% ownership stake in CECO with 10,803,834 shares.

This marks a decrease of around 19% in their position size since the end of 2012 when they owned over 13.3 million shares.  The latest 13D amendment was made due to portfolio activity on April 12th.

Looking at Blum's Form 4's, we see that they've been selling from April 4th through the 13th at prices ranging from $2.1 to $2.18.

It's also worth mentioning that Blum owns another large stake in the for-profit education space: ITT Educational (ESI).  As of the end of 2012, this was an even larger position for them, though they were out selling some shares in the fourth quarter according to their last 13F filed with the SEC.

The for-profit education sector has been under scrutiny from some time by regulators and has been shorted by numerous hedge funds as student loan debt has grown rapidly over the past few years.  Back in 2010, Steve Eisman laid out a bearish view on the sector in his presentation: subprime goes to college.

Per Google Finance, "Career Education Corporation ((CEC) through colleges, schools and universities that are part of the CEC family, offers education to a diverse student population of approximately 100,000 students in a variety of career-oriented disciplines through online, on-ground and hybrid learning program offerings. The Company has approximately 90 campuses that serve these students are located throughout the United States and in France, the United Kingdom and Monaco. It offers doctoral, master’s, bachelor’s and associate degrees, diploma and certificate programs. It institutions include, among others, American InterContinental University (AIU); Brooks Institute; Colorado Technical University (CTU); Harrington College of Design; INSEEC Group (INSEEC) Schools; International University of Monaco (IUM); International Academy of Design & Technology (IADT); Le Cordon Bleu North America (LCB), and Sanford-Brown Institutes and Colleges."

What We're Reading ~ Analytical Links 4/17/13

A new site aggregating conference call transcripts [ConferenceCallTranscripts.org]

Intel (INTC): Anatomy of a tech value trap [Reformed Broker]

Why equity long/short investing is not dead [HFIntelligence]

Sticking to a plan in the face of emotional volatility [Abnormal Returns]

Rare interview with Liberty Media's (LMCA) John Malone [CNBC]

Jeremy Grantham on how to play resource scarcity [Advisor.ca]

Aereo has TV networks circling the wagons [NYTimes]

The death of value investing [Business Insider]

Thermo Fisher (TMO) nears deal for Life Technologies (LIFE) [Reuters]

On Dish Network's (DISH) bid for Sprint Nextel (S) [Bloomberg]

Interview with Markel's (MKL) Tom Gayner [GuruFocus]

Diabetes in Mexico: eating themselves to death [The Economist]

Top 5 websites capturing larger share of real estate traffic [Inman]

As big investors emerge, Bitcoin gets ready for close-up [Dealbook]

Ken Heebner's Interview on Consuelo Mack's WealthTrack

Ken Heebner is the founder of Capital Growth Management and he manages the CGM Focus Fund, among other actively managed mutual funds.  He has put up big numbers some years, but he also was hit big during the financial crisis.  However, his long-term numbers beat the market (10 year and 15 year performance) and put him in the top 1% of his peers.

He sat down with Consuelo Mack on WealthTrack and talked about the themes he's seeing these days and how he's playing them:


Resurgence In Housing = Big Theme

Heebner's big theme in the US is housing.  He says, "I think it's the single most important factor causing economic activity and the stock market to surprise on the upside."

He notes that after a large drawdown in prices during the financial crisis, housing starts declined as homebuilders cut back.  As such, demand has grown while supply was largely stagnant.  As such, supply needs to catch up with demand and home prices can head higher until supply catches up.

As a result of this, Heebner also sees consumer confidence rising due to improved personal balance sheets which can obviously translate into increased consumer spending.

However, he doesn't necessarily think homebuilder stocks offer the best value as they're well off their lows and the general perception is more favorable for the industry nowadays.  The time to really load up on shares was when the majority of people were pessimistic.


His Outlook For Banks

Other themes he's tracking include industry consolidation and corporate profit margins.

He points out that 5 major banks have almost 50% of deposits and this consolidation hasn't been seen in quite some time.  Additionally, Heebner highlights the low P/E ratios many banks trade it.  He also feels that business opportunities for banks are presenting themselves and they should have some solid pricing power.

In particular, he highlights Morgan Stanley (MS) and Goldman Sachs (GS), noting that they can see P/E multiple expansion and that half of the earnings from MS come from wealth management.  He also points out the negative sentiment surrounding MS in particular.  We've highlighted Dan Loeb and Third Point's pitch on Morgan Stanley as well.

Of the industry, Heebner says, ""I look for situations where I think the fundamentals are a lot better than everyone else thinks they are.  I wish there were more of them.  I'd say the big investment banks are in that category today."


On Running a Concentrated Portfolio & Cutting Losses Quickly

Heebner likes to focus on companies where the risk/reward is very skewed in his favor.  While there's a lot of companies he looks at possibly owning, he says he wants to place the most capital on the companies he feels best about.  He asks, "Why hold the ones that aren't as good?  The side effect is volatility that exceeds everyone else's portfolio."

A lot has been made of Heebner's high turnover.  This, he says, is partly due to the fact that he likes to cut losses quickly.  Many great investors over time have highlighted the importance of managing losses.


Embedded below is the video of Ken Heebner's interview with Consuelo Mack on WealthTrack:

Steve Mandel's Lone Pine Capital Raises Lululemon (LULU) Stake

Steve Mandel's hedge fund firm Lone Pine Capital has filed a 13G with the SEC regarding shares of Lululemon Athletica (LULU).  Per the filing, Lone Pine has disclosed a 5.01% ownership stake in LULU with 5,632,431 shares.  This marks almost a 17% increase in their position size since the end of 2012. 

The 13G was required due to portfolio activity on April 5th.  Recently, Lululemon has seen a bit of controversy as customers were complaining about yoga pants that were too-sheer (i.e. they were see-through or somewhat transparent).  Shares dropped from $70 down to as low as $61.60 on the news but have since rebounded back to $70.  It's likely Lone Pine was buying somewhere in this sell-off.

Steve Mandel was recently listed as one of the top 10 highest paid hedge fund managers of 2012.

Per Google Finance, Lululemon Athletica "manufactures, distributes and sells technical athletics and yoga apparel."

For more on this hedge fund, we've highlighted some of Lone Pine's other portfolio activity.

Odey Asset Management Reveals Epistem Holdings Stake

Crispin Odey's UK firm Odey Asset Management has disclosed a new position in London listed Epistem Holdings (LON:  EHP). Due to trading on the 12th of April, Odey hold 5.02% of Epistem's voting rights. It appears that the Odey UK Absolutue Return Fund, managed by James Hanbury, is the main holder of the position with 4.2% of voting rights. 

Per Google Finance - "Epistem Holdings Plc is a holding company. The Company is engaged in  provision of services to the biotechnology and pharmaceutical industries, covering pre-clinical  testing and gene biomarker and diagnostic services and the development of novel therapeutics for  partner companies. The trading activity of the Company is principally undertaken in the subsidiary  undertaking, Epistem Limited. The Company operates in three segments: Contract Research  Services, Personalized Medicine and Novel Therapies. Contract Research Services provides pre-  clinical testing services. Personalized Medicine specializes in molecular measures of biological effect  and point of care molecular diagnostic testing. Novel Therapies is discovering key regulators of  epithelial stem cells."

You can read about other recent portfolio activity from Odey here.

ValueAct Capital Discloses Invensys Position

Highly respected activist, Jeffrey Ubben’s ValueAct Capital, has disclosed a new position in London listed Invensys (LON: ISTS).  Due to trading on April 9th, ValueAct hold 7% of Invensys’s voting rights. 

Other notable investors in this company include Marathon Asset Management, who have a position in Invensys of 4.94% which they disclosed back in March 2012. 

Per Google Finance – “Invensys plc is a global technology company. The Company operates in  three divisions: Invensys Operations Management, Invensys Rail and Invensys Controls. Invensys  Operations Management, which is a technology, software and consulting business that creates and  applies technologies to enable the operation of industrial and commercial operations, such as oil  refineries, fossil fuel and nuclear power plants, petrochemical works and other manufacturing sites.  Invensys Rail, which provides software-based signalling, communication and control systems that  enable the operation of trains in mainline and mass transit networks worldwide. Invensys Controls,  which designs, engineers and manufactures products, components, systems and services used in  appliances, heating, air conditioning/cooling and refrigeration products across a range of industries  in residential and commercial markets. In November 2012, the Company had sold its rail business to  Siemens AG.”

For more from this hedge fund, late last year we posted up Jeff Ubben's presentation on Moody's and CBRE Group.

Free 35 Page Report on Family Office Investors (PDF)

Richard C. Wilson, CEO of the Family Offices Group has created a 35 page report on family office investors that you can download for free here: http://familyofficesgroup.com/family-office-book

Family Offices are a growing investor segment for all types of alternative investment funds including hedge funds.  At the same time, both single and multi-family offices are typically very private and relatively hard to learn about as a investor base.  Our educational report helps you learn the fundamentals of family offices for free, to help spread education and understanding of this area.  Right now family offices are being started on a daily basis all over the world and in 10 years from now the industry will be three times as large in terms of assets under management.  It is important for every fund manager to gain an understanding of this investor type now, before they are left behind on this global trend.

As you may already know, the Family Offices Group is the largest association of family office professionals in the world with 60,000 global members.  They provide live events, family office data (FamilyOffices.com), a bestselling book, and their free to download family office report.

Bill Ackman's Pershing Square Discloses Mondelez Position

Bill Ackman's hedge fund firm Pershing Square Capital Management just filed an amended 13F with the SEC regarding their portfolio as of the end of 2012.  In it, they add a new holding entry: Mondelez International (MDLZ). 

As of December 31st, Pershing Square reports owning 5,978,214 shares.  This is a small position (worth around $179 million) compared to the rest of Pershing's portfolio, but is still worth mentioning as it's a new disclosure.

Last year, Kraft (former ticker KFT) split up into Kraft Foods (new ticker KRFT) and Mondelez International (new ticker MDLZ).  KRFT houses Kraft's North American grocery business and is seen as a steady cashflow generating, dividend income-type stock.  MDLZ, on the other hand, is seen as the growth engine, housing the snacks business with international exposure.

Pershing Square has not disclosed a position in KRFT and only has revealed their stake in the post-split shares of MDLZ.


Ackman Owned Kraft in the Past

This will not be the first time Ackman's hedge fund has had exposure to a Kraft entity.  In fact, he even published a presentation on Kraft back in 2010.  Interestingly, Pershing Square owned Kraft shares before the split but sold their entire stake in the former Kraft entity in the second quarter of 2012.   Ackman dumped shares sometime between March 30th and June 30th.

What's unclear, however, is if Ackman re-bought into the old Kraft entity before the split and received his MDLZ shares that way, or if he simply bought shares in the open market after the split was complete.  Regardless, he owned MDLZ shares at the end of 2012 and has just now revealed this via an amended 13F filing.


Other Hedge Funds That Own Mondelez

After the Kraft split, we've seen some hedge funds take large positions in the emerging markets-focused snack maker.  At the end of 2012, James Crichton and Adam Weiss's hedge fund Scout Capital was one of the largest institutional owners of MDLZ with over 27.5 million shares.  This was their largest position at the time, though there's no way to know if it still is.

Additionally, Nelson Peltz's firm Trian Fund Management has reportedly taken a stake in Mondelez (as well as PepsiCo) on speculation that he was possibly trying to merge the two entities together.  The Daily Telegraph reported that Peltz had spent $2 billion on shares of both companies.

However, it is definitely worth mentioning that back in the fourth quarter of 2012, Peltz's investment vehicle had sold completely out of its stake in MDLZ (as they did not disclose a position in their Q4 13F filing).  So while Peltz could have reversed course since then, he did not report ownership of a MDLZ stake as of December 31st.


About Mondelez

Per Google Finance, Mondelez is "is a maker of chocolate, biscuits, gum, candy, coffee and powdered beverages. The Company consists of the global snacking and food brands. Mondelez International's portfolio includes several brands, such as Cadbury and Milka chocolate, Jacobs coffee, LU, Nabisco and Oreo biscuits, Tang powdered beverages and Trident gums. The Company’s products include chocolates, cookies, gums, beverages and crackers. Alpen Gold is a chocolate brand in Russia. Alpen Gold is available in chocolate bars, boxed chocolates and creamy, mouth-watering pralines. Its markets include Poland, Russia and Ukraine. Bubbaloo is a gum brand sold in more than 25 countries and three different continents, including India, Mexico, Portugal and Spain. Belvita are breakfast biscuits made with wholegrain, cereals and fiber. It is sold in Belgium, France, Netherlands, United Kingdom and the United States."

For more on Pershing Square, head to our coverage of Bill Ackman's other positions.

Jeff Saut on Equity Investor Sentiment and Gold: Weekly Commentary

Market strategist Jeff Saut's weekly commentary focuses on his awe of the stock market rally.  He writes,

"The “buying stampede” is at a legendary 70 sessions and quite frankly I have never seen anything like  this in 42 years in this business and more than 50 years of watching the markets."

Also worth pointing out is the fact that Saut met with hundreds of individual investors last week and found that most find the stock market's rally as 'artificial' and think another crash will come because of it (equity mutual fund inflows have increased this year though).

Even more intriguing, however, is the latest sentiment survey from the American Association of Individual Investors which shows a huge drop in sentiment (from 35% bullish down to 19% bullish), even while the market hits new all-time highs.  Typically, you see the opposite (investors become bullish during peaks and bearish during troughs).

Saut also opines a bit on gold after it's seen quite a drastic fall over the past few days which you can read in his embedded below commentary:




You can download a .pdf copy here.

For more from this strategist, check out his previous commentary on how we're due for a pullback.

Top 10 Highest Paid Hedge Fund Managers of 2012

Institutional Investor's Alpha is out with their annual ranking of top earning hedge fund managers.  Here's the list:

Top 10 Highest-Paid Hedge Fund Managers of 2012

1. David Tepper (Appaloosa Management): $2.2 billion
2. Ray Dalio (Bridgewater Associates): $1.7 b
3. Steven Cohen (SAC Capital): $1.4 b
4. Jim Simons (Renaissance Technologies): $1.1 b
5. Ken Griffin (Citadel): $900 million
6. Eddie Lampert (ESL Investments): $750 m
7. Stephen Mandel (Lone Pine Capital): $580 m
8. Leon Cooperman (Omega Advisors): $560 m
9. David Shaw (D.E. Shaw): $530 m
10. Dan Loeb (Third Point): $380 m


Tepper finds himself atop the list after a solid 2012, returning around 30% after fees.  Lee Cooperman's firm also turned in great numbers last year (up around 28%) as did Ken Griffin, whose Citadel returned over 25%.

Of the managers listed, over half make a solid portion of their investments via equity strategies (though Appaloosa also focuses on distressed and Third Point also dabbles in mortgages).  Two managers listed are primarily quant funds (RenTec, D.E. Shaw).  Eddie Lampert's earnings are largely tied to Sears (which his hedge fund owns a large stake in) and shares rallied in 2012.

II Alpha ranks all the way up to the top 25 managers and you can view the full list here.

Jonathan Ruffer's Latest Commentary: Reducing High-Yield Equities, Adding Interest Rate Hedges

Today we check in with UK-based manager Jonathan Ruffer via his April market commentary from Ruffer Investment Company.  In his latest missive, he talks about the continued government printing presses and how liquidity benefits asset prices.


Investors Flee Cash Seeking Yield

Ruffer points out that while many investors have gotten over their losses from the financial crisis, there still is no worthwhile yield on any 'safe' investments.

He writes,

"The  lack of yield on cash is a distortion which means that safety can no longer be found in conventionally defined ‘safe  assets’ or ‘safe havens’, and cash itself is dangerous to hold in these inherently inflationary conditions. Without a refuge,  and safety closed off to prudent investors, there seems little choice but to strive for capital gain – which has been broadly  available. Thus we are all chivvied towards reckless behaviour at a time when the macro-economic climate cries out for  carefulness in the management of assets."

His main concern has been and continues to be inflation going forward.  Previously, we'd noted how Ruffer had been seeking 'refuge' in inflation-linked bonds, gold and Japanese equities.  As of late, gold has obviously been selling off.  But as a pleasant surprise to Ruffer, his Japanese equities holdings have fared better than anticipated.


Trimming Equities, Adding to Interest Rate Hedges

But as equities have surged, Ruffer has been reducing their positions in high-yield staple equities.  Additionally, Ruffer makes the case that interest rates could rise sooner rather than later and his firm has used instruments that would take advantage of such happening in the US and Japan.  If interest rates surged higher faster than many anticipate, Ruffer sees this as bad for equities and has looked to hedge against such a scenario.

Embedded below is Jonathan Ruffer's Q1 letter:

JANA Partners Discloses Ashland (ASH) Stake

Barry Rosenstein's hedge fund firm JANA Partners has filed a 13D with the SEC regarding shares of Ashland (ASH).  Per the filing, JANA has revealed a 7.4% ownership stake in ASH with over 5.8 million shares.

This is a brand new position for the hedge fund.  However, they have owned the name in the past: back in 2010.  The latest filing was required due to portfolio activity on April 1st, though JANA was out buying ASH shares as early as February 12th and as recent as April 10th according to the filing, at prices ranging from $76.xx to $80.xx.  ASH shares currently trade around $84.


Breakdown of Options Position

In the fine print, we see that JANA's position includes 4,145 and 2,210 call options with strike prices of $65 and $70 that expire next week (April 19th).  They also own May expiration calls via 1,465 options with a strike of $60 and 1,445 options with a strike of $65.  Additionally, they've sold 2,270 April puts with a strike of $70 and they've also sold 1,445 May puts with a strike of $65.


Reason For Purchasing ASH Shares

As to why they purchased the stake, JANA reveals their intentions in the "purpose of transaction" section of the 13D filing:

"The Reporting Person acquired the Shares because it believes the Shares are undervalued and represent an attractive investment opportunity. The Reporting Person has had discussions with the Issuer’s management relating to, among other things, the Issuer’s business, corporate structure, capitalization, operations, stragetgy and future plans. The Reporting Person expects to continue to have such discussions with the Issuer’s management as well as with the Issuer’s board of directors, shareholders and other parties relating to such matters, and may take other steps seeking to bring about changes to increase shareholder value."

Per Google Finance, Ashland is "a global specialty chemical company that provides products, services and solutions throughout a variety of industries. Ashland’s business operates in four segments: Ashland Specialty Ingredients; Ashland Water Technologies; Ashland Performance Materials and Ashland Consumer Markets."

For more from this hedge fund,  be sure to check out Rosenstein's in-depth interview with Columbia Business School.

What We're Reading ~ Hedge Fund Links 4/12/13

Notes from Jeff Gundlach's DoubleLine lunch [Reformed Broker]

Diworseification: avoiding over-diversification with best idea funds [SumZero]

Lee Cooperman: stocks are the place to be [HFIntelligence]

Alternative investments are no longer all that alternative [Abnormal Returns]

Vulcan Value Partners offers top investing ideas [Barrons]

Third Point plans Greece fund [Bloomberg]

Some March hedge fund performance numbers [HFIntelligence]

Are hedge fund-backed reinsurers here to stay? [Reuters]

Ackman says mistakes were made in JC Penney (JCP) turnaround [Reuters]

Paulson said to start fund to reduce clients' tax bills [Bloomberg]

Quant funds run one-third of hedge fund assets [HedgeWorld]

Agrium (AGU) sweeps proxy vote, JANA Partners cries foul [Reuters]

Canadian Pacific (CP): Off the tracks after Ackman [Seeking Alpha]

Institutional herding in the corporate bond market [SSRN]

An old profile of Carl Icahn [LATimes]

Bruce Berkowitz's Fairholme Reduces MBIA Stake

Bruce Berkowitz's investment firm Fairholme Capital has just filed an amended 13G with the SEC regarding shares of MBIA (MBI).  Per the filing, Fairholme has disclosed that they've reduced their position in MBI by 11 million shares.

This marks around a 26% reduction in their position size.  The filing was required due to portfolio activity on March 31st and Fairholme now owns 16.3% of the company.  We've previously posted up Berkowitz's investment thesis on MBIA for those interested.

Per Google Finance, MBIA  "operates the financial guarantee insurance businesses in the industry and is a provider of asset management advisory services. These activities are managed through three business segments: United States public finance insurance, structured finance and international insurance, and advisory services. MBIA’s United States public finance insurance business is operated through National Public Finance Guarantee Corporation and its subsidiaries, its structured finance and international insurance business is primarily operated through MBIA Insurance Corporation and its subsidiaries, and its asset management advisory services business is primarily operated through Cutwater Holdings, LLC and its subsidiaries. It also manages certain business activities through its corporate, asset/liability products, and conduit segments. The corporate segment includes revenues and expenses that arise from general corporate activities."

For more on Fairholme, head to a recent interview with Berkowitz as well as notes from his CSIMA presentation.

Tiger Global Reduces Position in UK-based Dignity Plc

Chase Coleman’s hedge fund Tiger Global Management has slightly reduced its position in London listed funeral services company, Dignity (LON: DTY).

Due to trading on April 4th, Tiger Global now hold 5.98% of the voting rights, reduced from their previous 6.69% position. Based on public filings, Tiger Global have been invested in Dignity for several years.

Per Google Finance - “Dignity plc is a United Kingdom-based holding company. The Company, along  with its subsidiaries, is engaged in the provision of funeral services, including funeral directing,  crematoria operation and the marketing and administration of pre-arranged funeral plans. Its  operations are managed across three main areas: funeral services, crematoria and pre-arranged  funeral plans. Funeral services revenues relate to the provision of funerals and ancillary items, such  as memorials and floral tributes. As of December 28, 2011, the Company operated a network of 600  funeral locations throughout the United Kingdom. During the fiscal year ended December 28, 2011,  it conducted 62,300 funerals. Crematoria revenues arise from cremation services and the sale of  memorials and burial plots at the Company's crematoria and cemeteries. It operates 35 crematoria  in England and Scotland. On January 25, 2013, the Company acquired Yew Holdings Limited.”

For more on this hedge fund, we've highlighted some of Tiger Global's other portfolio activity.

Third Point Short Japanese Yen, Long Liberty Global & International Paper: Q1 Letter 2013

Dan Loeb's hedge fund Third Point has released its Q1 2013 letter to investors.  In it, we see that Third Point finished the first quarter up 9%.  There were three main takeaways from Third Point's activity: a short position in the Japanese Yen, as well as long positions in Liberty Global (LBTYA) and International Paper (IP).

Liberty Global (LBTYA)

 Loeb's firm bought when shares swooned in Q1 after announcing a takeover of Virgin Media (VMED), a company Third Point also has a large stake in.  Third Point likes the company's impending buyback and sees "Liberty's strategic value as the primary alternative to the incumbent telecom operator's fixed infrastructure in its markets is overlooked." 

Third Point also thinks shares could compound at around 20% per year after closing of the VMED deal.  As of the end of 2012, numerous other hedgies had stakes in LBTYA including Coatue Management, Blue Ridge Capital, Eton Park Capital, and Maverick Capital.


International Paper (IP) 

They like the company's pricing power in North American Containerboard and see numerous catalysts for the company, including finding out whether the industry's price increase has been sanctioned.  We also recently highlighted that Senator Investment Group added to their IP position.


Third Point has also been short the Japanese Yen, in what has been almost a consensus hedge fund trade recently.  You can read the rationale behind their position in Third Point's Q1 2013 investor letter, embedded below:




For more from this hedge fund manager, be sure to also check out Dan Loeb's recommended reading list.

What We're Reading ~ Analytical Links 4/10/13

Choosing simplicity as a default [Abnormal Returns]

Goldman Sachs on slipping into a slowdown [Business Insider]

On sustainable competitive advantages & profitability [Deloitte]

Finding alpha in short interest data [Thomson Reuters]

Lumber prices near housing bubble high [Calculated Risk]

Do you think you might be trying too hard? [Greenbackd]

An interesting presentation on floats and moats [Fundoo Professor]

The supply and demand of alpha is not static [Abnormal Returns]

Comparing returns between property and collectibles [FT]

Shodan: the scariest search engine on the internet [CNN Money]

A low growth world can also mean high profits [NYTimes]

Single family homes built for rent market [Eye on Housing]

College, Inc. [PBS Frontline]

Daniel Kahneman on the danger in trusting your gut [Forbes]

Carrefour (EPA:CA): up the right aisle [The Economist]

Holy buybacks Batman ~ DirecTV (DTV) [Fool]

How entrepreneurs really succeed [Malcom Gladwell]

Mark Cuban on lessons learned about leadership [Forbes]

The best undergraduate business schools for finance [Business Week]

What We're Reading ~ Hedge Fund Links 4/5/13

Some stock picks from David Einhorn [Portfolios With Purpose]

Lee Cooperman: stocks are the only place to be [HFIntelligence]

Latest interview with short seller Jim Chanos [Salon]

To use a fund of funds or go direct? [HFIntelligence]

Half of hedge funds think their competitors are cheating [WSJ]

Whitebox's Andy Redleaf on surviving to trade another day [HFIntelligence]

Hedge funds are too big to beat the market [CBS]

New launches from ex-Maverick Capital partners [Reuters]

Notes from a panel of respected credit hedge fund managers [UnstructuredFinance]

Boaz Weinstein: don't get too comfortable [HFIntelligence]

Tiger Cubs report a rough Q1 [Institutional Investor]

Ray Dalio's Bridgewater is number 1 in earnings [Institutional Investor]

A hedge fund has been active in LightSquared debt [WSJ]

Investor activism gone wild [NYTimes]

The hedge fund rebound could be short-lived, or not [Quartz] 

Big public pension funds trump hedge fund benchmarks [Pensions & Investments]

Dell buyout was Southeastern's idea [WSJ]

Hard times for Harbinger's Phil Falcone [Alpha]

Some portfolio activity from Danoff's Contrafund [Reuters]

SEC's new social media policy falls short [TermSheet]

Eric Sprott's April Commentary: Caveat Depositor

Eric Sprott of Sprott Asset Management is out with his April commentary entitled, "Caveat Depositor."  In it, he delves into the Cyprus situation and the macro effects moving forward.


Caveat Depositor  

by Eric Sprott & Shree Kargutkar, Sprott Asset Management 

“If there is a risk in a bank, our first question should be: ‘Ok, what are you the bank going to do about that? What can you do to recapitalise yourself?’ If the bank can’t do it, then we’ll talk to the shareholders and the bondholders. We’ll ask them to contribute in recapitalising the bank. And if necessary the uninsured deposit holders: ‘What can you do in order to save your own banks?’” – Jeroen Dijsselbloem, March 26, 2013 1 

A deal has just been struck with Cyprus. However, it was not the deal that Cyprus saw other countries receive. This was not the deal received by Greece, Italy and Spain. There were no bailed out banks in the aftermath. There was no transfer of risk from over-levered banks to the taxpayers. The risk was pushed back onto the banks. Their equity was wiped out. Their bondholders were wiped out. Their uninsured depositors saw their accounts raided for additional liquidity. It wasn’t just that the rules of the game had changed, the game itself changed. By raiding the depositors’ accounts, a major central bank has gone where they would not previously have dared. The Rubicon has been crossed. Going forward, this is expected to be the “template” for dealing with risky, over-levered banks and the countries which support them. 

For the first time since the crisis began, we are faced with a new paradigm, or a “template”, for how a major central bank will address weakness in the financial sector. While the old template involved “bailing out” through transfer of risk from the corporate sector to the taxpayer, the new template calls for “bailing in”, whereby the risk is contained within the affected institution at the expense of equity holders, bond holders and finally the depositor. 

How does the new template affect you?  

This “template” is already being applied to the “too big to bail” banks in other developed countries around the world. A statement in the joint paper published by the FDIC and the Bank of England in December 2012 reads: 

“An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company into equity. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailedin creditors would become the owners of the resolved firm…. Such a resolution strategy would ensure market discipline and maintain financial stability without cost to taxpayers”.2 

Note the lack of the phrase “uninsured depositors” in this context, which opens the doors for both insured and uninsured depositors to be affected. In a similar vein, Canada’s recently released budget addresses the same problem. Page 144 of Canada’s Economic Action Plan 2013 reads: 

“The Government proposes to implement a – bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers.”3 

Likewise, New Zealand’s Open Bank Resolution policy allows for a “bail in” of afflicted banks by wiping out the equity holders first, the bond holders second and finally forcing a haircut on the depositors.4 

Over-levered banks are not a recent development. We are faced with a banking crisis, seemingly once every generation. In a majority of cases, the bad banks were allowed to fail and newer, stronger banks took their place. However, the recent modus operandi of the central banks and policy makers allowed over-levered banks to get even bigger, rewarded risk taking with bailouts and let the inherent problem of unsustainability fester.

We carried out the exercise of taking the largest banks, or in other words, the “too big to fail” banks in the G7 countries and added up their assets in relation to the host country GDP. For the layperson, a typical bank’s assets are primarily composed of the loans they have originated while the liabilities are primarily composed of deposits they have accepted. With the exception of the US, all G7 countries have banking systems that have become larger and in some cases dwarfed their respective economies. 

Governments around the world are finally beginning to realize the gravity of the risk that exists in their banking sectors. The EU has decided to build upon the new template of the “bail-in” regime. The US, UK and Canada have all followed suit. This puts the onus squarely upon the depositor. The depositor is a lender to the financial institution that he banks with. However, most depositors naively assume that their deposits are 100% safe in their banks and trust them to safeguard their savings. Under the new “template” all lenders (including depositors) to the bank can be forced to “bail in” their respective banks. Several G7 countries already have provisions that allow troubled banks to be bailed in using depositor accounts. We have been vocal about our concerns over the state of the global financial system for the better part of the decade. The Greek tragedy is now being played out in Cyprus with a new twist as depositors have been unwillingly turned into sacrificial lambs. Given the size of the banking sector in most G7 countries and the burgeoning government debts, the ability of the governments to bail out their banks is severely constrained, especially considering the political headwinds that exist today. For this reason, we strongly believe that real assets trump a fiat currency in a “savings” account. It is not our intention to be alarmist here, merely to say, “caveat depositor”. "

Footnotes:
1     Import Export Stats – US Census Foreign trade: http://blogs.ft.com/brusselsblog/2013/03/the-ftreuters-dijsselbloem- interviewtranscript/
2     http://www.bankofengland.co.uk/publications/Documents/news/2012/nr156.pdf
3     http://www.budget.gc.ca/2013/doc/plan/budget2013-eng.pdf
4     http://www.centralbanking.com/central-banking/official-record/2257939/rbnzarticle- says-open-bank-resolution-helps-keep-banks-in-line

For more from this manager, we've also posted up how Sprott thinks the sell-off in gold is an opportunity to buy.

Whitney Tilson's Kase Capital Q1 Letter: Pitch on Deckers, Sears Hometown & Outlet Stores

The hedge fund duo of Whitney Tilson and Glenn Tongue split up last year and now Tilson is managing his Kase Capital solo.  He just sent out his first quarter letter to investors where he outlines two of his new investments: Deckers (DECK) and Sears Hometown & Outlet Stores (SHOS), which you can read in the letter below.

Kase Capital's Top Holdings

In Kase Capital's letter, Tilson also lists his largest positions:

1. AIG (AIG)
2. Berkshire Hathaway (BRK.A)
3. Howard Hughes (HHC)
4. Deckers (DECK)
5. Citigroup (C)
6. Goldman Sachs (GS)
7. Netflix (NFLX)
8. Canadian Pacific (CP)
9. dELiA*s (DLIA)
10. Iridium (IRDM)
11. Grupo Prisa (B Shares)
12. Sears Hometown & Outlet (SHOS)
13. Spark Networks (LOV)


Tilson's Shorts & Exposure Levels

Tilson also reiterated a few stocks that he's short: InterOil (IOC), K-12 (LRN), and Nokia (NOK).  He's also holding a large cash balance, waiting for better opportunities to deploy capital.  His equity exposure comes in at 66% long and 22% short currently.


Embedded below is Whitney Tilson's Kase Capital first quarter letter to investors for 2013:

Bill Gross on How To Be a Better Investor: PIMCO Investment Outlook

PIMCO's Bill Gross is out with his monthly investment outlook for April.  Entitled "A Man in the Mirror," Gross examines himself as a market participant and provides wisdom by outlaying how others can learn from his mistakes.

One interesting part he raises is how all investors of this generation have benefited from a period of credit expansion.  He writes,

"But let me admit something. There is not a Bond King or a Stock King or an Investor Sovereign alive that can claim title to a throne. All of us, even the old guys like Buffett, Soros, Fuss, yeah – me too, have cut our teeth during perhaps a most advantageous period of time, the most attractive epoch, that an investor could experience."

Later, he goes on to emphasize how investors may be forced to adapt and to make a change, an important thing to keep in mind as we approach the potential of a rising interest rate environment in the future.

Embedded below is Bill Gross' April commentary:




You can download a .pdf copy here.

For more from this bond kingpin, head to Gross' previous investment outlook: rational temperance.

What We're Reading ~ Analytical Links 4/3/13

A sweet spot for equities: opportunity and dangers [Aswath Damodaran]

How much of stock market's growth is caused by its shrinking? [Dealbreaker]

Rally on fumes [Capital Observer]

Greed + confirmation bias = disaster [Kid Dynamite]

A little perspective on the markets [Market Anthropology]

How to find high quality stocks [Greenbackd]

Use Benjamin Graham's investing checklist to invest like him [Old School Value]

Presentation on student debt [NewYorkFed]

Cummins (CMI): should you chase it? [CFA Institute]

Dell (DELL) outlines the death of the PC [Forbes]

The next big catalysts for Blackberry (BBRY) [Yahoo Finance]

Apple (AAPL): is it different this time? [Fusion Investing]

eBay (EBAY): estimates rising on upbeat analyst day [Barrons]

A.H. Belo (AHC): hidden value or value trap? [Seeking Alpha]

Altisource Residential (RESI): spin-off with growth ahead [Seeking Alpha]

Insider buying of gold stocks surges to multi-year highs [Globe and Mail]

How to make a stock pitch [Business Insider]

Dan Loeb's Third Point Discloses Porsche & Volkswagen Stakes: March Exposure Report

Dan Loeb's Third Point Offshore Fund finished March up 2.9% and is now up 9% for 2013.  Managing $11.7 billion, the fund has current net long equity exposure of 45.1%, down around 2% from February.


Top Positions

1. Yahoo! (YHOO)
2. Virgin Media (VMED)
3. Gold
4. American International Group (AIG)
5. Ally Financial (multiple securities held)

Third Point's top holdings remain unchanged from the month prior.  Their position in Virgin Media was a new addition to the portfolio in 2013.


Newly Disclosed Positions

In their March "top winners" and "top losers" columns, Third Point discloses a few positions we haven't seen before.  In their "top losers" column from last month, they show holdings in Volkswagen AG, Porsche Automobil Holding SE, and Bond Street Holdings.  Porsche is notable because as of 2012 year-end, it was the top holding at Children's Investment Fund (see TCI's Porsche thesis from a conference late last year).

Additionally, Third Point shows positions in Cheniere Energy (LNG) and DE Master Blenders in their top winners category.  The latter was spun-off from Sara Lee, a position Third Point previously owned (and most likely where those shares came from).

Embedded below is Third Point's March exposure report:




For more on this hedge fund, head to Third Point's Q4 letter.

Senator Investment Group Adds To International Paper Position

Alex Klabin and Douglas Silverman's hedge fund Senator Investment Group recently filed a 13G with the SEC regarding shares of International Paper (IP).  Per the filing, Senator has disclosed a 5.2% ownership stake in IP with 23,088,500 shares.  The filing was required due to portfolio activity on March 28th.

This marks a 452% increase in the number of shares they own.  At the end of 2012, Senator owned 4,179,065 shares, but they also owned call options representing 3,500,000 shares as well.

Per Google Finance, International Paper is "a global paper and packaging company, with primary markets and manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. The Company operates in four segments: Industrial Packaging; Printing Papers; Consumer Packaging, and Distribution."

About Senator

Alex Klabin and Doug Silverman founded the hedge fund firm in February 2008 with a focus on global long/short investing in distressed assets and equities. They were originally seeded by Blackstone Strategic Alliance Fund with $150 million and at the end of 2012 reported holdings worth $4.5 billion on their 13F filing (which isn't indicative of their entire AUM total).  Prior to founding Senator, both worked at Jamie Dinan's York Capital.

For more on this hedge fund, we've also posted up Senator's pitch on Rayonier (RYN) as well.

Corsair Capital Management Boosts Wausau Paper Holdings

Jay Petschek and Steven Major's hedge fund Corsair Capital Management recently filed a 13G with the SEC regarding shares of Wausau Paper (WPP).  Per the filing, Corsair disclosed a 5.6% ownership stake in WPP with 2,774,724 shares.

This marks an increase of 1,920% in the number of shares they own.  At the end of 2012, they only owned 137,323 shares.  The 13G was required due to portfolio activity as of March 13th.


Starboard Value Involved Too, Pushing For Change

Investment firm Starboard Value has been involved with shares of Wausau for some time.  Starboard had increased its stake in WPP, owning 14.8% of the company as of March and recently gained two seats on the board of directors.

Starboard has been fighting for Wausau to divest all its operations except for the tissue segment.  A few weeks ago, the company announced it planned to sell its specialty paper business for $130 million.  Wausau looks to be repositioning itself by turning focus to the tissue business.

Per Google Finance, Wausua Paper "manufactures, converts, and sells paper and paper products.  The Company operates in two principal segments: Tissue and Paper, with both business segments marketing their products under the Wausau Paper brand name. The Tissue segment produces a complete line of towel and tissue products that are marketed, along with soap and dispensing systems, for the away-from-home market."

For more on this hedge fund, we've also posted up Corsair's thesis on Acacia Research (ACTG).

Marcato Capital Management Discloses CyrusOne (CONE) Stake

Mick McGuire's hedge fund firm Marcato Capital Management recently filed a 13G on shares of CyrusOne (CONE) with the SEC.  Per the filing, Marcato has revealed an 11.8% ownership stake in CONE with 2,592,394 shares.  The filing was originally required due to portfolio activity on February 21st.

Per an additional Form 4 filed with the SEC, we see that McGuire's firm was out buying some of their shares on various dates between February 28th and March 12th, at prices ranging from $21.25 up to $22.02 per share.  Cyrus One shares currently trade just below $23.


Interest Stems From Cincinnati Bell Stake

While Marcato Capital Management has disclosed CONE as a new position, it's important to realize that the hedge fund also owns a stake in Cincinnati Bell (CBB).  CONE is a subsidiary of CBB.  CBB completed an initial public offering of 16,500,000 CONE shares back on January 18th.  After the IPO, CBB expected to effectively own 71.6% of CyrusOne.

A few months ago, McGuire pitched CBB at the Great Investors' Best Ideas symposium and highlighted the compelling angle of the CONE spin-off IPO.  And now that CONE is a separately traded entity, Marcato has revealed a sizable stake in it.

Per Google Finance, CyrusOne is "a owner, operator and developer of enterprise-class, carrier-neutral data center properties. The Company provides mission-critical data center facilities that protect operation of information technology (IT) infrastructure for approximately 500 customers. As of September 30, 2012, the Company’s property portfolio included 23 operating data centers in nine markets: Austin; Chicago; Cincinnati; Dallas; Houston; London; San Antonio; Singapore, and South Bend providing approximately 1,630,000 net rentable square feet (NRSF) and powered by approximately 125 megawatts of utility power."

For more from this hedge fund, head to Marcato's recent portfolio activity.

Jeff Saut's Market Commentary: Still Due For a Pullback

Market strategist Jeff Saut released his investment commentary earlier this week.  In it, he talks about how the rally since the end of December has been rampant and is one of the longest he's seen.  He concludes,

"While we are certainly due for a pause/pullback, any such action should prove to be short-lived and shallow, providing there is not some kind of 'black swan' event that precipitates it.  If investors want to be bullish on the US economy, but are worried about the extended rally in stocks, they might consider 'long' positions in the US dollar."

Embedded below is Jeff Saut's weekly commentary:




You can download a .pdf copy here.

For more from this strategist, see his previous commentary on a permanent investment.

Lee Cooperman Raises Monitise Stake

Lee Cooperman's hedge fund Omega Advisors has revealed an increase in London listed Monitise (LON:MONI).  Due to trading on March 20th, Omega's position has increased from 5.65% to 10.06% of Monitise's voting rights.

Cooperman's firm originally took a stake in Monitise back in January of this year.  We've also detailed how Louis Bacon's hedge fund Moore Capital Management also disclosed a stake back in December.

Per Google Finance – “Monitise plc is a United Kingdom-based holding company. The principal  activity of the Company is as a technology company delivering mobile banking, payments and  commerce networks worldwide. The Company’s segments include Live Operations, Investment in  future operations and Investment in technology platform. Live operations include both territory  deployments and development contracts, which consist of Monitise United Kingdom, Monitise  Americas and Global accounts. Investment in future operations segment represents the Company’s  operations which are not live operations covering both pre-sales and start-up period. Investment in  technology platform segment comprises the ongoing development, enhancement and maintenance  costs of the Monitise technology platform. On June 25, 2012, the Company acquired US mobile  banking and payments specialist, Clairmail Inc.”

The Bull Case on Coach (COH) From Broyhill Asset Management

Broyhill Asset Management recently released its research on shares of Coach (COH).  They're bullish on the company and classify it as a classic compounder.

Broyhill writes,

"Coach currently trades at 8.3x EBIT,  13.0x current and 11.7x forward earnings. In other words, the stock is priced as if Coach’s growth is long in  its past. At its peak in 2001, shares fetched 32 times earnings. If we assume that Coach ultimately trades  back towards its average forward multiple of 15x over the next three years, we estimate the stock is worth  $76.60 in our base case, which represents more than 50% upside potential. In our bull case, upside is significantly greater."

Broyhill's thesis on this handbag retailer is pegged on three growth drivers: the ascent of affordable luxury, continued brand extension, and ongoing international expansion.

They feel a short-term shift in investor sentiment has created an entry point for long-term investors.  Their report, embedded below, highlights industry dynamics, competitive positioning, and executive leadership.


They also highlight the following as areas of potential risk:

- International expansion
- The Chinese consumer
- Margin compression
- Brand dilution
- Competition

Embedded below is Broyhill's full 20-page pitch on shares of Coach (COH):




For more research from this firm, we've also highlighted Broyhill's pitch on Oaktree Capital Group.

What We're Reading ~ Analytical Links 3/27/13

Doug Kass' basic investing tenets [TheStreet]

Cannibals: finding companies doing 'good' buybacks [ValueInvestingLetter]

Four villains of decision making [Farnam Street]

Student loan write-offs hit $3 billion in first 2 months of year [Yahoo News]

America's new railroad age [WSJ]

Examining Cupid PLC [Bronte Capital]

Relative value in credit risk [Bigger Capital]

Technicals: keeping an eye on Dr. Copper [Kimble Charting]

Soda consumption declines to lowest level since 1996 [CNBC]

Value investing in India is dead [Atyant Capital]

Investors face a shrinking stock supply [USAToday]

Market psychology money and investing personality tests [MarketPsych]

Hewlett Packard (HPQ) shares soar, but is it a real turnaround? [Barrons]

Dell (DELL) board continue talks with Icahn and Blackstone [Dealbook]

Google (GOOG): How YouTube is casually beating other social networks [PandoDaily]

Don't blame Barnes & Noble (BKS) [Digital Book World]

10 influential blogs financial advisors should be following [Financial-Planning]