We're posting up notes from the Ira Sohn Conference 2013 in New York. Next up is a summary of the presentation from Jonathon Jacobson of Highfields Capital. He presented "The Illusion of Yield." His pitched the short case on Digital Realty Trust (DLR).
The Illusion of Yield
Jacobson said money market assets are in decline. Individual investors fled mutual funds, and slowly, but surely individuals are tiptoeing back to the market. They are buying high-yield bond funds and dividend stocks.
"Low risk" such as REITs, pharma/healthcare, Utilities, Telcos, even blue chips. He showed how health care is up 18% ytd, Utilities 18%, staples 16%. Very rare for this to happen in a bull market. This shows that investors are buying high dividend "safe" stocks. "All dividends are not created equal"
AT&T (T) beware: wireline a melting ice cube, wireless becoming competitive. Short: Linn Energy (LINE). Half of cash flow is from hedging gains.
Short Digital Realty Trust (DLR)
Short idea: Digital Realty Trust (DLR). $9B market cap, trades at 18x AFFO (adjusted funds from operations), 4.6% dividend yield. Fundamentals deteriorating, commodity business without barriers to entry.
CAPEX higher than company represents, dividend not sustainable. Stock worth about $20/share, not the $65 it's trading for. Cloud-based competition is coming in- Google (GOOG), Amazon.com (AMZN), and Microsoft (MSFT).
Rents at new data centers are down 20% since 2006. Spent $967M on CAPEX, claim only $22M of it was maintenance capex. This doesn't square. It's actually more like $413M/ year over time. So on $1B on revenue, cost of maintenance capex is more like 40%, not 2% This makes a huge difference- it implies they are only making 87c/share, not $3.12/share.
With a 4% yield on this 87c, you get a $19 stock. Replacement cost as estimated by the company is $18/share. With no barriers to entry, increasing competition, prices dropping, why should you pay 3x book value for this business? Keep issuing secondary shares to fund ongoing operating cash shortfall, still doing acquisitions to mask what is happening.
Check out the rest of the hedge fund presentations from the event: notes from Ira Sohn Conference 2013.
Thursday, May 9, 2013
Jon Jacobson's Sohn Conference Presentation: Short Digital Realty Trust (DLR)
Mitch Julis' Sohn Conference Presentation: Clear Channel Outdoor (CCO), Apple (AAPL)
We're posting up notes from the Ira Sohn Conference 2013 in New York. Next up is a summary of the presentation from Mitchell Julis of Canyon Partners. He presented Clear Channel Outdoor (CCO) and wandered into other topics throughout his talk.
Long Idea: Clear Channel Outdoor (CCO)
Stub equity. Says depressed multiple. So his bull case needs multiple expansion. And he expects some EBITDA growth. Complex story, litigation, etc.
Apple. (AAPL) Long. Cites their bond at 1.5% interest rate, says the discrepancy between the debt and equity is significant. "Capital structure matters." - quote from Michael Milken.
He also touched on how tons of CUSIPs have been bought by CB's since 2007 and you don't want to fight them. Julis says "if you don't do macro, macro will do you."
While everyone is just going long in this environment, he said to look for earnings power and staying power (Warren Buffett's great at this).
Check out the rest of the hedge fund presentations from the event: notes from Ira Sohn Conference 2013.
Keith Meister's Sohn Conference Presentation on Time Warner Telecom & Level 3 Communications
We're posting up notes from the Ira Sohn Conference 2013 in New York. Next up is a summary of the presentation from Keith Meister of Corvex Management (he previously worked with Carl Icahn). He presented Time Warner Telecom (TWTC) and Level 3 Communications (LVLT) as he likes plays on the data boom.
Long: Time Warner Telecom (TWTC)
Has his own fund, used to work for Carl Icahn. Buys companies going through change, activism. Likes recurring revenue businesses, with secular growth even in no-growth world, consolidating industries. Global data traffic over networks is indisputable, no matter which tablet/ smartphone/game is popular. Networks are consolidating. Ideas: Long TWTC. 80% enterprise/20% wholesale. Possible takeover target. Growing, market share gainer, balance sheet optionality for capital return. Steady organic growth, declining monthly churn. Potential acquirers: Comcast (CMCSA), Verizon (VZ), AT&T (T), Level 3 Communications (LVLT), Cablevision (CVC), Charter Communications (CHTR), or maybe even Google (GOOG). Price target: $34. Meister said he will file a 13D on TWTC as he owns 6% of the company and thinks this is a takeover target.
Long: Level 3 Communications (LVLT)
Long idea: LVLT. 55% ent/45% wholesale. Acquirer of other companies.
Scale asset, real estate play, and $8.5B NOLs. It's like Sprint last
year- as people begin to believe the story, the stock will work. Expects
TWTC to be acquired. Both about $4-5B market cap. Trade at 7-8x EBITDA,
which is growing 10% CAGR. LVLT 5.3x debt/EBITDA, TWTC only 1.5x. LVLT
1.5 beta, TWTC 0.8x. LVLT is a global roll-up; TWTC is in 75 local
markets. His firm owns over 3% of LVLT.
For more on this manager, head to posts on Corvex's position in CommonWealth REIT, as well as Keith Meister's pitch on ADT.
Check out the rest of the hedge fund presentations from the event: notes from Ira Sohn Conference 2013.
David Stemerman's Sohn Conference Presentation: Short African Bank
We're posting up notes from the Ira Sohn Conference 2013 in New York. Next up is a summary of the presentation from David Stemerman of Conatus Capital. Prior to founding his fund, he worked at Lone Pine Capital. He presented a negative view on South African consumer credit. He recommended shorting African Bank (ABL:SJ).
Negative on South Africa, Short African Bank (ABL:SJ)
His factors: 1. Quality of Business 2. Management quality 3. Industry cycles
Short Idea: Short when boom turns to bust. South Africa. Banks in South Africa. Unsustainable increase in consumer credit, unsound lending practices, cycle is turning from boom to bust, and African Bank (ABL:SJ) is vulnerable to a downturn.
Short African Bank. (Listed only in South Africa) Consumers are spending 48% of their income on debt service! Trades at 1.3x book value.
Check out the rest of the hedge fund presentations from the event: notes from Ira Sohn Conference 2013.
Li Lu's Sohn Conference Presentation on Korean Preferreds
We're posting up notes from the Ira Sohn Conference 2013 in New York. Next up is a summary of the presentation from Li Lu of Himalaya Capital. He presented on preferred stock of Samsung, Hyundai and A-1 Pacific, arguing that Korean preferreds are cheap because there's irrational perception that they aren't debt or equity.
Korean Preferreds: Samsung, Hyundai, A-1 Pacific
Li Lu is a Buffett disciple and he was considered to take over Buffett's fund. Idea: Korean preferred stocks, Samsung (an idea he also pitched about 4- 5 years ago). Talked about the accounting treatment of preferred shares, and stock options.
Earlier this week, we drew attention to a rare interview with Li Lu on investment process which is definitely worth a read. And for more, here's a talk Li Lu gave.
Check out the rest of the hedge fund presentations from the event: notes from Ira Sohn Conference 2013.
Clifton Robbins' Ira Sohn Conference Presentation on CACI & Akamai
We're posting up notes from the Ira Sohn Conference 2013 in New York. Next up is a summary of the presentation from Clifton Robbins of Blue Harbour Group. He presented the long case for CACI (CACI), which he owns 93% of and his second pick was a new position in Akamai (AKAM).
Long CACI (CACI)
Robbins expects a lot of M&A due to cash on balance sheets. Two longs. CACI. Government Services Contractor. Intelligence, Cybersecurity, etc. Was originally a software company. Strong FCFs. Trades at only 7x EBITDA, valuation implies 30-40% upside.
Long Akamai (AKAM)
He says it's a unique business at crossroads of megatrends. Say it can do better
balance sheet optimization, no debt $1B in cash. Says stock up only 18%,
while growing faster than comps. Disputes margin pressure problems.
Argues stock from today's price of $45 is undervalued by $15. All the cash
is in the US. Says they can do accretive acquisitions.
Check out the rest of the hedge fund presentations from the event: notes from Ira Sohn Conference 2013.
Tor Olav Troim's Sohn Conference Presentation on Opportunities in Cyclical Industries
We're posting up notes from the Ira Sohn Conference 2013 in New York. Next up is a summary of the presentation from Tor Olav Troim of Seadrill (SDRL).
He presented "Opportunities in Cyclical Industries. Some long ideas: Frontline, Seadrill, and global arbitrage on the gas market via Golar LNG (GLNG).
Opportunities in Cyclical Industries
Fredriksen's partner. Long Ideas: They own: Seadrill, Frontline, LNG co, Shipping company. Claims they created $31B USD.
Long: Frontline. Showed how shipping rates collapsed in 2008, from $160k to $20k in three months! Value of a vessel went from $140M to $300k, effectively lost 99% of it's value. New ships have huge fuel savings, and they are cheap to build now. Can make back investment in 6-7 years.
Long: Seadrill. Drilling- "The best business we know!" Full pay back in 5 years on 30-year life assets. Showed charts explaining how 90 new rigs are needed by 2020. By having the rigs quickly available for the oil companies, they can speed up their payback by a year, which is a huge impact on rate of return. Possible to have a rig shortage, which is great for pricing. Sometimes the rigs have paid for themselves 3 times by 10 years. Global arbitrage on the gas market.
Long: Golar LNG (GLNG). Profit is $30-50M USD per boatload to ship from Africa to Europe.
Check out the rest of the hedge fund presentations from the event: notes from Ira Sohn Conference 2013.
Simeon McMillan's Sohn Conference Presentation on Tribute Company (Contest Winner)
We're posting up notes from the Ira Sohn Conference 2013 in New York. Next up is a summary of the presentation from Simeon McMillan, a Columbia MBA student who won the Sohn investment contest and got to pitch at the conference: Tribune Company.
Tribune Company (TRBAA)
Newspapers, broadcast TV stations, cable networks. McMillan used a sum of the parts (SOTP) analysis. Follows Greenblatt's book criteria. Only traded OTC, post-bankruptcy equity. SOTP gets low is 6% up from here, medium $88, up 60%, and high could even double. Key swing factor is the value of the WGN cable network.
Check out the rest of the hedge fund presentations from the event: notes from Ira Sohn Conference 2013.
Wednesday, May 8, 2013
Notes From Value Investing Congress Las Vegas 2013: Day 2
Yesterday we posted up some quick notes from day 1 of the 2013 Value Investing Congress in Las Vegas and today we'll highlight key takeaways from day 2 below:
Whitney Tilson, Kase Capital: AIG, Hertz (HTZ)
He
talked about how American International Group (AIG) is still a position
he likes as it's still cheap and the company has been streamlined to
something much easier to understand and there's been a lot of
advancement since the financial crisis and even since last year. It's around 14% of his portfolio and was his largest position as of last month. Tilson also likes his long of Berkshire Hathaway (BRK.A / BRK.B) and recently adjusted his intrinsic value figure to just north of $193,000. Additionally, he mentioned he's started a new position in Hertz (HTZ) and you can read the pitch on Hertz in this newsletter that convinced him.
Guy Gottfried, Rational Investment Group: WPX Energy (WPX)
His pitch was on WPX Energy, a spin-off from Williams Companies last year. He says it trades at 8x free cashflow and .66x book value. Gottfried feels it's a very cheap stock for a play on natural gas that doesn't require gas prices to head higher.
Mark Boyar, Boyar Value Group: Weight Watchers (WTW), Dole Foods (DOLE), Western Union (WU)
He thinks we might be in the midst of multiple expansion. Boyar likes Weight Watchers (WTW) as a play on the weight management industry and notes it's down 50% over the past 12 months. He also pitched Dole Foods (DOLE) as the company reduced its debt load by selling the packaged foods business. His third and final pick was Western Union (WU).
Vitaliy Katsenelson, Investment Management Associates: Whistler Blackcomb (WB.TO)
He said that profit growth is slowing down and that the market is actually getting expensive on a P/E basis. Katsenelson argued that there's no secular bull market, at least not yet. In the mean time, he likes stocks with solid dividends and says that the vast majority of returns in sideways markets are derived from dividends. He's the author of The Little Book of Sideways Markets, by the way. His pick was a high dividend payer (over 7%) in Whistler Blackcomb, the owner of the popular ski resort. He likes their lower costs due to no property development etc.
Zeke Ashton, Centaur Capital Partners: Fidelity National (FNF), First American (FAF)
He emphasized the importance of learning from mistakes. While you will encounter your own mistakes as an investor, it's also easy to learn from others' mistakes too. Ashton argued that emotional mistakes are much more prevalent than analytical ones and so obviously behavioral finance is an important part of investing. As far as current opportunities in the market go, he's having a hard time finding good ones as so many shares have been bid up. He's not a big fan of homebuilders but if you want a play on housing, he said to look at the title insurers as a proxy with lower risk. His picks were Fidelity National (FNF) and First American (FAF).
Joe Altman & Chris Kyriopoulos, COMPOUND Capital: TARP Warrants, Nathan's (NATH)
They launched their fund at a hell of a time: during the financial crisis when Lehman Brothers failed. These two mentioned that they like TARP warrants, which we'd note has been a hedge fund favorite (especially AIG and BAC warrants, though Compound prefers AIG and COF ones). They note these are liquid plays that are often underfollowed. However, their pitch today was Nathan's (NATH), the popular hot dog proprietor.
David Hurwitz, SC Fundamental: Long KISCO, Short Salesforce.com (CRM)
He pitched one long: KISCO in Korea (001940.KRX) and one short: Salesforce.com (CRM). He says KISCO is much cheaper than CRM.
Chris Mittleman, Mittleman Brothers: Revlon (REV)
He pitched this as a turnaround story, praising management for a good effort. Ron Perelman owns a ton of the company and that's partially the reason it's so cheap. Mittleman likes that it's essentially a recession resistant business. A solid portion of their revenues come from Walmart. He also mentioned Carmike Cinemas (CKEC).
Ori Eyal, Emerging Value Capital: Hilan Tech
Eyal talked about the opportunities to invest in Israel, somewhere he specializes in (launching the Emerging Value Israel Fund). He says the country is stable and pro-business and has a growing economy. He pitched Hilan Tech, which he dubbed the 'ADP of Israel.' He says Israeli stocks on the whole are cheap as they've largely traded sideways the past few years.
Harris Kupperman, Mongolia Growth Group: Real Estate
He touched on how there's too many investors out there all doing the exact same thing (i.e. herding). One place that there certainly aren't many investors involved is Mongolia. He says the country's GDP will explode 10x over the next decade or so, creating a big opportunity and he recommended real estate there.
For more from this event, head to notes from day 1 of the Value Investing Congress.
Li Lu's Presentation at FAME Student Investment Conference
This week we highlighted Li Lu's interview in Columbia Business School's Spring newsletter of Graham & Doddsville. Today, thanks to Santangels Review, we wanted to share a video of Li Lu's presentation at the FAME Student Investment Conference.
Li Lu manages Himalaya Capital and has been endorsed by Charlie Munger as a talented investor. And for a man that was recently under the radar, he's certainly been popping up in the public as of late.
Embedded below are video of Li Lu's talk:
Video 1
Video 2
Video 3
Be sure to also check out the extensive interview with Li Lu in Graham & Doddsville.
Tuesday, May 7, 2013
Berkshire Hathaway Slightly Reduces Tesco Position, Sells More Moody's
Warren Buffett's Berkshire Hathaway has been active in selling shares of some positions recently. The latest news is that Berkshire seems to have very slightly reduced their position in UK's Tesco.
Tesco Position Reduced
Berkshire has reported ownership of 4.98% of Tesco ordinary shares as of May 3rd, 2013. This is down from their previous 5.08% ownership with back in January of 2012.
This is a very small reduction, but since everyone loves tracking Buffett's every move, we thought this should at least be mentioned.
It's also worth noting that this looks to be caused completely by a reduction in the size of their cash settled equity swaps on the name. They show a 1.79% position now and at the beginning of 2012 it was 1.87%.
Moody's Reduced Again
We highlighted last week how Buffett sold some Moody's shares and Berkshire just filed another Form 4 with the SEC reporting even more sales.
Due to trading on May 2nd and 3rd, Berkshire has sold 1,375,011 MCO shares at weighted average prices ranging from $60.496 to $63.4212. After this latest batch of sales, Buffett still owns 25,293,539 shares of Moody's.
For more from this legendary investor, head to Buffett's latest book recommendations.
Notes From 2013 Value Investing Congress Las Vegas: Day 1
Here's some brief notes from the 2013 Value Investing Congress taking place in Las Vegas. This event has somewhat of a new format with a lot more speakers presenting rapid fire ideas. As such, we'll highlight the takeaways from each pitch below from day 1. Check back tomorrow as we'll have notes from day 2 as well.
*** 50% discount to next VIC: Also, there's currently a 50% off sale for the New York Value Investing Congress in September. This is the biggest discount to the event you'll see and the sale ends tonight! Sign up here with discount code N13MF
Steven Romick, FPA Funds: Occidental Petroleum (OXY) & Oracle (ORCL)
Romick likes to focus on contrarian names that investors have seemingly forgotten about. He mentioned old large cap tech names such as Oracle (ORCL), Microsoft (MSFT), and Cisco Systems (CSCO). He likes ORCL because they offer a unique product and have recurring revenue streams. His other idea was Occidental Petroleum (OXY), an oil producer that isn't really focused and can make a lot of adjustments to create value now that the chairman is gone. Romick says OXY is a sum of the parts play.
Phil Goldstein, Bulldog Investors: Imperial Holdings (IFT)
The company was raided by the FBI and lawsuits post-raid and Bulldog started buying around $1.60. They went activist and got seats on the board and he thinks there's value to be unlocked there.
John Hempton, Bronte Capital: Transglobe Energy (TGA)
He mentioned he's short an astonishing 120 companies. His specialty is frauds and he looks for fake cash and fake assets (receivables, goodwill, etc). He spoke negatively about Transglobe Energy, pointing out they don't collect on oil they've sold until 7 months later. He's also skeptical since the company shows no inventory and he has other balance sheet questions. Additionally, he flagged Jos A. Bank (JOSB) due to potential inventory issues and PureCircle (PURE.LN) for balance sheet issues.
David Nierenberg, D3 Funds: Rosetta Stone (RST)
His firm runs a concentrated portfolio of microcap stocks (typically busted growth names). His pitch was on Rosetta Stone (RST), the popular language learning software company. Nierenberg notes RST's solid brand in a fragmented industry. He highlighted that the company has $7 per share in cash and no debt and has been cutting costs by closing some of their mall kiosks. He sees upside of 75% but notes that competition in the space could intensify and free offerings could emerge.
Tim Eriksen, Eriksen Capital Management: First Internet Bancorp (INBK)
He focuses on the section of the market where many companies are ignored (companies with market caps below $100 million) and he also runs a concentrated portfolio. His pick was First Internet Bancorp (INBK): $45m market cap, trading below TBV, with a potential catalyst of rising interest rates (loan growth). Eriksen argued it's cheap because no one really knows about it, investors are still somewhat hesitant about financials and it's slightly illiquid.
Marcelo Lima, Heller House Capital: Hargreaves Services PLC (HSP.LN)
Lima pitched the out of favor coal industry via a UK play: Hargreaves Services PLC (HSP.LN), noting that the UK gets around 40% of its electricity from coal power. He likes the acquisitions they've made at less than 7x earnings and highlights the benefits of their long-term contracts not being vulnerable to the ebbs and flows of commodity prices. In the past, fraud at a Belgian subsidiary and issues at a mine weighed on shares but those problems are now gone.
Geoffrey Batt, Euphrates Advisors: Baghdad Soft Drinks (IBSD.IQ)
Batt runs the Euphrates Baghdad Fund and compared Iraq to Germany after World War II, South Korea in the 1960's and Russia in the 1990's. He sees countries that have undergone chaos as opportunities ripe for investing and Iraq fits the bill this time around. But obviously, he points out, you still need to see stabilization in the economy and if things gradually become less worse, then equities there can head higher. He says that the country has begun a private credit cycle and notes their oil production potential is huge. However, he didn't pitch anything oil related. Instead, he said he likes soda via Baghdad Soft Drinks, a Pepsi bottler.
Zack Buckley, Buckley Capital Partners: Bluecora (BCOR)
His expertise is technology stocks and he pitched Bluecora (BCOR), formerly Infospace. He likes that they bought TaxACT and highlights Bluecora's $700 million in net operating losses (NOLs). He said they'll probably look to do acquisitions within a year or so.
Isaac Schwartz, Robotti & Co: Halyk Bank of Kazakhstan (LON:HSBK)
He pitched Halyk National Savings Bank of Kazakhstan (Borat, anyone?) as he likes to play "ugly ducklings." Schwartz notes the company trades around TBV and is the largest bank in the country (even though its market share is only around 20%) with the dividend now back at 4%.
Amitabh Singhi, Surefin Investments: Greenply (MTLM.IN)
He specializes in India and mentioned that Indians are fixated by gold. Sighi likes the underappreciated, unfollowed small cap sector in India. He's looking long-term and thinks agriculture could be a big winner. Singhi notes that land prices have accelerated higher and while there's around 400 million acres of ag-land in the country, farms are usually only around 5 acres each. His pick was Greenply (MTLM.IN), an Indian plywood maker.
Chan Lee & Albert Yong, Petra Capital: Sebang, Sebang Global Battery
These two harped on how South Korean equities are very cheap compared to other equity markets (they're based there). In particular, they're focused on small & mid caps and note how these plays give you access to emerging markets exposure. They like Sebang the holding company and subsidiary Sebang Global Battery. They also mentioned Daechang Forging.
Jeff Pintar, Pintar Investment Company: Residential Real Estate
Pintar owns a ton of residential properties, over 2000 as the real estate bubble created immense opportunities. He pointed out that demand for new homes is rising and supply can't keep up so more homes need to be built. As to where the biggest demand will be in the future, he singled out Texas, Florida, California and the Carolina regions. He thinks values can head as high as 50% in select areas.
Chris Mayer, Capital & Crisis Newsletter: First Citizens Bank (FCNCA), Atlas Financial (AFH)
He manages a newsletter with 28,000 subscribers and talked about the positives of investing in owner-operators and likes management to have skin in the game. Mayer pitched First Citizens Bank as it's 33% family owned and also lauded Atlas Financial (AFH), Howard Hughes (HHC) and Covanta (CVA).
Be sure to check back tomorrow for notes from day 2 of the Value Investing Congress 2013 in Las Vegas.
*** Special discount for Market Folly readers: The New York Value Investing Congress will take place in September and you can currently get a 50% discount to the event with code: N13MF. This discount expires tonight (Tuesday) so take advantage while it lasts. This is the biggest discount you will see for the VIC. ***
Monday, May 6, 2013
Glenview Capital Adds To Health Management Associates Position
Larry Robbins' hedge fund Glenview Capital just filed a 13D with the SEC regarding shares of Health Management Associates (HMA). Per the filing, Glenview has revealed a 14.56% ownership stake in HMA with 37,757,583 shares.
This marks an increase in the number of shares owned by 7.7% since the end of 2012. The 13D was filed due to portfolio activity on May 6th. This is the second subsequent purchase by Robbins' hedge fund as we detailed the last time Glenview added to its HMA stake.
Glenview's Bet on Hospitals
Glenview has had a huge year thus far as noted in our summary of 2013 hedge fund performance numbers. Robbins has bet a lot on hospitals including HMA, Tenet Healthcare (THC), and HCA (HCA). And recently, Glenview bought more Lifepoint Hospitals as well.
Robbins originally pitched going long hospitals back in May of last year and has profited handsomely from this call.
Per Google Finance, Health Management Associates "operates general acute care hospitals and other health care facilities in non-urban communities."
Oaktree Capital Reports Reduced Charter Communications Stake (Sold to Liberty Media)
Howard Marks' investment firm Oaktree Capital filed a 13G with the SEC recently regarding shares of Charter Communications (CHTR). Per the filing, Oaktree has reported a 2.20% ownership stake in CHTR with 2,225,882 shares.
This marks a reduction of 82% in their position size since the end of 2012. The filing was made due to portfolio activity on May 1st.
This filing is largely a formality as it's already been reported that John Malone's Liberty Media (LMCA) has acquired a 27.3% stake in CHTR, buying from Apollo Management, Oaktree Capital and Crestview Partners. That deal encompasses around 26.9 million shares and 1.1 million warrants for $95.50 per share. The deal closed in the first half of the second quarter.
In other ownership activity, we also highlighted how Steve Mandel's Lone Pine Capital added to its CHTR stake this year.
Per Google Finance, Charter Communications "provides cable services in the United States, offering a range of entertainment, information and communications solutions to residential and commercial customers. Its infrastructure consists of a hybrid fiber coaxial cable plant passing approximately 12 million homes, with 98% of homes passed at 550 megahertz or greater and 98% of plant miles two-way active. A national Internet protocol (IP) infrastructure interconnects Charter markets."
For more on this hedge fund, head to commentary from Oaktree's Howard Marks.
PointState Capital Raises PDC Energy Stake
Zachary Schreiber's hedge fund firm PointState Capital filed a 13G with the SEC regarding shares of PDC Energy (PDCE). Per the filing, PointState has revealed a 5.2% ownership stake in with 1,571,500 shares.
This marks an increase of 49% in their position size since the end of 2012. The 13G was required due to portfolio activity on April 25th.
Per Google Finance, PDC Energy is "a domestic independent exploration and production company, which acquires, develops, explores, and produces natural gas, natural gas liquids (NGLs), and crude oil. Its Western Operating Region is focused on development in the Wattenberg Field in Colorado, particularly in the liquid-rich horizontal Niobrara play and on the ongoing development of refractures and recompletions of its Wattenberg wells. In its Eastern Operating Region, it is focused on horizontal development in the Marcellus Shale in northern West Virginia, and initiated exploration and development activity in the Utica Shale play in Ohio. Its segments include Oil and Gas Exploration and Production, and Gas Marketing."
We've also detailed other portfolio activity from PointState Capital here.
Graham & Doddsville Newsletter: Interview With Li Lu (Columbia Business School)
Columbia Business School is out with its Graham & Doddsville investment newsletter for Spring 2013. It features an interview with Li Lu of Himalaya Capital, a man who was dubbed one of Charlie Munger's favorite investment managers.
This interview is really fantastic as he touches on investment process a lot so we'd recommend reading the whole thing below. But for those pressed for time, here are the takeaways:
Highlights From Li Lu's Interview
On value investing: "There are few people that switch in between or get it gradually. They either get it right away or they don't get it at all. I never really tried anything else. The first time I heard it, it just made sense; and I heard it from the best."
On defining yourself as an investor: Lu also touched on how you still have to find your own style of investing that matches your personality. He says, "The game of investing is a process of discovering: who you are, what you're interested in, what you're good at, what you love to do, then magnifying that until you gain a sizable edge over all the other people." He also added that, "The only way to gain an edge is through long and hard work."
On why he doesn't short anymore: He listed 3 reasons: "Three things about shorting make it a miserable business. On the long side, you have 100% downside but unlimited upside. On the short side, you have 100% upside and unlimited down-side. I do not like that math. Second, the best short has some element of fraud. However, a fraud can be perpetrated for a longtime. Of course you borrow to short, so they could really just wear you down. That’s why I could be 100% right and bankrupt at the same time. But, you know what, you go bankrupt first! Lastly, it screws up your mind. Shorts just grab your mind and take away from the concentrated effort that is required to do proper long investing."
On how he finds ideas: "Ideas come to me from all sources, principally from reading and talking." What's interesting is he doesn't really talk to other investors that much. He's more keen on chatting with people running businesses.
On the importance of management teams: "(They) always have a big influence on your success, no matter how good or how bad the business is itself. Management is always part of the equation of making the company successful, so the quality of management always matters. But to assess that quality is not always easy."
On decision making: "I think you want to avoid wrong decisions as much or more than you want to get it approximately right. If you avoid the wrong decisions, you'll probably come out okay over time."
The issue also features pitches from Columbia Business School MBA students on: Motors Liquidation Company (MTLQU), Precision Castparts (PCP), Hertz (HTZ), Advance Auto Parts (AAP), Dollar Tree (DLTR), Stanley Black & Decker (SWK), & Yum Brands (YUM).
Embedded below is the Spring 2013 Graham & Doddsville issue:
You can download a .pdf copy here.
50% Discount to the New York Value Investing Congress: Expires Tomorrow!
We're excited to share with our readers a 50% discount to the upcoming Value Investing Congress in New York City in September. This is literally the biggest discount to the event you'll see and it expires tomorrow night. Click here to register and use discount code: N13MF
Confirmed Speakers Thus Far
- Mick McGuire, Marcato Capital Management
- Alexander Roepers, Atlantic Investment Management
- Rahul Saraogi, Atyant Capital (India)
- Carl Chen, Temple Honor Asia (Taiwan)
- Evan Vanderveer & David Shapiro, Vanshap Capital
Many more speakers will be announced, and remember that the New York conference is their main event, so you can bet that more big name fund managers will be added.
MarketFolly readers should be very familiar with the speakers as Mick McGuire and Rahul Saraogi have been featured on the site numerous times before. Alexander Roepers has presented at the VIC in the past, and Vanshap Capital is partly owned by Tom Gayner's Markel Corp.
Event Details
9th Annual New York Value Investing Congress
Date: September 15-17, 2013
Venue: Jazz at Lincoln Center's Frederick P. Rose Hall (New York City)
Two-Day 50% Off Discount Special
Regular Price: $4,695
Two-Day Special Discount Price: $2,345
Discount Code: N13MF
Again, we want to reiterate that this discount expires tomorrow night (May 7th) and this is the largest possible discount you can receive to the event.
To take advantage of this discount, click here and use code: N13MF
Friday, May 3, 2013
Rare Interview with Charlie Munger
This weekend is Berkshire Hathaway-palooza and as a part of that, CNBC sat down with Charlie Munger for a rare interview that we wanted to highlight.
He thinks things are "suboptimal" right now and notes that there's a lot of people on the sidelines still.
As to how they're preceding, he said that, "At Berkshire, we're trying to swim well against the tide or with it, we just keep swimming."
Regarding what they look for in potential deals, he noted that, "We've always liked quality people with the best ability." They're willing to pay more money for the best businesses and he says this was the case with Heinz.
On the Federal Reserve's actions, Munger said that, "Very low interest rates will change behavior and raise prices."
Charlie also talked about how Berkshire's given more money to Todd Combs and Ted Weschler to manage and he feels that they'll be "huge contributors to the future of Berkshire."
Embedded below is the video of Charlie Munger's interview where he talks about housing and many other subjects as well:
For more on this great investor, head to Munger's secrets to success as well as notes from Munger's Daily Journal meeting.
What We're Reading ~ Hedge Fund Links 5/3/13
Seth Klarman cautions "false sense of calm in the US" [ValueWalk]
Emerging manager interview with Tappan Street Partners [Distressed Debt Investing]
Children's Investment Fund trumpets Japan Tobacco investment [Moneybeat]
Paul Singer on gold's irreplaceability and euro's dark future [ValueWalk]
Corvex's Keith Meister lays out investment in Commonwealth [Moneybeat]
Valiant Capital has rough first quarter [Institutional Investor's Alpha]
JANA's Rosenstein slams Agrium [Absolute Return]
SEC said to push for lifting ban on hedge fund ads [Bloomberg]
Hedge funds scooping up personal property tax liens [Term Sheet]
Highfields Capital faces uphill task with Tim Hortons [Hedgeworld]
Eddie Lampert tries to convince shareholders Sears is on the right track [Hedgeworld]
Lansdowne exits Prudential short after meaningful losses [Bloomberg]
You've never heard of one of the best performing hedge funds [Quartz]
Tough times for hedge funds that bet on market tumult [Reuters]
Hedge funds drive demand for Greek Corporate Debt [Moneybeat]
Indian hedge funds dare where foreign investors fear [Reuters]
The hunt for Steve Cohen [Vanity Fair]
Thursday, May 2, 2013
Warren Buffett's Berkshire Hathaway Sells Some Moody's Shares
It's been a while since Warren Buffett's Berkshire Hathaway has filed a Form 4 with the SEC on a stock other than Davita (DVA). And while they've been buying DVA shares, today we see that Berkshire has been selling Moody's (MCO) shares.
In a Form 4 with the SEC, Berkshire has disclosed portfolio activity on April 29th, 30th, and May 1st. All told, Buffett sold 1,746,700 shares with the majority coming at weighted average prices ranging from $59.9348 to $60.7241.
After these sales, Berkshire still owns 26,668,550 shares of MCO, so these transactions are just a drop in the overall bucket. That said, it's still worth pointing out that Buffett trimmed his MCO stake numerous times in 2010. What's interesting is that in 2010, MCO shares were trading for half the amount they are now.
It's also worth mentioning that ValueAct Capital's Jeff Ubben presented Moody's as an investment idea late last year at the Invest For Kids Chicago event.
Per Google Finance, Moody's is "a provider of credit ratings; credit and economic related research, data and analytical tools; risk management software, and quantitative credit risk measures, credit portfolio management solutions and training services."
For more on the Oracle from Omaha, head to new book recommendations from Warren Buffett.
Third Point Shows Japan Tobacco Stake, International Paper Now Top 5 Holding
Dan Loeb's Third Point Offshore Fund finished April up 1.4% and is now up 10.5% for the year. In their latest exposure report, we see a few holdings revealed, including positions in Japan Tobacco (a top winner last month) and Banco do Brasil SA (a top loser last month). The former has been a large holding at Children's Investment Fund.
The other takeaway from April is that Third Point has listed International Paper (IP) as a top holding. Loeb's firm outlined their thesis on IP in Third Point's Q1 letter and sized up the position in the first quarter. But now we get some context as to how big of a position it is since it's now a top 5 holding.
The hedge fund originally started a position in this company in the fourth quarter of 2012 and at the end of December, this position was worth almost $60 million. Since then, IP has run up from $38 to a high of $49 thus far this year so part of the position size could also be attributed to price appreciation. We've also highlighted how fellow hedge fund Senator Investment Group added to their IP position as well.
Third Point's Top Positions
1. Yahoo! (YHOO)
2. Virgin Media (VMED)
3. American International Group (AIG)
4. International Paper (IP)
5. Ally Financial (multiple securities held)
Looking at their top holdings compared to last month, gold has fallen out of the list (most likely due to the fact that gold prices have fallen this year).
Third Point's net long equity exposure came in at 45.4% at the end of April. This is largely unchanged compared to the month prior at 45.1% net long.
Dan Loeb was recently listed among the top 10 highest paid hedge fund managers of 2012.
Video of Jim Chanos' Presentation on China From Wine Country Conference
Earlier, we posted up Jim Chanos' slideshow presentation on China from the Wine Country Conference. Now the conference has uploaded video of his presentation so you can hear his thoughts in his own words. The video is embedded below and his talk lasts a little over a half hour:
For more resources on this short seller, head to Jim Chanos' recent interview.
Wednesday, May 1, 2013
What We're Reading ~ Analytical Links 5/1/13
The Art of Value Investing: How the World's Best Investors Beat the Market [Amazon]
The fine art of being wrong [The Big Picture]
Notes from the Ben Graham Centre's 2013 Value Investing Conference [Santangels]
A profile of Berkshire's Todd Combs & Ted Weschler [Omaha.com]
Warren Buffett at the Coca-Cola annual meeting [Joe Kusnan]
In China, a persistent edge for big insiders [Barrons]
The competing incentives and pressures that influence sell-side analysts [CFA]
Stock analysts tell all [WSJ]
Netflix (NFLX) CEO Reed Hastings on the future of TV/cable [AllThingsD]
Pharmaceutical firms seeing bullish investor sentiment [Markit]
Travel sites merge, which some see as boon for consumers [NYTimes]
The behavior of individual investors [SSRN]
Does Apple (AAPL) show statistical evidence of an economic moat? [Greenbackd]
The tax advantages of being a landlord [Markewatch]
Sam Zell's tips for real estate newbies [TheRealDeal]
Corsair Capital's Thesis on Ryman Hospitality: Q1 Letter
Jay Petschek and Steven Major's hedge fund Corsair Capital finished the first quarter of 2013 up 8.1% net and their compounded net annual return sits at 14.5%. Their Q1 letter detailed a write-up of their thesis on Ryman Hospitality (RHP), a current core investment.
Corsair's Thesis on Ryman
In summary, the company is a transformation story as they've morphed from Gaylord Hotels into Ryman, specializing in the premium large group segment.
They've converted from a C-Corp into a REIT, sold the Gaylord brand and management rights to Marriott, and are looking to leverage Marriott's group customer base.
Due to these (and numerous other changes outlined below), Corsair feels that Ryman has great revenue visibility and thinks it should trade closer to the valuation of shopping mall REITs.
With a 4.5% yield, they see a $60 stock in the near term and the potential to head as high as $70 if investors give it the premium valuation they think it deserves.
Embedded below is Corsair Capital's Q1 letter with their thesis on Ryman Hospitality:
For more from this hedge fund, we've highlighted some of Corsair's recent portfolio activity as well as their thesis on Acacia Research too.
Tuesday, April 30, 2013
2013 Hedge Fund Performance Numbers: Q1
It's been a while since we checked in on the performance of prominent hedge funds so today we'll highlight how some of the top managers have been faring in 2013.
Some of the top performers thus far include Glenview Capital (up 17.94%), Third Point Ultra (up 15.44%), Odey European (up 15.29%), and Owl Creek (up 15.17%). The following numbers are year-to-date as of the end of the first quarter or as of the 2nd week of April.
2013 Hedge Fund Performance Numbers: Q1 YTD
Long/Short Equity / Equity Diversified
Greenlight Capital (David Einhorn): 5.78%
Maverick Capital (Lee Ainslie): 2.30%
Lansdowne (Paul Ruddock & Steve Heinz): 7.01%
Passport Global (John Burbank): 5.95%
Cobalt Offshore (Wayne Cooperman): 5.17%
Elm Ridge Value (Ronald Gutfleish): 8.31%
Eminence Fund (Ricky Sandler): 6.33%
Glenview Capital (Larry Robbins): 17.94%
Ivory Capital (Curtis Macnguyen): 3.35%
Omega Overseas (Leon Cooperman): 6.55%
Joho Capital (Robert Karr): 12.21%
GLG European Long Short (Pierre Lagrange): 2.38%
Marshall Wace Core (Ernesto Fragomeni): 5.82%
Odey European (Crispin Odey): 15.29%
Kingdon Offshore (Mark Kingdon): 9.69%
Renaissance Institutional Equities (Jim Simons): 11.42%
Zweig-Dimenna: 6.92%
Event-Driven
Marcato International (Mick McGuire): 6.52%
Merger Arbitrage
Paulon Enhanced (John Paulson): 11.56%
Macro
Brevan Howard Emerging Market Strategies: (3.17%)
Caxton Global (Andrew Law): 6.39%
Discovery Global Opportunity (Robert Citrone): 14.64%
Eclectica Fund (Hugh Hendry): 3.40%
Moore Global (Louis Bacon): 6.63%
Tudor BVI Global Fund (Paul Tudor Jones): 8.68%
Multi-Strategy
Davidson Kempner: 4.08%
Owl Creek Overseas (Jeffrey Altman): 15.17%
Paulson Advantage (John Paulson): 2.84%
Paulson Advantage Plus (John Paulson): 3.47%
Paulson Recovery Fund (John Paulson): 14.11%
Perry Partners (Richard Perry): 8.18%
Pershing Square International (Bill Ackman): 4.64%
Third Point Offshore (Dan Loeb): 10.44%
Third Point Ultra (Dan Loeb): 15.44%
York Investment Ltd (Jamie Dinan): 4.69%
Millennium International (Israel Englander): 3.65%
Credit
BlueMountain Long Short Credit: 3.17%
Appaloosa Management (David Tepper's Palomino Fund): 10.58%
Saba Capiatl (Boaz Weinstein): 0.56%
Fixed Income/Global
Pine River (Steve Kuhn): 7.04%
Distressed
King Street Europe: 4.95%
Canyon Value Realization Fund (Mitch Julis): 8.02%
Cerberus International (Steve Feinberg): 2.46%
Contrarian Capital (Jon Bauer): 4.56%
King Street Capital: 5.28%
Paulson Credit Opportunities (John Paulson): 10.17%
Source: HSBC Hedge Weekly Report
Eminence Capital Starts Asbury Automotive Group Stake
Ricky Sandler's hedge fund firm Eminence Capital recently filed a 13G with the SEC regarding shares of Asbury Automotive Group (ABG). Per the filing, Eminence has revealed a 5.5% ownership stake in ABG with 1,718,704 shares.
This is a brand new position for the hedge fund and the 13G was required due to portfolio activity on April 19th.
Per Google Finance, Asbury Automotive Group is "an automotive retailer in the United States. It offers a range of automotive products and services, including new and used vehicles; vehicle maintenance; replacement parts and collision repair services; new and used vehicle financing, and aftermarket products, such as insurance, warranty and service contracts."
This most likely isn't Eminence's only play in the space. In their 13F filing which detailed positions as of the end of 2012, their second largest disclosed stake was in Advance Auto Parts (AAP). We won't find out if they still own the position until the middle of May when the next batch of 13F filings are released. But given the size of the investment and the fact that they over doubled their stake in AAP during the fourth quarter, it seems somewhat likely that they still retain a position.
For more on this hedge fund, we've detailed some of Eminence's previous activity here.
Scout Capital Discloses SeaWorld Entertainment Stake
Adam Weiss and James Crichton's hedge fund firm Scout Capital filed a 13G on shares of SeaWorld Entertainment (SEAS) and revealed a 7.8% ownership stake with 7,200,257 shares.
The 13G was required due to activity on April 18th. SeaWorld recently completed its initial public offering and it's likely that Scout participated in the IPO.
Per Google Finance, SeaWorld Entertainment is "a theme park and entertainment company. The Company is engaged in delivering personal, interactive and educational experiences that blend imagination with nature and enable its customers to celebrate, connect with and care for the natural world. The Company own or license a portfolio of globally recognized brands including SeaWorld, Shamu and Busch Gardens. The Company has built a diversified portfolio of 11 destination and regional theme parks that are grouped in key markets across the United States. Its theme parks feature a diverse array of rides, shows and other attractions with broad demographic appeal which deliver memorable experiences and a strong value proposition for its guests."
This hedge fund has been active recently and we also highlighted Scout's other new position.
JANA Partners Reveals New Activist Position in Oil States International
Barry Rosenstein's hedge fund JANA Partners today filed a 13D with the SEC revealing a brand new position in Oil States International (OIS). Per the filing, JANA now owns 9.1% of the company with 5,000,002 shares.
The 13D was required due to portfolio activity on April 19th. They've been out buying OIS shares as recently as April 29th at a price of $76.66. JANA's
reported 5 million share position is inclusive of options to purchase
824,600 shares.
Drilling down this position, we see that JANA owns 3,640 call options with a strike price of $65 and 4,606 call options with a strike of $60, both with expiration on June 3rd, 2013.
Additionally, they've sold 3,640 put options with a strike price of $65 that expire on June 3rd, 2013. JANA's been busy of late as they also recently revealed a position in Ashland (ASH) as well.
JANA's New Activist Position
In the 13D filing, we see that JANA has pursued shareholder activism as the purpose of transaction section notes that JANA:
"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 the Issuer’s corporate structure including a discussion on April 26, 2013 regarding separating its Well Site Services, Offshore Products, and Tubular Services segments (referred to collectively as "Oilfield Services") from its Accommodations segment and the formation of a REIT for Accommodations. The Reporting Person also may seek to discuss the Issuer’s capitalization, operations, strategy and future plans."
Per Google Finance, Oil States International is "a provider of specialty products and services to natural resources companies worldwide. The Company operates in oil and natural gas and coal producing regions, including Canada, onshore and offshore the United States, Australia, West Africa, the North Sea, South America and Southeast and Central Asia. Its customers include national oil companies, oil and natural gas companies, onshore and offshore drilling companies, other oilfield service companies and mining companies. It operates in four segments: accommodations, offshore products, well site services and tubular services."
For more on this activist investor, be sure to check out a very interesting interview with Barry Rosenstein.
Friday, April 26, 2013
What We're Reading ~ Hedge Fund Links 4/26/13
David Tepper builds stake in Energy Holdings debt [ValueWalk]
Mark Anson's formula for choosing a good hedge fund for your portfolio [CFA]
How hedge funds need to adapt [All About Alpha]
The mind of DoubleLine's Jeffrey Gundlach [Crossing Wall Street]
George Soros' European solution to the Eurozone's problem [George Soros]
JANA Partners says Rockwood worth $80 in possible takeover [Bloomberg]
ValueAct takes $2 billion Microsoft (MSFT) stake [Yahoo News]
John Paulson says he's staying the course on gold [Hedgeworld]
Rob Arnott: most hedge funds disappoint [Term Sheet]
Hedge fund managers mixed on 2013 outlook [HedgeCo]
Billionaire Carl Icahn's tale of aggression [Forbes India]
Hedge fund gold wagers defy worst slump in 33 years [Bloomberg]
Hedge funds plowed into gold as market looked vulnerable [Hedgeworld]
Devitt sees consolidation in outlook for fund of funds [Investment Europe]
Hedge funds find new Swiss rules good for business [Reuters]
Singapore will replace Switzerland as wealth capital [CNBC]
Nelson Peltz's Trian Fund Decreases Family Dollar Stake
Nelson Peltz's investment firm Trian Fund Management today filed an amended 13D with the SEC regarding shares of Family Dollar (FDO). Per the filing, Trian has disclosed a 7.35% ownership stake in FDO with 8,444,597 shares.
This means that Trian has reduced the number of FDO shares they own by around 6%. In total, they sold 524,260 shares at a price of $63.5090. The 13G filing was reported portfolio activity on April 25th.
Per Google Finance, Family Dollar "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."
In other recent activity from this firm, we recently highlighted Trian's new stakes in Mondelez and PepsiCo.
Senator Investment Group Discloses Taminco Position
Alexander Klabin and Doug Silverman's hedge fund Senator Investment Group filed a 13G with the SEC regarding shares of Taminco (TAM). Per the filing, Senator has revealed an 8.82% ownership stake in Taminco with 5,750,000 shares.
The filing was required due to portfolio activity on April 18th as the company went public. According to IPO materials, Taminco is the "world’s largest pure play producer of alkylamines and alkylamine derivatives."
In other recent portfolio activity from the hedge fund, we posted about how Senator added to its International Paper stake.
Soros Fund Starts J.C. Penney Stake
George Soros' family office Soros Fund Management filed a 13G with the SEC late yesterday afternoon regarding shares of J.C. Penney (JCP). Per the filing, Soros Fund has revealed a 7.9% stake in JCP with almost 17.4 million shares.
This is a brand new position for the family office as they did not disclose a stake at the end of 2012 in their most recent 13F filing. The 13G just filed was required due to portfolio activity on April 15th.
CEO Ron Johnson was recently fired from JCP and shares have risen since then. He was originally recommended by Pershing Square's Bill Ackman and the company will now turn to new management.
We've highlighted how Bill Ackman has a large stake in J.C. Penney and have posted up Ackman's presentation on JCP before. There's also one coincidence here: both Pershing Square and Soros Fund share the same New York office building address. Perhaps Ackman recently gave an elevator pitch?
Shares of JCP have fallen from $35 down to around $16 over the past year as they have struggled amidst a turnaround plan involving the company's stores.
Per Google Finance, J.C. Penney is "a retailer, operating 1,102 department stores in 49 states and Puerto Rico as of January 28, 2012. Its business consists of selling merchandise and services to consumers through its department stores and through its Internet Website at jcp.com. It sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products through Sephora inside jcpenney and home furnishings."
Wednesday, April 24, 2013
Jim Chanos on His Tech Longs/Shorts, China & the Art of Short Selling: CNBC Interview
Kynikos Associates founder Jim Chanos was on CNBC today talking his short positions, China, and even some of his longs. Here's the key takeaways from his talk:
Chanos' Technology Longs & Shorts
One of the main takeaways here is that he's long leading players in the mobile smartphone/tablet arena: Apple (AAPL) and Samsung (KRX:005930). At the same time, he's short the slowly dying PC makers like Dell (DELL) and Hewlett Packard (HPQ). While the trade hasn't been working well as of late, he still thinks the fundamentals will win out over time. He thinks printers, ink and PCS all face secular declines.
On China
A few days ago, we posted up Jim Chanos' presentation on China from the Wine Country Conference. On CNBC today, he talked about why he feels China's economic situation has actually gotten worse. He points to the rapid credit expansion over there and sees a potential bubble. He likes to be short companies related to real estate and construction in China and also pointed out steelmakers and iron ore players. Greenlight Capital's David Einhorn has also said to short iron ore.
On What He Looks For in Shorts
The Kynikos manager says that "timing is not my forte" and the ever-rising markets of today can be difficult for a short-seller. He says, "It's problematic because it's more frustrating, but on the other hand you're given more opportunities." He feels that ultimately, the fundamentals will win out because these rallies have also propped up the 'leaky boats'. He also somewhat joked that they like to look at companies that put their names on sports team arenas.
Chanos looks for an edge in something that everyone's not focused on. Two simple indicators he likes: wholesale executive departures and large amounts of insider selling from multiple individuals. He says, "Those two indicators together are about as big of red flag as you can get."
Embedded below are the videos of Chanos' interview on CNBC:
Video 1 on China
Video 2 on tech stocks
Video 3 on natural gas and coal
Video 4 on what he looks for in short selling
For more from this hedge fund manager, head to Chanos' recent China presentation.
What We're Reading ~ Analytical Links 4/24/13
12 rules of goldbuggery [The Big Picture]
On Africa's economic prospects [The Economist]
Nate Silver: confidence kills predictions [IndexUniverse]
Leverage: financial versus operating [MicroFundy]
The endgame is forced liquidation [Hussman Funds]
P/C insurance industry overview and outlook [Insurance Information Institute]
Twitter is becoming the first and quickest source of investment news [Guardian]
Shameless plug: if you don't already, follow @MarketFolly on Twitter
An economic analysis of cable TV pricing [Colorado.edu]
Paying for sports programming [The Sports Economist]
Here comes Amazon's (AMZN) Kindle TV set-top box [BusinessWeek]
eBay (EBAY) fighting online sales tax [Dealbook]
Public speaking: how to shine on the soapbox [Anthony Scaramucci]
A quant finance reading list [Quantstart]
For aspiring investment managers: Kaplan's Series65 exam prep .pdf [Kaplan]
Bitcoin investors hang on for the ride [WSJ]
Lone Pine Capital Ramps Up Workday Stake
This marks a 259% increase in the hedge fund's position size since the end of the fourth quarter when they owned just over 980,000 shares. The 13G was required due to portfolio activity on April 10th.
In other activity from the hedge fund, last week we pointed out that Lone Pine boosted its Lululemon stake.
About Workday
Per Google Finance, Workday is "a provider of enterprise cloud-based applications for human capital management (HCM), payroll, financial management, time tracking, procurement and employee expense management. It is focused on the consumer Internet experience and cloud delivery model. Its applications are designed for global enterprises to manage complex and dynamic operating environments. The Company provides its customers the applications to manage critical business functions for their financial and human capital resources."
Other Hedge Funds Involved
Workday went public in October of 2012 and numerous hedge funds participated in its initial public offering. At the end of 2012, some of the largest holders of WDAY shares included the likes of Blue Ridge Capital, Lone Pine Capital, Tiger Global, and Dorsal Capital. The largest disclosed owner seems to be venture capital firm Greylock Partners.
Steve Mandel was recently named one of the top 10 highest paid hedge fund managers of 2012. You can see additional portfolio activity from Lone Pine here.
Scout Capital Discloses New Position in Post Holdings
This is a brand new position for the fund as they did not disclose owning any shares in their last 13F filed with the SEC which detailed positions at the end of the fourth quarter. Their new disclosure was required due to portfolio activity on April 11th.
Post Holdings was created as a result of a spin-off from Ralcorp Holdings (RAH), which took place at the beginning of 2012 and shares have rallied furiously since then, almost doubling from $24 to current prices just shy of $44.
Other Funds Involved in POST
Parsing through 13F filings from Q4, we see that while a large portion of POST's top holders are 'vanilla' institutional plays, a few hedge funds held Post Holdings at the end of 2012: Paulson & Co and Highfields Capital. New 13F filings are due out in the middle of May and we'll be able to see who else might have scooped up shares of POST in Q1.
About Scout Capital
Scout was founded and is co-managed by James Crichton and Adam Weiss. Before founding Scout, Crichton worked at Zweig-DiMenna and received his MBA from Harvard. Weiss, on the other hand, worked at Dan Loeb's Third Point and received his MBA from Columbia.
About Post Holdings
Per Google Finance, Post Holdings is "a manufacturer, marketer and distributor of branded ready-to-eat cereals in the United States and Canada. The Company’s portfolio of brands includes Honey Bunches of Oats, Pebbles, Great Grains, Grape-Nuts, Shredded Wheat, Raisin Bran, Golden Crisp, Alpha-Bits and Honeycomb. It markets and sells ready-to-eat cereal products in three different categories: sweetened, balanced and unsweetened. Its sweetened products include Pebbles, Honeycomb, Golden Crisp, Alpha-Bits and Waffle Crisp. Its balanced products include Honey Bunches of Oats, Post Selects, Great Grains and Shreddies. The Company’s unsweetened products include Post Shredded Wheat, Post Raisin Bran and Grape-Nuts."
For more on this hedge fund, we've highlighted some of their thoughts on their other positions.
Tuesday, April 23, 2013
Connect with Family Offices at Events in New York & Los Angeles
Here is the speaker line up for the Family Office Workshop Series:
- John Johnson, Capricorn Investment Group, LLC ($5B Multi-Family Office) [LA Workshop]
- Paul Tramontano, Constelaltion Wealth Advisors (Top 30 Multi-Family Office) [NYC Workshop]
- Jonathan Bergman, TAG Associates, LLC (Top 30 Multi-Family Office) [NYC Workshop]
- Richard C. Wilson, Family Offices Group (#1 Family Office Association) [LA&NYC Workshops]
- George Isaac, GAI Capital LTD (Single Family Office) [LA Workshop]
- Michael Connor, Consolidated Investment Group ($1B+ Single Family Office) [NYC Workshop]
- John Bishop, Bishop Office, LLC (Single Family Office) [LA & NYC Workshops]
- Lee Hauser, PhD., First Foundation (Multi-Family Office) [LA Workshop]
- Todd Ganos, Integrated Wealth Counsel, LLC (Multi-Family OFfice) [LA Workshop]
- Bill Malloy, Malloy & Company (3rd Generation Single Family Office) [LA & NYC Workshops]
Benefits of Attending One or Both of These Family Office Training Workshops:
1) Get trained directly from $1B+ single family offices and top 50 multi-family office executives on how to operate, grow, and invest capital as a family office. Learn about and take advantage of the rapidly growing family office industry.
2) Connect face-to-face with peers, ultra-wealthy families, and family offices that you can share resources or partner with in the future. (From our last family office workshop, negotiations are under way for three joint venture deals worth 7 and 8 figure potential.)
3) Come away with the top 20 fund management selection criteria that most family offices apply to their fund manager research process. Plus, listen to a presentation on quick character analysis tools you can use to evaluate potential business partners, investors, or fund manager executives.
Reserve your seat today: http://FamilyOfficesGroup.com/Workshops
If you have any questions please call them at (212) 729-5067 or email them at Events@FamilyOffices.com
P.S. If you missed their invite to download their free family office report last week, you may still do so here today: http://familyofficesgroup.com/family-office-book
Monday, April 22, 2013
Jim Chanos' Presentation on China From The Wine Country Conference
Jim Chanos' of hedge fund Kynikos Associates recently gave a presentation entitled "China: The Edifice Complex" at the Wine Country Conference which benefits the Les Turner ALS Foundation.
Chanos has held a negative view on China for a while now, largely focused on the property market. His presentation this time of course focuses on that as well but also highlights rising wages and a wealth gap.
Embedded below is Jim Chanos' China presentation from the Wine Country Conference:
We've previously summarized the hedge fund bear thesis on China as well. And for more from the well-known short-seller, check out Jim Chanos' recent interview.
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.
