Oaktree Capital Discloses NewPage Stake

Howard Marks' hedge fund firm Oaktree Capital has filed a 13G with the SEC and disclosed a 15.8% ownership stake in NewPage Holdings with 1,117,192 shares.

The filing was required due to activity on October 22nd. 

Per Google Finance, NewPage Group is: "After struggling through several financially challenging years for the coated paper making industry, NewPage would like to do just that, turn over a new page. Through subsidiary NewPage Corp., the company is one of the largest makers of coated and specialty paper in North America. From mills in the Eastern and Midwestern US, NewPage churns out about 3.5 million tons of paper annually. Its papers are often used to produce annual reports, magazines, and catalogs. Customers include xpedx, Advance Magazine Publishers (dba Condé Nast), McGraw-Hill, Time Inc., and Avery Dennison. NewPage Corp. filed for Chapter 11 bankruptcy in late 2011."

Marcato Capital's Presentation on Sotheby's: Excellence in Investing San Francisco

Mick McGuire of activist hedge fund Marcato Capital Management pitched Sotheby's (BID) at the Excellence in Investing San Francisco conference yesterday.  We'll be posting up notes from the event soon, but in the mean time here's Marcato's take on BID.

Marcato's Presentation on Sotheby's (BID)

McGuire feels there's an opportunity for BID to return capital to shareholders and suggests that a $1.3 billion accelerated repurchase (around 38% of market cap) could boost shares to $68, up 56% from July 30th close. He's also looking for various operational improvements that can contribute to the upside.

Marcato isn't alone on their bullish and activist stance on BID as Dan Loeb's Third Point sent a letter to the BID board recently.

Embedded below is McGuire's presentation from the Excellence in Investing San Francisco conference:



Check back soon as we'll be posting up notes from Excellence in Investing SF shortly!

Hoplite Capital Adds to H&R Block Stake: Q3 Letter

John Lykouretzos' hedge fund Hoplite Capital is out with its Q3 letter.  In it, we see that they added to positions in Sea World Entertainment (SEAS), Monster Beverage (MNST), and H&R Block (HRB) during Q3 as shares sold off but their theses remain unchanged. 

HRB is their largest position and Lykouretzos writes,

"While HRB has recently announced that it will no longer be selling its bank to Republic Bancorp, we are confident they will either sell the bank or shut it down and pursue a more shareholder-friendly capital structure."

The hedge fund also exited their stake in Intuitive Surgical (ISRG) during the quarter as their thesis was incorrect.

This year, ISRG shares tumbled from $500 down to $420 after the second quarter and then continued to cascade to current levels of $369.  Numerous other prominent hedge funds like Viking Global were long shares of ISRG at the end of the Q2 so we'll have to wait and see if others sold in Q3 when the next batch of 13F filings come out.

Some of Hoplite's shorts include a semiconductor manufacturer and a wireless telecom operator in an emerging market.  They've recently added to shorts in companies that supply equipment to mining companies or that have exposure to mining in general and these are some of their top shorts.

Their Q3 letter also mentions that they were short a "handset manufacturer" that spiked when part of the company was acquired, and we assume that this position was Nokia (NOK).  As we detailed this week, Dan Loeb's Third Point bought NOK recently.

At the end of Q3, Hoplite had gross exposure of 150.7% and was 54.9% net long.


For more of the latest hedge fund letters, head to:

- Greenlight Capital's Q3 letter

- Third Point's Q3 letter

- Cobalt Capital's Q3 letter

- Corsair Capital's Q3 letter

Carl Icahn's Letter to Apple's Tim Cook

Activist Carl Icahn today launched a new website, Shareholders Square Table and included a release of the letter he sent to Apple (AAPL) CEO Tim Cook.  Icahn has been quite busy as yesterday we highlighted he sold half of his Netflix stake and he's also now disclosed that he's increased his Apple stake from 3.8 million shares up to 4.7 million shares.

Icahn says he thinks Apple should buy back $150 billion of stock.  He loves what Cook is doing operationally and his only 'beef' with the company is regarding the size of their buyback as he argues a more sizable buyback will boost EPS and share prices.


Icahn's Letter to Apple's Tim Cook

"Dear Tim: 

It was a pleasure meeting you for dinner at the end of September. When we met, my affiliates and I owned 3,875,063 shares of Apple. As of this morning, we owned 4,730,739 shares of Apple, an increase of 22% in position size, reflecting our belief the market continues to dramatically undervalue the company, even when taking into account the recent market appreciation, which in turn makes our proposal unchanged with respect to a $150 Billion buyback. We were pleased to hear at our dinner that you appreciated our input and that you would speak to us again in three weeks to continue the dialogue. In anticipation of doing so soon, we aim to reiterate in this letter the point of view already expressed to you directly with the hope of effectively summarizing it for the company’s board of directors and our fellow shareholders. 

From our perspective, Apple is the world’s greatest consumer product innovator and has one of the strongest and most respected brand names in history. We consider Apple to be our most compelling investment. I first informed my followers on Twitter on August 13, 2013 of my “large position.” I also expressed to you my opinion that “a larger buyback should be done now.” At that time, we owned 3,448,663 shares and the stock price was $467. Since then we have purchased an incremental 1,282,076 shares (bringing the total value of my position to $2.5 Billion) and we currently intend to buy more. 

We want to be very clear that we could not be more supportive of you, the existing management team, the culture at Apple and the innovative spirit it engenders. The criticism we have as shareholders has nothing to do with your management leadership or operational strategy. Our criticism relates to one thing only: the size and timeframe of Apple’s buyback program. It is obvious to us that it should be much bigger and immediate. 

When we met, you agreed with us that the shares are undervalued. In our view, irrational undervaluation as dramatic as this is often a short term anomaly. The timing for a larger buyback is still ripe, but the opportunity will not last forever. While the board’s actions to date ($60 billion share repurchase over three years) may seem like a large buyback, it is simply not large enough given that Apple currently holds $147 billion of cash on its balance sheet, and that it will generate $51 billion of EBIT next year (Wall Street consensus forecast). 

The S&P 500 trades at roughly 14x forward earnings. After backing off net cash, Apple trades at just 9x (not factoring into account that the company has a significantly lower cash tax rate than the rate Wall Street analysts use). This discount (cash adjusted) becomes even more compelling given our confidence that Apple will grow earnings per share at a rate well in excess of the S&P 500 for the foreseeable future. With such an enormous valuation gap and such a massive amount of cash on the balance sheet, we find it difficult to imagine why the board would not move more aggressively to buy back stock by immediately announcing a $150 Billion tender offer (financed with debt or a mix of debt and cash on the balance sheet). 

While this would certainly be unprecedented because of its size, it is actually appropriate and manageable relative to the size and financial strength of your company. Apple generates more than enough cash flow to service this amount of debt and has $147 billion of cash in the bank. As we proposed at our dinner, if the company decided to borrow the full $150 billion at a 3% interest rate to commence a tender at $525 per share, the result would be an immediate 33% boost to earnings per share, translating into a 33% increase in the value of the shares, which significantly assumes no multiple expansion. Longer term (in three years) if you execute this buyback as proposed, we expect the share price to appreciate to $1,250, assuming the market rewards EBIT growth of 7.5% per year with a more normal market multiple of 11x EBIT. 

It is our belief that a company’s board has a responsibility to recognize opportunities to increase shareholder value, which includes allocating capital to execute large and well-timed buybacks. Apple’s Board of Directors does not currently include an individual with a track record as an investment professional. In my opinion, any further delay in executing the buyback we hereby propose will reflect this lack of expertise on the board. My firm’s success and my expertise as an investor would be difficult for anyone to argue. Per my investment thesis, commencing this buyback immediately would ultimately result in further stock appreciation of 140% for the shareholders who choose not to sell into the proposed tender offer. Furthermore, to invalidate any possible criticism that I would not stand by this thesis in terms of its long term benefit to shareholders, I hereby agree to withhold my shares from the proposed $150 Billion tender offer. There is nothing short term about my intentions here. 

Sincerely, 

Carl Icahn
Chairman, Icahn Enterprises (IEP)"

ValueAct Capital Trims Adobe Systems Position

Jeff Ubben's activist hedge fund ValueAct Capital filed a Form 4 with the SEC regarding its position in Adobe Systems (ADBE).  Per the filing, ValueAct sold 3,466,894 shares at prices of $52.52, $53.01, and $53.22 on October 18th, 21st, and 22nd respectively. 

After these transactions, ValueAct is still left holding a sizable stake of 25.3 million ADBE shares.  For more activity from this hedge fund, we posted when they boosted their Rockwell Collins stake.  You can also view Jeff Ubben's presentation from the Value Investing Congress.

Per Google Finance, Adobe Systems is "a diversified software company. The Company offers a line of software and services used by professionals, marketers, knowledge workers, application developers, enterprises and consumers for creating, managing, delivering, measuring and engaging with content and experiences across multiple operating systems, devices and media. The Company markets and licenses its software directly to enterprise customers through its sales force and to end users through application stores and its Website at www.adobe.com. Adobe also distributes its products through a network of distributors, value-added resellers (VARs), systems integrators, independent software vendors (ISVs), retailers and original equipment manufacturers (OEMs). In May 2013, Adobe Systems Inc acquired Ideacodes LLC. In July 2013, Adobe Systems Inc announced the completion of acquisition of privately held Neolane."

What We're Reading ~ Analytical Links 10/23/13

Margin debt hits new high [WSJ]

A dozen things learned from Bill Ruane about investing [25iq]

Look to helicopter Ben for clues to Yellen's Fed [FT]

The biggest emerging market in the world: the US [FT]

Do investment consultants pick future winners? [CBS News]

Sales are colossal, shares are soaring. All Amazon is missing is a profit [NYTimes]

Painful prescription: looking at Express Scripts [CNN Money]

In 5 years, Microsoft will be the most valuable company [BusinessInsider] 

Not already invested in Twitter? Might want to stay on the sidelines [AnObjectiveView]

Why Warren Buffett passed on the Washington Post [Fortune]

Interview with now-Nobel laureate Robert Shiller [WashingtonPost]

Emerging market investors sour on Mexico stocks [WSJ]

On hot chocolate demand and cocoa prices rising [FT]

Death of the American mall and rebirth of public space [The International]

Investing as a hobby [AbnormalReturns]

Buying shares in star athletes [NYTimes]

East Coast's Q3 Letter: Checklists and Competitive Advantage

Christopher Begg is out with East Coast Asset Management's Q3 letter to investors entitled "Architecture of Reason."  In it, they outline some of their thoughts on the current market, as well as dive into aspects of their investment checklists. 

Begg writes,

"As many of the businesses we own now trade at higher valuations, we now find ourselves in a middling period of fair value.  We are not finding as many new businesses to purchase at a discount yet we remain content with the harmony of our portfolio in absolute terms and in proportion and perspective to other investment considerations, including the octave of cash and the extremely dissonant harmony of bonds."

In the letter, Begg also outlines their economics and competitive advantage checklists:

Economics - Owner Mindset

1. Owner Earnings - cash flow is the lifeblood of the business
2. Wealth creation engine - what is the number? the operating metric
3. Number vector - what is the vector of the number?
4. Economic 'goodwill' - the only goodwill that counts
5. Real vs. nominal profitability - the inflation test
6. Metrics - custom economic score card
7. Intangibles and the vanishing point - demystify all intangible assets
8. Non-economic accounting maneuvers - testing for disease
9. Debt - proportion: is debt proportional to operating income?
10. Statement of cashflows: management's "statement" - initial capital allocation test
11. Equitiy - proportionality: E=MC2 - is equity used in proportionality with its value?
12. Total other obligations: ideal city - harmony - company specific / community


Competitive Advantage

1. Novice test - explain what the business does to a novice
2. TAM - total addressable market by business unit
3. H4 industry - longitude/critical data points of the industry
4. ABC's - diagrams - an actual unit sold, the business model and competitive landscape
5. Degree of Timelessness - is it eternal?
6. Variant viewpoints - CEO parachute test - company and competitor
7. Advantaged moat - the give external senses
8. Nuthatch concept - test 1 - locality: are they a local champion?
9. Test 2 - inversion: can they do something their competitors cannot do?
10. Aggregation of owner earnings - ten years out: confidence of whole vs the parts
11. Gating factors: for industry and company success
12. Elasticity of demand and supply - pricing power - it (is) not but only a tiny knowledge of the eye


Embedded below is East Coast's Q3 letter:




For more investor letters from this quarter, head to:

- Dan Loeb's Q3 letter

- David Einhorn's Q3 letter

- Corsair Capital's Q3 letter

- Cobalt Capital's Q3 letter

Carl Icahn Sells Over Half of Netflix Stake

Carl Icahn's firm Icahn Enterprises has sold half of its stake in high-flying Netflix (NFLX).  Per an amended 13D filing, Icahn now owns 4.5% of NFLX with 2,665,557 shares, marking a 62% reduction in his position size since the second quarter.

Icahn was selling NFLX shares in mid-October and as recently as October 22nd.  Most of his sales were around $341, while some sales were in the low $300's.  Icahn originally invested at $58.

While Carl's son Brett won in a previous decision to hold onto NFLX shares a while ago, Carl overruled him this time around, basically saying you have to harvest some gains when you're up over 400% in a year.

Keep in mind also, that now that Icahn has sold down below the 5% threshold, he doesn't have to report his activity in the name, allowing him to continue to sell-down his stake without disclosing it if he so chooses.


Icahn's Thesis on Netflix

Included in the filing, Brett Icahn and David Schechter outline their thought process regarding their position and NFLX thesis, so it's worth reading:

"Our cost basis in Netflix is $58 per share. Despite its notable appreciation in just over one year to $323 per share, for the reasons set forth below, we believe the company remains significantly undervalued. As a subscription service priced at only $7.99 per month, we believe Netflix is one of the great consumer bargains of our time. We find it difficult to understand why a household would not subscribe to the service, considering the low monthly price, the robust content aggregation (which includes an increasing mix of premium and award-winning original series) and the dramatically superior user experience from both an interface and overall technology perspective. Netflix’s predominately fixed content cost (variable primarily to the extent management chooses to further improve the service) gives the business model massive operational leverage. Our recognition of this operational leverage, combined with our expectations for both domestic and international subscriber growth with modest price increases over time, has been and continues to be the core of our investment thesis. 

With respect to Netflix’s opportunity in the United States, Reed Hastings’ estimated range for a total domestic market size of 60 million to 90 million domestic subscribers implies that Netflix will add 30 million new domestic subscribers, using the low end of that range. While the timeframe is debatable, we share Reed’s confidence in the overall size of this market, and we note that Netflix is currently adding six million net subscriber additions per year. Furthermore, at just $7.99 per month, we think Netflix has pricing power – and while we do not expect price increases for the next two years we think it is reasonable to anticipate that the company could ultimately raise prices to $9.99 per month over the course of the next five years (this equates to a very modest annualized increase of roughly 4.6%). Together, we expect these new subscriber additions and price increases would raise domestic streaming revenues by $4.3 billion annually. Even if the company decides to increase spending on cost of revenues (largely content) by $1 billion annually (a 55% increase) in order to seek to achieve this growth by further improving the user experience, the operating leverage would still be impressive, adding $3.3 billion to domestic contribution profit.    

While the domestic growth story alone is compelling, we believe the international opportunity is even larger in the long term. We strongly support the company’s strategy to reinvest its domestic profits into international growth and recognize that its rapidly improving domestic operating profit implies an accelerated pace for future international expansion, with large new markets launched in 2014 and beyond. There are large portions of the world in which Netflix has yet to launch, and the company is still in the early innings of the international game, including the markets already launched. Because Netflix launches its product in each territory with a robust service, it must spend on the completion of this product, and the marketing of it, in advance of signing up new subscribers, which is why we expect the international segment to continue losing money in the near term. However, as these international markets mature, we expect that the aggregate international operating profits will actually exceed the domestic. 

Given this opportunity set and the company’s management team, which we view as exceedingly competent, we believe Netflix’s valuation is still relatively low. In our experience, there are few companies at any given time in history that represent the pure life blood of a colossal secular growth category, and even fewer where the CEO of that company instills deserved confidence among the company’s investors by repeatedly exhibiting both vision and the ability to execute on that vision. We are proud to have identified Netflix as such a company and believe that it is well positioned for greatness. 

Carl Icahn stated: 

While I basically agree with David and Brett’s assessment above and have often held positions for many years, as a hardened veteran of seven bear markets I have learned that when you are lucky and/or smart enough to have made a total return of 457% in only 14 months it is time to take some of the chips off the table. I want to thank Reed Hastings, Ted Sarandos and the rest of the Netflix team for a job well done. And last but not least, I wish to thank Kevin Spacey. I also want to thank David and Brett. The Sargon Portfolio which David and Brett co-manage and I supervise, has generated 37% annualized returns since its inception on April 1, 2010 through September 30, 2013 and currently manages in excess of $4.8 billion for Icahn Enterprises and my own capital.  Icahn Enterprises has assets of approximately $29 billion."


For more on this investor, we've highlighted some of Carl Icahn's recent portfolio activity here.

Investing in a Slow Growth Environment: 6 Themes

Strategist Jeff Saut recently released a slideshow from Raymond James entitled 'Gleanings' where he touches on how to invest in a slow-growth environment.  He recently held a conference call with Tom O'Halloran who runs Lord Abbett's Growth Leaders Fund and they both agree on many of the same themes.


6 Investing Themes in a Slow Growth Economy

O'Halloran outlines his 6 rivers of growth as follows:


1. Ongoing Digitization of Society - "Driving that revolution are such growth engines as e-commerce (sales over the  Internet), hosted software (the delivery of software from a site where it is hosted  on the Internet), social networks (platforms that connect individuals and  businesses), mobility, and cloud computing (a vast network of remote servers that  have added unprecedented functionality to the technology ecosystem). Meanwhile,  the Internet has enabled a mobility boom by linking itself to telecommunications  networks. This has led to a proliferation in advanced wireless devices and has  changed the way consumers and businesses communicate."


2. U.S. Mass Consumerism - "Consumer companies are helping consumers look good and feel good. These  companies also are making people’s lives much more convenient through a  growing market in at-home products and services. Rapidly growing social  networking sites are empowering individuals to take full advantage of this market.  These trends open up big new markets for "winner take most" companies.  Affected markets and products include apparel and retailing as well as a wide  variety of beauty products, ranging from cosmetic lasers to invisible braces.  Compelling approaches to basic human needs or desires, such as sleep, beauty, and  health, are also generating significant growth. "


3. Emerging Nations - "The superior growth rates of emerging nations are giving rise to a growing middle  class in these nations. The implications for increased spending are staggering. The  Organization for Economic Co-operation and Development (OECD) believes the  middle class in the Asia-Pacific region alone could spend an incremental $25  trillion by 2030. The growth in emerging nations will shift this decade toward the  consumer sector of those nations and away from the sectors tied to Chinese  industrialization. Increasing disposable incomes in these emerging nations have  particularly benefited the consumer, healthcare, and technology areas."


4. Modern Medicine - "Three areas of innovation that have fueled growth in health care include genomics,  biotechnology, and minimally invasive devices and procedures. In genomics,  significant progress in identifying genetic defects has led to breakthrough  diagnostics, targeted drug therapies, and preventive medicine. The biotechnology  industry is a major beneficiary of the greater understanding of human genetics  and physiology. Scientists at biotechnology companies have used this knowledge  to fundamentally change the drug-discovery process and develop new drugs they  believe will be more effective and/or safer than earlier treatments."


5. Manufacturing Renaissance - "U.S. exports to China alone have accelerated a whopping 583% between 2000 and  2012. Against that backdrop, there are opportunities in leading providers of  advanced technology and training that will increase industrial productivity,  flexibility, and efficiency while lowering costs and making manufacturing  competitive globally. These include: fiber lasers used in cutting and welding  applications, a producer of vision systems and surface inspection systems, and a  provider of 3-D measurement and imaging systems that speed up the design and  development process of highly engineered products. The dramatic improvements  in 3-D software and printing technology should also help fuel the growth of U.S.  manufacturing, particularly in the medical, motor vehicle, and aerospace sectors,  where faster prototyping and time to market can become a significant competitive  advantage."


6. North American Energy Revival - "Thanks to horizontal drilling and hydrofracking technology that breaks open shale  rock by pumping high-pressure fluids into the ground, shale gas is now abundantly  accessible. According to some experts, the United States alone has a 200-year  supply of this unconventional energy source. With natural gas in abundance, the  economics of high-performance, fuel-efficient internal combustion engines that  run on natural gas have become increasingly attractive to consumers. Shale  producers have been so prodigious that they have created a supply/demand  imbalance. For now, users of the cheap natural gas are the biggest beneficiaries.  These include chemical companies and companies that make equipment used to  compress and liquefy natural gas."


For more from Saut, we posted his latest market commentary here.

Third Point Starts Nokia Stake: Q3 Letter

Dan Loeb is out with Third Point's Q3 letter and in it the hedge fund firm reveals they started a new stake in Nokia (NOK) in the third quarter after the company sold some of its businesses to Microsoft.  The other main takeaway is that due to strong performance, Third Point will return 10% of capital at year-end.


Third Point's Thesis on Nokia

Third Point writes,

"At our purchase price, we seized an opportunity to create new Nokia at a substantial discount to target value.  The company will have approximately €8 billion of net cash when the transaction closes, and we expect a meaningful portion of the excess will be distributed to shareholders in coming quarters.  Either a buyback or a special dividend is possible, which should draw additional investors to new Nokia when the cash return scenario develops following the deal closing."

This is the kind of event-driven play they like and their letter below details the breakdown of the separate businesses left at the 'new' Nokia.


Third Point's Q3 Letter

Embedded below:




For more Q3 hedge fund letters, head to:

- David Einhorn's Q3 letter

- Excerpts from Cobalt Capital's letter

- Corsair Capital's thesis on News Corp

JANA Partners Goes Activist on QEP Resources, Sends Letter to Board

Barry Rosenstein's hedge fund JANA Partners has been quite active submitting SEC filings as of late.  The activist investor has revealed their latest target: QEP Resources (QEP).  Per a 13D filed with the SEC, JANA has revealed a 7.5% ownership stake with 13,500,000 shares.

This marks a 55% increase in the number of shares they own since the end of the second quarter.  The filing was made due to activity on October 11th.

JANA was out buying in late August, sporadically throughout September, and then all throughout October at prices ranging from $27.68 to $31.46 and are now the largest institutional shareholder.  However, they've owned QEP shares for over a year.

JANA's Letter to QEP's Board

Rosenstein penned a letter to QEP's board, noting that the company needs to unlock the value of its midstream business.  JANA also wants to see bolt-on M&A and organic project development for growth.  Additionally, the hedge fund calls for more board members and management with proven Midstream experience and to align management incentives.  Lastly, JANA is looking for the company to return capital to shareholders.

Embedded below is JANA Partners' letter to QEP Resources:




For more on this hedge fund, head to a recent interview with JANA's Barry Rosenstein.

Strategist Jeff Saut: Primary Stock Market Trend Remains Up & A Pitch on Weyerhaeuser

Market strategist Jeff Saut is out with his weekly investment strategy commentary.  In it, he highlights various positive economic datapoints and he thinks GDP growth will accelerate in 2014 to 3%.

Saut also points out that the Fed is on the market's side with Janet Yellen set to takeover and "that implies no tapering and plenty of liquidity."

He also touches on how housing market bulls have cooled a bit due to rising interest rates.  He notes that over the past few weeks, rates have retraced a bit.


Weyerhaeuser (WY) as a Play on Housing

Saut highlights a "second derivative way" to get access to the housing theme via Weyerhaeuser (WY).  This is one of their analysts' current favorites and here's their take:

"We believe: 1) the embedded value of Weyerhaeuser’s homebuilding platform is underappreciated relative to other  public builder valuations (most notably, the 17,700 lots it controls in California); 2) the recent underperformance of  WY shares has created a buying opportunity; and 3) in the context of our REIT coverage, there are relatively few  opportunities to find similar long-term earnings/cash flow growth stories. In our view, Weyerhaeuser’s  homebuilding platform (one of the 20 largest in the country), significant wood products business, and immense  timberland portfolio position it as a compelling alternative to pure-play homebuilders in this housing recovery.  Weyerhaeuser is targeting a payout of 75% of FAD over the cycle and is well positioned to raise its dividend as the  housing recovery gains momentum. The company has already boosted its dividend by 33% since October (WY  shares currently yield ~3%)."


Embedded below is Jeff Saut's latest market commentary:




You can download a .pdf here.

And you can catch up on some of Saut's previous commentary here.

Carl Icahn To Sell WebMD Shares to Company

Activist investor Carl Icahn will do some selling instead of buying this time around.  In an amended 13D filed with the SEC today, Icahn has said that his investment vehicles will sell 5,527,433 shares of WebMD (WBMD) back to the company for $32.08 per share.

Previously, Icahn owned 12% of WebMD (WBMD).  The transaction will close today (Monday October 21st).

For more activity from this activist, we recently highlighted Icahn's new Talisman Energy stake.

Cobalt Capital's Thesis on EOG Resources: Q3 Letter

Wayne Cooperman's hedge fund Cobalt Capital is out with its Q3 letter.  In it, they briefly detail their thesis on EOG Resources (EOG), a stock they were buying in the third quarter.

If you're unfamiliar with Cobalt, the name Cooperman should ring a bell as Wayne is Lee Cooperman's son.  Lee, of course, runs a hedge fund himself: Omega Advisors.  Cobalt has compounded 15.3% net annually since inception.

During Q3, Cobalt averaged 60% long and 28% short for net exposure of 32%.

Their view on markets is that interest rates heading higher and less earnings growth will be problematic for markets.  That said, Cooperman, like his father, feels equities are the best asset class.  And with the Fed on the market's side for the time being, the market should have a tailwind.  They're cautious but still on the lookout for opportunities both long & short.


Cobalt's Thesis on EOG Resources

In his Q3 letter, Cooperman writes,

"Our largest purchase in the third quarter was EOG resources. EOG has some of the best oil   resource assets in North America, particularly its large core position in the Eagle Ford Shale. We tracked EOG’s well results in the state-reported data and believed that production was trending above expectations. With the stock trading at just 5-6x forward EBITDA, a one-to-two- turn discount to peers despite better assets and growth, we took advantage and purchased shares at a meaningful discount to intrinsic value. Generally speaking, we have found that oil-focused E&P stocks have been a much better value than gassy E&P’s and other energy plays lately, especially given their scarcity value as oil prices have risen and global tensions remain acute. In general, oil stocks do not price in oil remaining at or near current levels for long so we have been able to purchase high quality oil assets at good prices and we have hedged out some of our oil exposure by shorting oil futures."

At the end of the third quarter, EOG was Cobalt's fifth largest position.

For more hedge fund letters, we recently posted up David Einhorn's Q3 letter, as well as Corsair Capital's thesis on News Corp.

What We're Reading ~ Hedge Fund Links 10/18/13

Ray Dalio on the Japanese & world economies [Japan Society]

Why aren't hedge funds advertising? [InvestmentNews]

Children's Investment Fund up big in strong year for activists [II Alpha]

Activist Barington Capital pushes Darden Restaurants [Dealbook]

Hedge fund chart guru sees dark days ahead [BusinessWeek]

An activist attacks Carl Icahn [Turnkey Analyst]

Kyle Bass on why Japan is still in trouble [II Alpha]

Interview with Steve Romick [Morningstar]

Bill Fleckenstein to re-start short fund next year [TheStreet]

Corsair Capital's Thesis on News Corp: Q3 Letter

Jay Petschek and Steven Major's hedge fund Corsair Capital has released its Q3 letter and in it, they detail the thesis of one of their holdings: News Corp (NWSA).

They see this as a typical undervalued spin-off play as the old News Corp this year has split up into a publishing entity ('new' News Corp) and an entertainment division (21st Century Fox).  Many nvestors held shares of the growth company (Fox), and dumped shares of NWSA.


Corsair's Thesis on News Corp (NWSA)

Corsair writes,

"The misperception of NWSA as a  shrinking newsprint business enabled new investors to purchase several growing video/digital assets (which  contribute approximately 50% of the company’s EBITDA) at a cheap valuation. With solid cash generative businesses, a net-cash rich balance sheet of almost $4.00 per share and a management team focused on creating  shareholder value, NWSA shares offer limited downside and upside of a $25.00 stock price in the next 12  months. Potential catalysts include accretive acquisitions, share buybacks, a growing dividend policy, more  bullish sell-side coverage and a re-rating of the stock."

Corsair also recently disclosed a new position in Perion Network.


Embedded below is Corsair's Q3 letter with their write-up on NWSA:




For more hedge fund letters, we just posted up David Einhorn's Q3 letter as well.

Odey Adds to Shanta Gold Position

Crispin Odey’s Odey Asset Management has been adding to its holding of London listed Shanta   Gold (LON: SHG). Due to trading on October 10th,  Odey now own 16.1% of Shanta’s voting rights.  

It has been nearly a year since Odey first disclosed a stake in Shanta. Since then, they have filed eight times to disclose an increased holding. Odey seem to have bought between £17 and £9 per share, adding to their position as the price has moved downwards.

Although it has moved down considerably, Shanta’s stock price has not been as volatile as many other gold miners during the last year.

Per Google Finance - “Shanta Gold Limited is engaged in gold exploration, development and mining in Tanzania. The Company’s properties include New Luika, Lupa Goldfields , Singida, Mgusu, and Songea. The Company’s portfolio of properties includes approximately 35 prospecting licenses, which covers a total surface area of approximately 962 square kilometers. Its flagship project, New Luika Gold Mine has approximately five prospecting licenses covering approximately 199 square kilometers.”

You can view a recent interview with Crispin Odey's market outlook here.

Tiger Global Increases BBA Aviation Stake Again

Chase Coleman and Feroz Dewan's investment firm Tiger Global has been adding to its BBA Aviation (LON:BBA) stake again.  Due to trading on October 14th, Tiger Global now hold 11.14% of BBA's voting rights.  That's more than double the voting rights from their last filing back on September 17th.

As the BBA stake has grown, it has become a significant holding when compared to all of Tiger's other disclosed holdings.  Tiger initially disclosed an interest in BBA back in July of this year.

Per Google Finance: “BBA Aviation plc is a provider of aviation services and aftermarket support to   operators of business and general aviation, military and commercial aircraft. The Company delivers   its services at over 220 locations on five continents. The Company operates through two segments:   Flight Support segment and Aftermarket Services segment. The Company’s Flight Support segment   provides refuelling, ground handling and other services to the business, general and commercial   aviation markets. Its Aftermarket Services segment maintain, manufacture and support engines   and aerospace components, sub-systems and systems. The Flight Support segment consists of   Signature Flight Support and ASIG, and Aftermarket Services and Systems segment consists of Engine   Repair and Overhaul, Legacy Support and APPH. Its Flight Support has approximately 200 locations   worldwide, and its Aftermarket Services has approximately 23 locations worldwide.”

What We're Reading ~ Analytical Links 10/16/13

Being a long-term investor in a short-term world [The Big Picture]

Living in a low return world [Abnormal Returns]

The most important variable governing market prices [Minyanville]

Sears (SHLD) rally belies big worries about the retailer's prospects [Barrons]

In-depth look at Amazon's (AMZN) Jeff Bezos [BusinessWeek]

Pay TV: the future is not written [FT]

Takeaways from Liberty Media's (LMCA) analyst day [StreetInsider]

US cable companies home in on security [Reuters]

Scott Adams' secret to success [WSJ]

Iron Mountain (IRM) drops as Barclays says REIT conversion unlikely [Barrons]

How the Winklevoss twins found Bitcoin [Bloomberg]

Thoughts on Twitter's IPO & a good trade/bad investment [Aswath Damodaran]

Profile of Twitter & Square's Jack Dorsey [NewYorker]

Corsair Capital Discloses New Perion Network Stake

Jay Petschek and Steven Major's hedge fund Corsair Capital has filed a 13G with the SEC and disclosed a brand new position in Perion Network (PERI).  Per the filing, they now own 6.6% of the company with 820,236 shares.

The filing was required due to activity on October 3rd.

Per Google Finance, Perion Network is "a digital media company. The Company's products include: IncrediMail, a communication client; Smilebox, a photo sharing and social expression product and service; and Sweet IM, an instant messaging application. The Company generates revenues primarily through search, the sale of products and services, and advertising. IncrediMail is its communication client, available over the Internet it its basic version free of charge, used for managing email messages and Facebook feeds, with many graphic and personalizing capabilities. Smilebox is an Internet photo sharing service available for the desktop and smart-phone. Its product is available in seven languages in addition to English."

For more on this hedge fund, head to Corsair Capital's thesis on American Realty Capital Properties.

JANA Partners Exercises Calls on Oil States International

Barry Rosenstein's hedge fund JANA Partners has filed a Form 4 with the SEC regarding shares of Oil States International (OIS).  Per the filing, JANA has exercised 10,000 call options and converted those into 1 million shares of OIS. 

After the transaction, JANA now owns over 6.4 million shares of OIS.  The options had a exercise price of $80 with an expiration date of October 11th.

David Einhorn's Greenlight Capital is also involved in this company as it's one of his largest positions.  Earlier this year, our Hedge Fund Wisdom newsletter analyzed OIS and outlined the investment thesis.  You can subscribe here to read it.

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. In September 2013, Oil States International Inc sold Sooner, Inc. and its subsidiaries (Sooner) to Marubeni-Itochu Tubulars America, Inc."

For more on this hedge fund, we posted Barry Rosenstein's recent interview.

Eminence Capital Adds to Group 1 Automotive Position

Ricky Sandler's hedge fund Eminence Capital has filed a 13G with the SEC regarding Group 1 Automotive (GPI).  Per the filing, Eminence has revealed a 5.4% ownership stake in GPI with 1,312,745 shares.

This marks a 77% increase in the number of shares they own since the end of the second quarter.  The SEC filing was required due to portfolio activity on October 4th.

Eminence has been involved in other auto-related names and we've highlighted Sandler's position in Sonic Automotive recently as well.

Per Google Finance, Sonic Automotive is "an operator in the automotive retailing industry. Through its operating subsidiaries, it markets and sells a range of automotive products and services, including new and used cars and light trucks; arrange related vehicle financing; service and insurance contracts; provide automotive maintenance and repair services, and sell vehicle part. In June 2013, Group 1 Automotive Inc acquired Rountree Ford Lincoln. In October 2013, the Company acquired Joe Marina Honda in Tulsa, Oklahoma."

David Einhorn Shorts More Green Mountain Coffee: Q3 Letter

David Einhorn is out with his Greenlight Capital Q3 letter.  In it, Einhorn discloses that they've shorted more Green Mountain Coffee Roasters (GMCR).  They write,

"Although the company again missed the consensus estimate for sales, bullish analysts scrambled to lower forward revenue forecasts while insisting that all is well in mudville."  Their updated take on GMCR is below and we've previously posted Einhorn's original short case on GMCR.

He also talks about his long positions in Apple (AAPL) and Vodafone (VOD), both of which were quite profitable in the quarter.

Einhorn also discloses that Greenlight built a 'medium-sized long' in Osram Licht AG (Germany: OSR).  Additionally, they exited Gjensidige Forsikring (Norway: GJF) and Oaktree Capital (OAK).

At the end of Q3, Greenlight's largest positions in alphabetical order were:  Apple, General Motors, gold, Marvell Technology, Oil States International, and Vodafone.

Embedded below is David Einhorn's Q3 2013 letter:



For more on this hedge fund, we also posted a recent interview with Einhorn talking about his positions.

David Tepper: Markets Could See a 18-20x Multiple (Interview)

Appaloosa Management founder David Tepper appeared on CNBC today and gave his market thoughts.

Tepper thinks an 18-20x market multiple could be the 'new normal' while Lee Cooperman said earlier today he sees a 16x multiple.  Regardless, Tepper thinks stocks will be up next year and feels we'll see a higher multiple on the markets.

Regarding tapering, he feels that they're not going to taper for some time.  "My basic belief has been when you have this large QE, markets go up."  Generally speaking, despite the near-term uncertainty, he expects the markets to go up. 


The videos of Tepper's interview are embedded below:

Video 1 on tapering


Video 2 on interest rates


Video 3


For more hedge fund interviews, head to Lee Cooperman on the 3 stages of a bull market from earlier today.

Lee Cooperman on 3 Stages of a Bull Market: Interview

Omega Advisors' Lee Cooperman spoke with CNBC this morning.  He thinks markets are fairly valued and he thinks a 15-16x multiple is about right.  He doesn't think it's a bargain anymore.

Cooperman on the 3 Stages of a Bull Market

Phase 1: "Wow we survived."  As the market bottoms and pessimism slowly starts to fade.
Phase 2: "Reflecting that which is perspective."  4-5 years of rising economic activity.
Phase 3: "Exuberance phase, the silliness phase where people forget about the mistakes."  He doesn't think we're quite there yet, but there are pockets of silly valuation like Potbelly (PBPB) and Telsa (TSLA).


His Stock Picks Now

"What we're looking for is to find more growth at a lower valuation."  He said he's looking at 'red chips' instead of 'blue chip' stocks and specifically touched on Sprint Nextel (S).   He also likes Motorola Solutions (MSI), Swatch Group (UHR), Sandridge Energy (SD), and Qualcomm (QCOM).

Embedded below are the videos of Cooperman's interview:


Video 1 on bull market stages


Video 2 on Sprint (S)


Video 3


Video 4 on Qualcomm (QCOM)


For more hedge fund thoughts, we also posted up David Tepper's interview from today.

Julian Robertson Calls Environment 'Precarious,' Likes Ulta Salon, Delta & Others

Tiger Management's Julian Robertson was on CNBC last week and we wanted to highlight some of his comments from the transcript.  Stocks Robertson mentioned in the interview that he likes include Ulta Salon (ULTA), Delta Airlines (DAL), WuXi Pharma (WX), DigitalGlobe (DGI) and Norwegian company Schibsted,


On the economic landscape: "Well, I would-- characterize it as precarious. And-- I think everyone knows that. And-- I think that-- rather than just sitting back and-- saying, "What if this happens or that happens"-- we go ahead and find good companies and invest in them and-- bad companies and-- them."


On Ulta Salon (ULTA): "But I do see sweet stocks that I really love and like and-- think are going to do well. And-- one is-- a company that-- probably makes that beautiful toenail polish you've got on. A company called Ulta. And it has just beautiful beauty salons all over the country.  And it sells all the great products. And it's growing-- probably at 25%-- or so, will grow that way over the next three or four years. This year won't be quite that good. But-- it is just amazing what's happened. And-- how well they've caught this great movement. And-- we've interviewed a lot of women and Ulta is where they're going."


On what he looks for when picking stocks:  "Well, I-- one of the things that I'm particularly interested in is-- stocks and who's already picked them. And-- we've had some really good people here who have excelled in certain fields and-- I love to see really what they had bought recently. And-- Ulta is one of those stocks. And-- I think it's going to be a real good one for next year, so."


On the market: "That's really the way I'm looking at stocks primarily now. I think we're in the middle of a kind of a bubble market, where it's going to take something-- bubble-like to happen. And-- prick the bubble and we'll probably have pretty bad-- reactions to the breaking of the bubble. But-- probably not right now. And somehow I think we'll wallow through the political and fiscal crisis we have in front of us. And then we'll sort of see what happens ... I think the market is reasonably -- yes, is fully valued."


On DigitalGlobe (DGI):  "Digital Globe is I think a really great company. And it's had its virtual monopoly in the area where it is. And-- I think they're really these satellites that are up flying around are-- it's a great business to be in."


On WuXi Pharma (WX): "This year one of our best stocks has been-- a Chinese company which-- disintermediates-- PhDs. In other words, instead of getting a U.S. PhD for maybe-- $20,000 a month, you get a Chinese PhD for-- $3,000 a month.  And-- it's a company that's named Wuxi that supplies the really good Chinese researchers. And-- I've been in that stock for several years and it's just been lately that it's started to do anything. And I don't know why that is or was or anything. But it's been a really good performer of late-- Wuxi.  you're buying-- something at a fifth the price you were paying before. And-- you figure that's going to work at some time. And these Chinese PhDs are really well-trained and very, very good and-- Wuxi is able to come up with good ones."


On Twitter's IPO: "I don't plan to be (a buyer of the IPO).  That isn't to say that I won't.  But I don't expect to at this point.  I think social media is very long-lasting.  I just don't know the particular thing with Twitter."


On the airlines:  "Well, we're beginning to put some money in the airlines. And-- I mean, Delta airline, the airlines have been weeded down. And-- Delta Airlines (DAL) a very good story. I mean, it's at a very reasonable price and it's a good airline. I've talked to you about Ryanair (RYAAY), which is a low-cost producer in the world. I think that-- area is something to look at. And there-- they-- there have been-- I think some really interesting moves made in that industry.  Seems so much (consolidation) that I think it will slow down from here."


On Europe:"I think a lot of smart Europeans think that Europe has bottomed. And I-- I've been hearing that increasingly. And-- I-- I'm not completely sure of that. But-- it's certainly better than it was."


On Schibsted: "Schibsted is a very interesting company. We came upon-- Schibsted-- it was-- we had-- a model we were setting up on-- newspaper stocks. And Schibsted had come out as being wildly overpriced. And then we went into it in thorough detail and-- although it's true that-- Schibsted had still had its papers, it had gone tremendously into internet products.  And-- it is really an internet-- producer-- media producer of internet products-- throughout the world now and-- is going to grow at very rapid rates for the next several years. And-- so I think Schibsted is quite a terrific-- Norwegian company."


On his success: "(What) I've done is-- hired really good people and never been self-conscious of hiring people that were smarter than I am. And-- it's been fun for me to work with them and-- to play with them in all that we've had together. And-- so that's the secret sauce."


On being long or short this market:  "Well, I think you have to have kind of-- a little more--sort of lean towards-- being conservative in a market like this. It's just-- gotten a little too -- I would say raising cash or going short."

What We're Reading ~ Hedge Fund Links 10/11/13

Mandel's Lone Pine to launch first hedge fund in a decade [II Alpha]

Jim Chanos' recent WSJ Conference speech [ValueWalk]

This once $14b hedge fund's future is in doubt [CNBC]

Andrew Ross Sorkin's interview with Bill Ackman [NYTimes]

On Bruce Berkowitz's new hedge fund [WSJ]

George Soros on the future of Europe [GeorgeSoros]

Hedge funds expand bets with most junk since 2008 [Bloomberg]

Record hedge fund inflows come at a price [FT]

Meredith Whitney raising money for new hedge fund [Reuters]

Some Tiger Cub performance numbers [II Alpha]

DE Shaw shuts doors to new investors [FT]

Legal giants wage ware over role of activist investors [Forbes]

Cannell Capital Files 13D on Hooper Holmes (HH), Sends Letter to Board

Carlo Cannell's hedge fund Cannell Capital filed a 13D on shares of Hooper Holmes (HH).  They've disclosed a 14.24% ownership stake in the company with 9,946,766 shares.

The activist 13D details that Cannell was out buying in mid-August at prices between $0.36 and $0.38.  Carlo Cannell then attached a letter to the board as well with comments.


Cannell's Letter To Hooper Holmes

"Mr. Ronald Aprahamian
Chairman of the Board
Hooper Holmes, Inc.
170 Mt. Airy Road Basking Ridge, NJ 07920 

Dear Mr. Aprahamian, 

Cannell Capital LLC ("CC") writes today with several suggestions and comments for Hooper Holmes, Inc. ("HH"), the common equity of which CC, or accounts managed by CC, owns 14.2% as of September 30, 2013. 

First, in our opinion, the size and remuneration of the Board of Directors ("BOD") is too large.  The $73,000 to $104,000 each non-executive member has received per annum as the stock price has slid from $17.43 in April 2000 to $0.36 in August 2013 is galling.  We estimate aggregate cash compensation of $1.0 million for its six directors.  That is simply not reasonable (see Exhibit "A" enclosed).  Given the pro forma size following the divestiture of Portamedic, which we reckon should decrease revenues 60%, we call for the removal of Elaine Rigolosi for two reasons (i) as Chair of the Compensation Committee she is culpable for the egregiousness of compensation over her 25 terms; (ii) she is in our opinion less qualified than other new members of the Board. 

Second, the BOD should "downgrade" the auditor of HH. The $593,000 that KPMG LLP received last year is excessive given the current manifestation of HH. As part and parcel of this downgrade we call for the BOD to effect a reverse stock split sufficient - amongst other measures - to effect in a Form 15 filing a notice of its intent to "go dark." (Here is list of pros and cons for which we suggest for illustrative purposes: http://www.andrewskurth.com/pressroom-publications-126.html ). 

Lastly, we wish to congratulate HH for negotiating the sale of Portamedic. Our 2015 forecast of the Health & Wellness segment, now unencumbered by the Portamedic "cancer", is as follows: 

(FY Dec, $ Million)             Good            Great
Health & Wellness Growth  20%             25%
Revenue                                $72              $78
Net Income                           2                  4  


We are gratified by the recent progress.  We think the current pro forma enterprise value of $12 million is a paltry price to pay for a growing and good margin business, now liberated from the musty legacy business.  Combined with continued and robust reduction of superfluous expenses, we believe this "phoenix" could yield over $8 million in cash flow from operations in the next couple of years.  This would imply an attractive high-double-digit-percent return should a strategic buyer become interested in this growing niche - an outcome for which we both foretell and hope. 

Sincerely, 
/s/ J. Carlo Cannell
Managing Member"


About Hooper Holmes

Per Google Finance, Hooper Holmes is "engaged in providing health risk assessment services to the life insurance and health industries Hooper Holmes operates in one business segment and provides paramedical and medical examinations, personal health interviews and record collection, and laboratory testing, which help life insurance companies evaluate the risks associated with underwriting policies. It also conducts wellness screenings for wellness companies, disease management organizations and health plans. The Company's core activities consist of arranging for paramedical examinations on behalf of insurance carriers, primarily in connection with such carriers’ processing and evaluation of the risks associated with underwriting insurance policies - mainly life insurance policies. In October 2013, the Company sold its Portamedic service line to American Para Professional Systems, Inc."


Hear Cannell's Latest Investment Ideas

Carlo Cannell will be presenting his latest investment ideas at the Las Vegas Value Investing Congress next spring.  For a limited time, Market Folly readers can receive a huge 50% discount by clicking here.

Eminence Capital Boosts Sonic Automotive Stake

Ricky Sandler's hedge fund firm Eminence Capital filed a 13G with the SEC regarding shares of Sonic Automotive (SAH).  Per the filing, Eminence has disclosed a 5.1% ownership stake with 2,065,739 shares.

This marks an increase of 3% in the number of shares they own since the end of the second quarter.  The filing was required due to portfolio activity on September 30th.

Eminence has also held another automotive play as their top holding at the end of Q2 was Advance Auto Parts (AAP).

Per Google Finance, Sonic Automotive is "engaged in automotive retailing in the United States. The Company’s dealerships provide services, including sales of both new and used cars and light trucks; sales of replacement parts, performance of vehicle maintenance, manufacturer warranty repairs, paint and collision repair services (Fixed Operations) and arrangement of extended service contracts, financing, insurance and other aftermarket products (F&I) for its customers."

Head here for more recent activity from Eminence.

Barry Rosenstein Talks Outerwall, JANA Reduces Agrium Stake

JANA Partners founder Barry Rosenstein appeared on CNBC yesterday and we wanted to highlight some of his thoughts.  Additionally, JANA Partners filed an amended 13D with the SEC, indicating they've reduced their stake in Agrium (AGU).


On Outerwall (OUTR):  In his interview, Rosenstein said, "Nothing's off the table, there's a lot of options with this company... There's a lot of people interested in it, I've been contacted by a number of people since we showed up."  JANA's founder wants the company to return cash to shareholders.  He also thinks their Redbox DVD rental has a long life ahead of it.  We highlighted how JANA recently went activist on OUTR.

On what JANA looks for in an investment:  "We don't necessarily screen... we look for two things: value and catalysts.  Basic businesses, easy to understand business models, recurring revenues, and then there's gotta be a catalyst.

Reduced Agrium stake:   Per the SEC filing, JANA has sold over 7.3 million shares of their Agrium (AGU) stake.  The filing was required due to activity on October 8th and they're now left with just over 3.9 million shares.

Embedded below is the brief video CNBC has uploaded of Rosenstein's interview:



For more on this hedge fund, head to some of JANA's other recent portfolio activity.

What We're Reading ~ Analytical Links 10/9/13

Some big investors can't get enough of Europe's toxic assets [Quartz]

On cash flow and destiny [Horowitz]

5 things you need to know about Janet Yellen [WSJ]

For Yellen, a focus on reducing unemployment [NYTimes]

Invest in what Wall Street hates [Marketwatch]

Why does value investing work? [Turnkey Analyst]

On avoiding the next bubble [WSJ]

Verizon mega-bond could pave way for AT&T [Reuters]

A look at eBay's CEO John Donahoe [Barrons]

How Twitter's business model is just like broadcast TV, only worse [Buzzfeed]

A road map to high value healthcare delivery [Healthcare Transformation Institute]

A look at Tower Group [Aleph Blog]

Is Medifast a cry baby or corporate bully? [WhiteCollarFraud]

Nest Labs reinvents the smoke alarm [NYTimes]

Graham & Doddsville Fall Newsletter From Columbia Business School

Columbia Business School is out with its Fall 2013 edition of the Graham & Doddsville newsletter.  This issue features an interview with Aquamarine Capital's Guy Spier as well as a focus on Koch Industries, Homex (HMX) 9.75% Sr Guaranteed Notes, Wabash National (WNC), and Active Network (ACTV).

Spier gave an interesting interview about his career and investing style.  Here's a few select quotes:

"Something I believe quite strongly is that if you want to understand who an investor is, you need to understand their relationship to money in general, their relationship to the money that they specifically manage, and what the money means to them."

"At the end of the day, every successful investor ends up differentiating themselves on the unique aspects of their personality and who they are.  I'm not trying to be the best investor.  I'm just trying to be Guy Spier."

In his interview, Guy also walks through his thinking on Reciprocal Patent Exchange (RPX), as well as Fiat (FIATY).


Embedded below is the Fall 2013 edition of the Graham & Doddsville newsletter:




If you missed it in the past, Graham & Doddsville also had a great interview with JANA Partners.

Carl Icahn Reveals Talisman Energy Position, Gains Board Seats at Nuance Communications

Carl Icahn has been busy with positions in Talisman Energy (TLM) and Nuance Communications (NUAN).  The breakdown is below:


Icahn's New Talisman Energy Stake

Icahn simultaneously tweeted and filed a 13D with the SEC, disclosing a 5.97% ownership stake in Talisman Energy (TLM).  He owns 61,554,602 shares and this is a brand new position for him.

On Twitter, Icahn noted that he, "may have conversations with mgmt re strategic alternatives, board seats, etc."

So if you aren't already, follow @Carl_C_Icahn on Twitter, and don't forget to follow @MarketFolly if you haven't already.

Per Google Finance, Talisman Energy is "an oil and gas producers, through a combination of exploration, development and acquisitions. The Company's business activities include exploration, development, production, transportation and marketing of crude oil, natural gas and natural gas liquids. Talisman's three main operating areas are North America, the North Sea and Southeast Asia."


Icahn Gains Board Seats at Nuance Communications

Icahn has reached an agreement with Nuance Communications (NUAN) to gain 2 board seats.  Carl Icahn's son Brett Icahn will become a director, along with David Schecter.

Per Google Finance, Nuance Communications is "a provider of voice and language solutions for businesses and consumers globally. The Company's solutions are used in healthcare, mobile, consumer, enterprise customer service, and imaging markets. The Company offers accuracy, natural language understanding capability, domain knowledge and implementation capabilities. The Company's solutions are based on the Company's voice and language platform and are used by businesses for tasks and services, such as requesting information from a phone-based self-service solution, dictating medical records, searching the mobile Web by voice, entering a destination into a navigation system, or working with portable document format (PDF) documents."

TPG-Axon Discloses Outerwall Stake

Per a 13G just filed with the SEC, Dinakar Singh's TPG-Axon has revealed a 5.1% passive stake in Outerwall (OUTR) with shares 1,434,429.  This is a brand new position for them and the filing was required due to activity on October 4th.

We just posted about how JANA Partners has gone activist on Outerwall and now TPG-Axon has disclosed a stake in the company formerly known as Coinstar as well.

The NYPost just highlighted that the company has "rebuffed fresh approaches from buyout firms."  Piper Jaffray has also said they see a sum of the parts value of $70 for OUTR.

Conversely, Bloomberg points out that around 30% of OUTR shares were sold short as of the beginning of October.

Per Google Finance, Outerwall is "a provider of automated retail solutions, which offers convenient products and services. The Company's offerings in automated retail include its Redbox business, where consumers can rent or purchase movies and video games from self-service kiosks (Redbox segment), and its Coin business, where consumers can convert their coin to cash or stored value products at self-service coin counting kiosks (Coin segment). Its New Ventures business (New Ventures segment) is focused on identifying, evaluating, building, and developing self-service concepts in the marketplace."

Strategist Jeff Saut's Latest Market Commentary

Market strategist Jeff Saut's latest weekly commentary is entitled "Ashes to Ashes" and that's what he thinks the budget worries turn into by this time next week.  He then focuses on investor sentiment these days.

Saut points out views from individual investors he's been seeing:

"(They) seem to be 'frozen' like deer in the headlights, believing that you need to have a feel good environment to have a secular bull market.  The reality of the matter is that when you finally get that 'feel good' environment, it tends to be pretty late in the overall scheme of things."

Saut advises caution when it comes to fixed income as that had been the 'easy buy' and rates have increased this summer.  Regarding equities, he feels that you shouldn't worry too much about the worry surrounding Q3 earnings.

Embedded below is Jeff Saut's latest commentary:




You can download a .pdf here.

Ruffer's Q3 Letter: Still Anticipating Eventual Inflation

Jonathan Ruffer is out with his Ruffer Investment Company Q3 letter with his latest market commentary.  Ruffer leads off with some prudent advice:

"Today's investment world is full of distortions, and the effect on investors is that they rationalise these fantasies, so that what is false is represented in their minds as true.  Prudent investors will want to reverse this process!"

The main distortion he is writing about currently is that quantitative easing has been effective at buying time and getting investors to pile into risk assets, but there hasn't been a return to long-term economic growth.

Ruffer believes that various entities around the world like the Federal Reserve are determined to stave off deflation.  As such, Ruffer believes that sooner or later they'll overdo it when it comes to money creation and we'll see inflation.  And this is how they continue to invest.

Embedded below is Ruffer's investment commentary for Q3:




For more from this investment firm, head to Ruffer on the 3 arrows of deflation.

JANA Partners Goes Activist on Outerwall (OUTR)

Barry Rosenstein's hedge fund JANA Partners filed a 13D on shares of Outerwall (OUTR) and has disclosed a new 13.5% ownership stake in OUTR with 3,777,995 shares.

The activist 13D filing includes the standard boilerplate that JANA expects to talk with management.  In particular, they want to focus on "a review of strategic alternatives including exploring a strategic transaction, selling or discontinuing certain businesses, or pursuing a sale."

Outerwall was formerly called Coinstar and is known for their Redbox DVD rental kiosks, among other businesses. 

JANA was out buying in late August around $62-63, throughout September around $48, and then bought 1 million shares on October 4th at $52.25.

This hedge fund has been busy lately and we also recently highlighted how JANA went activist on Safeway as well.