Ricky Sandler Long GMCR & ZNGA, Short WAB (Invest For Kids Chicago Presentation)

We're posting up notes from the Invest For Kids Chicago conference 2015.  Next up is Eminence Capital's Ricky Sandler who pitched a long of Keurig Green Mountain Coffee (GMCR).


Ricky Sandler's Invest For Kids Chicago Presentation

•    At 25 launched his own business Fusion Partners. In '98 started Eminence
•    Long idea: GMCR/Keurig Green Mountain.
•    Controversial there is a credible short story. Thinks it’s already priced in and an incredible long opportunity.
•    Two businesses, hot biz (kcups) and Kold with sodas, brand new.
•    Hot platform sell 9MM to 10mm brewers/year and sell 10B to 11B kcups per year.
•    Razor/razorblade model.
•    Significant room for increased household penetration. Current penetration at 21M to 22M households compared to 70MM homes. With a coffeemaker.
•    Think market goes single serve.
•    Industry kcup should grow in the LDD range.
•    $4 of EPS from the hot business in FY15 estimated.
•    Think hot EPS can reach $5 over the next couple years driven by volume growth, $300MM restructuring, normalizing brewer losses form the last holiday season, normalized coffee costs, share buybacks and offsetting some headwinds.
•    Kold launched in September with Coca-Cola. Addressable market thinks its 5x – 10x hot.
•    Reviews are high on quality but negative on price/value.
•    $375 asp per machine and pods more expensive than a can of coke.
•    Not so much price of pod, but thinks the range of pods/products.
•    Think its convenience/choice. Negatives looking at just price.
•    Kold loss 50 cents per share.
•    Trades at 15.5x FY15E sept EPS and 13.5x EPS ex kold.
•    EPS estimates under pressure – poor 2.0 brewer launch execution and K-cup profitability impacted by mix shift. Finally negative reaction to kold.
•    Hot value = 17x -20x hot EPS ($5) or 85-100 plus option value for kold.
•    KO owns 17% at $92. Insiders bought at $90.


•    Loves Baidu (BIDU), and a top five position.


•    Zynga (ZNGA) – mobile gaming. Franchises include Farmville, words with friends.
•    Some think games are obsolete, ZNGA has 75MM active users.
•    Zynga was late to the consumer shift from desktop to mobile making the last two years rough. •    Mobile games for the last year =70% of bookings vs 30% a year ago.
•    Expect new titles over the next 12 months.
•    Trading at 1x sales when backing out SF real estate ($500MM value). $687MM EV.
•    Launch 6 new games, $300MM incremental bookings bringing total bookings to $900MM.
•    KING sold for 2.6x sales, using that valuation = $5.
•    At a 35% margin, ZNGA generate $315MM EBITDA or trading for 2x.
•    Has big infrastructure to support bigger biz. Downside protection by cash and real estate.
•    Top hit potential = $1B rev potential.
•    Mobile gaming is $20B biz. New categories such as esports and real money gaming growing.


•    Wabtec (WAB) – Short.
•    Leading supplier of brakes, electronics and other railroad components to the global rail industry.
•    55% - 60% of EBIT comes from NA freight segment.
•    LT rail is GDPish industry and cyclical.
•    Track record is fantastic – only US listed co whose stock price increased every year for 14 straight years, 19% EPS CAGR form 06 to 15E and hadn’t missed earnings since 09 and 3Q15.
•    Bull thesis – not cyclical, high ROIC/ high market share high after market mix/quality biz.
•    Product mix is opaque due to acquisition strategy.
•    Bulls think EPS will grow double digits for ever.
•    WAB is cyclical and currently at the peak of rail equipment super cycle driven by NA O&G activity.
•    Demand driven by trail traffic, production of new locomotives and freight cars.
•    Rail traffic is weak – CNI talking about laying off employees.
•    Locomotives – NSC storing locomotives, expect it to be up to 200. GE orders dropped significantly, only sold compared 3 the last quarter.
•    Freightcar peak – industry backlog driven by tank cars oil and covered hoppers i.e. frack sand. 40% downside to deliveries.
•    Trading at 20x EPS, 13x EBITDA. Could be peak earnings in FY15. Mid cycle earnings $3.5 - $4. At 16x = $60 or 30% downside.
•    Low short interest, favorable sell side ratings.
•    Consensus calls for positive organic growth.


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Andy Hall's Outlook For Oil: Invest For Kids Chicago Presentation

We're posting up notes from the Invest For Kids Chicago conference 2015.  Next up is Andy Hall of Astenbeck Capital who talked about his outlook for oil.


Andy Hall's Invest For Kids Chicago Presentation

•    Presentation is the outlook for oil.
•    Rarely consensus view for oil has been this pessimistic.
•    Saudi Arabia/Worries over China – murky long term outlook for oil and fossil fuels. Running out of storage perhaps. Cash costs production avg $20 per barrel.
•    Perception is worse than reality. Q3 stock build at 500K BPD vs estimate of 1.6MM BPD.
•    Q2 estimated surplus revised lower by 900 KBPD.
•    No super contango means no distressed surplus of oil in contrast to 09 and 86.
•    Global oil demand growing at 2MM BPD so far in FY15, double the rate predicted at beginning of the year.
 •    Chinese demand growing at 7% YoY, led by gasoline and jet fuel.
•    Demand response to lower prices has already reduced surplus. Current oversupply is not just crude oil but also NGLs.
•    Overall surplus will continue to shrink and become a growing deficit in h2 2016.
•    In 1986 OPEC spare capacity was almost 20% of global product, today OPEC spare capacity is less than 2%.
•    Cuts in industry capex will prove excessive – industry cut capex by 25% in FY15. Further cuts expected in fy16, only second time in 30 years capex cut in consecutive years. Believes capex reductions will prove excessive – not 1986.
•    Significant lag between laying down rigs and production rolling over. Production peaked in June and has since dropped by 500 kbpd. USA shale/tight oil production overs over first.
•    Us production to continue to fall – EIA has reduced USA oil production forecast for FY16 from growth of 200 kbpd to a decline of 400 kbpd.
•    Rig productivity has plateaued.
•    Iran will add 300k to 400k barrels per day. Iraq will decline due to budgetary constraints.
•    Nigeria, Venezuela and Algeria at risk.
•    High geopolitical risks throughout oil producing regions.
•    Stop growth – supply declines by 8.6% per annum at existing production. 1.3MM bpd per annum has been the average or 1.4% growth in demand.
•    Thinks $70 per barrel is where it needs to be. Shale co’s said $40 break even yet they haven’t been able to generate FCF since FY10. Their supplier costs will likely rise as well particularly after consolidation.
•    2/3 E&P have negative cash flow and may be heading to bankruptcy. PXD says they need $70, EOG needs $80.

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James Flynn on Horizon & Valeant Pharma: Invest For Kids Chicago Presentation

We're posting up notes from the Invest For Kids Chicago conference 2015.  Next up is James Flynn of Deerfield Management who talked about Horizon Pharma (HZNP) and Valeant Pharma (VRX).


James Flynn's Invest For Kids Chicago Presentation

•    Deerfield is a healthcare firm and biotech across private and public markets.
•    Everyday something new in headlines on distribution of drugs and pricing. All of the pharma stocks he lists are down, in some cases in excess of 50%.
•    Issues to consider – use of specialized forms of distribution to combat managed care barriers pricing, offshoring of drug profits, leverage and sustainability of biz models.
•    Distribution – thinks people are spending too much time on it. Managed care makes it hard for physician to prescribe high priced drugs, while pharma cos want the drug to have easy access. 10-20 years all types of back and forth. It’s an appropriate game for each biz model and nothing nefarious about it.


•    Valeant (VRX) pushes everything to the financial limit and got caught speeding. Thinks it’s more about Valeant vs specialty pharma.
•    Pricing – thinks this is more important. Started in 1993 as a debate, where pharma companies would raise prices 3x inflation. 1993 ultimately led to a decrease in price expansion and drug companies agreed to price with inflation.
•     In 1993 five drugs singled out such as Tenex (15%), Azmacort (15.6%), etc all in the 15% price increase range.
•    Valeant- 85 drugs at 36% price increases, net increased in 24% so contextual this is historic, outrageous and not in industry standard. Also an annual occurrence, happening for many years. Actual price increases in the 100%.
•    This won’t be going away (investigations on these actions).
•    Argument that saved pharma in 93 was that developing drugs was risky and expensive. When in market the drugs cut costs for system.
•    Valeant acquires drugs and spends very little on development or discovery. Argument on their end is weak.
•    Taxes – VRX rate is 5%, by merging with Biovail assumed the Barbados 5% tax status.
•    Tax dollars coming in help the government purchase of those drugs. Increasing costs to the system while decreasing revenue.
•    Will this go away or stay in headlines? Think it's staying.
•    The worst for Valeant. Acquire old tiered products in steep decline and raise prices. Some have no or limited patent life. Products eroding dependent upon price.
•    Margins can only go one way – invests no r&d, very little spend. Forced out of the acquire/raise biz, hard to own.
•    Leverage is a issue - $30B of debt and makes them vulnerable to interest rates.
•    Bull case – VRX pays down debt in 4 years and is trading at 4-5 earnings. Sounds attractive but can think of just as many variable that can make it bankrupt. 


•    Lot of other companies fell – what about those?
•    Likes Horizon Pharma (HZNP). Shares some similarities with VRX. Difference is that targeted products into pharma-physician sales, all growing and some synergies and good growth products. Low leverage/growing product base.
•    Horizon – without heroic price or acquisitions can pay back debt in one year and buy itself back in 5 years. Compelling given business model/products (long patent life/growing).


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Soren Aandahl Short ERSO: Invest For Kids Chicago Presentation

We're posting up notes from the Invest For Kids Chicago conference 2015.  Next up is Soren Aandahl of Glaucus Research who pitched short EROS.


Soren Aandahl's Invest For Kids Chicago Presentation

•    “Activist” short sellers.
•    Emerging markets focus.
•    Short EROS. The Company is a distributor of Bollywood movies.
•    Price has come down significantly (from $30), but thinks no one addressed core short thesis.
•    $0 price target for equity and debt.
•    Bull case/growth thesis is that they will leverage content library to be Netflix of India. 2015 – Said they could sell EROS Now at a $800MM valuation (10% stake). 
•    “30MM” new registered users supposedly. Higher than Savan and Hotstar, as well as YuppTV and Spuul with a couple million subs.
•    Think EROS actually has lower subs around a couple mm versus 30mm or higher. App annie, GT data, etc. point to smaller traffic as well as Google play. App activity is 90% lower than Savan and Hotstar.
•    Hotstar added 10MM users first 40 days and 43.7 app reviews. Erros claimed 13MM new subs in same time with only 203 app annie reviews.
•    Tried to back out and say the company has never claimed to be Netflix. Chairman says opposite in a CNBC review. Clip has been taken down.
•    Primary biz is to acquire and distribute Bollywood movies – and then amortized.
•    80% - 90% of Bollywood movie earned in the first few months, more aggressive than Hollywood. Only in theaters for 2/3 weeks, and then have already monetized other items due to piracy concerns.
•    Amortize movies year 1 at 40%-50% and then years 2-9 at 5%-7% versus via/other film operations at 80%-90% in year 1. Fails the matching principal.
•    Hides the cost of acquiring over later periods. Overstates operating profits.
•    EBIT margins for FY15 would go from 28% to -4% and gross margins from 45% to 16%.
•    Not a profitable biz. EROS cash flow consistently negative. Spends more money buying film rights versus FCF. Neg ev biz.
•    Will never be FCF positive.
•    Fabricating revenues, particularly overseas. Only 7% in India film industry rev generated outside of India. EROS says 39% is generated by India, 61% overseas, mainly from Dubai/UAE (37%).
•    80% of EROS gross box office movies are earning in India and 5% from Gulf States, yet this doesn’t match its revenues/UAE (37%).
•    Pulled statutory filings in Singapore/UK etc. Overseas subs not profitable.
•    You can back out India and other financials. In order for US financials to be true the biz ex India needs to have 77% gross margins and 56% EBIT margins.
•    Receivables have ballooned, DSOs global from 139 to 277, while India 95 to 135.
•    Suspicious payments to chairman’s family. 93.5MM in film rights from Netgen films owned by chairman’s sister. Only made 8 movies, combined budget 39MM and loss money. Distributor share gross (EROS) 16MM.
•    Chairman’s family are all executives.
•    2 CFO’s resigned last months, low quality auditor and off balance sheet liabilities.
•    Debt is trading at 50 cents, from par over the past 3 weeks. Only assets of value are the rights to some of the content library. Located in India, junior in Indian secured/unsecured creditors.
•    Worth $300 to $360MM.


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David Samra's Pitch on RBS: Invest For Kids Chicago

We're posting up notes from the Invest For Kids Chicago conference 2015.  Next up is David Samra of Aritsan Partners who pitched RBS.


David Samra's Invest For Kids Chicago Presentation

•    Stock pitch is RBS.
•    Generally don’t like banks. 13 years, first ten didn’t own any banks.
•    Everybody hates banks.
•    Banks are generally difficult investments as money is commodity and banks are inherently leveraged.
•    When economic conditions are good, loan underwriting is sloppy and regulatory oversight is weak. Valuations then trade at a premium to book value.
•    Versus FY08, funding structure has improved. For RBS deposits has since doubled and use of repos has diminished as well as commercial paper issuance.
•    Complexity has decreased overall for banking. Similar trends for the UK.
•    P/BV multiples have went from over 2.0x to in some cases below book.
•    Today banks are better funded, higher quality assets, significant liquidity and trade at lower valuations.
•    Don’t want to be in them forever.
•    Right now 965B in gross assets, 44.5B of tangible equity and 586MM of pretax income. Going forward looking at 480B of assets, 25B of tangible equity and 4.4B of pre-tax.
•    Bailed out twice. UK gov owns 73% of shares outstanding, effectively nationalized. Mgmt has been selling assets and simplifying operations.
•    Sold off a trillion pounds of assets. Equity has increased from 36.4B to 44.5B.
•    16% tier 1 capital ratio. Highest amongst large banks.
•    Continue to sell assets and slim down to a retail/commercial bank. Shrink the investment bank. Wil take 3-5 years.
•    Top 5 banks control most of the market.
•    Thinks the core bank value should trade at 1.7x bv and 13.5x earnings or 43B, plus excess capital no longer required to support non-core assets (RWA of 150Bn) or 18B.
•    Need to deduct fines, write downs, etc. of 13BN
•    Add 16bn of earnings over next five years, estimated mkt value of 64bn versus 36bn  current market cap.
•    Risks government ownership – significant headline risk concerning fines, restricting, diminished asset liquidity and economic recession – time delay.


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Rupal Bhansali Long GSK & Baidu: Invest For Kids Chicago Presentation

We're posting up notes from the Invest For Kids Chicago conference 2015.  Next up is Rupal Bhansali of Ariel Investments who pitched longs of GlaxoSmithKline and Baidu (BIDU).


Rupal Bhansali's Invest For Kids Chicago Presentation

•    GSK – UK Pharma company with three pillars to the franchise – (1) respiratory franchise with 50% market share, growth industry. Very hard to enter respiratory biz.
 •    Advair was a victim of its own success. Believes Advair bear case has already played out. •    Competition for blockbuster drug, Advair is priced in.
•    2) Vaccines – market leader in business with high barriers to entry. Margin upside from purchasing Novartis vaccines biz. Vaccines one of the highest barriers to entry biz in the world. Only 4-5 manufacturers of vaccines.
•    Consumer – strong brands such as Flonase, Aquafresh, Theraflu and new mgmt. team with a mandate to double the margins. New mgmt. team from L’Oreal.
•    Internet penetration of 48% vs 75% - 80% in developed mkt.
•    Trades at 16x fwd. EPS and 6% div yield. Margins set to improve to high 20%/30% ROIC.


•    Second idea is Baidu (BIDU).
•    Baidu = Google + Expedia + YouTube + Opentable + Groupon.
 •    Internet penetration of 48% vs 75% - 80% in developed mkt.
•    “Silicon Valley of China”
•    Down 33% over past year due to a profit warning.
•    Back to $200, might have some hiccups and could have better entry point
•    3rd inning in 9 inning game. So still good capital appreciation over lt time view.
•    Not a family ran business, more like a corporate Anglo-Saxon business. CEO went to Stanford.
•    Conservative as they spend through the P&L investments made in core biz versus capitalizing.


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David Heller Long Berry Plastics: Invest For Kids Chicago Presentation

We're posting up notes from the Invest For Kids Chicago conference 2015.  Next up is Cloud Gate Capital's David Heller who pitched long Berry Plastics (BERY).


David Heller's Invest For Kids Chicago Presentation

•    Long position in Berry Plastics (BERY).
•    Largest consumer plastic packaging biz in the world. Low oil a tailwind although a pass through.
•    $5B in sales.
•    Acquired Avintiv, global leader in the plastic nonwoven fabrics industry. Paid 8.1x EBITDA pre synergies/6.9x after synergies. Combined sales $7.2B and $1.2B of adj EBITDA.
•    $500MM FCF or 11.7% FCFE yield.
•    Why does the opportunity exist? Doesn’t make strategic sense, desperate move to achieve volume growth.
•    Contrary 9/10 top Avintiv customers overlap, purchasing power in polypropylene, faster growing energy markets.
•    2nd bear case – leverage is high once again to 5.2x. Argument is stable biz, locked in financing, delivering 0.5x per year. Debt markets very comfortable with leverage financing 100% at 4.3%.
•    Third bear case is melting ice cube. Think it grows with wage inflation, food dilation, population growth, etc.
•    Trades at 50% discount on a FCF basis and 10% disc on an EBITDA basis.
•    7%-8% FCF yield, could be worth $51 to $58, using conservative projections which gives you 25.8% - 35% IRRs.
•    Catalysts for growth such as new products, or acceleration of rev growth.


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Andy Greenberg Long NXRT: Invest For Kids Chicago Presentation

We're posting up notes from the Invest For Kids Chicago conference 2015.  Next up is Andy Greenberg of Saker Management who pitched NXRT.


Andy Greenberg's Invest For Kids Chicago Presentation

•    Event driven firm.
•    Idea is NXRT.
•    Externally managed REIT spun off from the NHF closed-end fund.
•    Class B rental pricing driven upwards. Class B units negative.
•    Advisors own 16% of stock and can own up to 25%.
•    Focused in Dallas and Atlanta, expanding elsewhere.
•    FFO $1.28 per share. Should be around ~$1.4. 30% of market cap in cash. Reserved for renovations/upgrades.
•    FFO - $1.6 by 2016.
•    6% div yield. Under 10x FFO.
•    Larger comps over 20x and smaller comps low double digits.
•    Valuation challenge – market cap, gross leverage high, variable rate debt and potential rental rate pressures in a recession.
•    Think leverage manageable, shorter holding period dividend covered at higher rates.
•    Think portfolio could be sold, private market transactions at higher prices. Company is frustrated with stock performance.
•    Poorly conceived structure out the great. Better in a private structure.
•    Advisor fee can be cancelled with no fee to the advisor.
•    CEO of Highland owns $45MM of stock.
•    Think this could trade higher than $20 by Fy17.


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Barry Sternlicht & Michael Sacks' Talk at Invest For Kids Chicago

We're posting up notes from the Invest For Kids Chicago conference 2015.  Next up is a conversation between Barry Sternlicht (Starwood Capital) and Michael Sacks (GCM Grosvenor).


Barry Sternlicht & Michael Sacks at Invest For Kids Chicago 2015

•    Barry started off at JMB working with the Bluhm family and Malkin.
 •    Left JMB in 91 and started Starwood with $21MM.  Today $51B real estate management firm.
•    Chicago as a real estate market? Great place dynamic city, lots to do. Started two hotel – (one hotel which is green), Baccarat hotel chain – sold for the highest price ever for a hotel to a Chinese buyer.
•    Mall management business based out of Chicago.
•    Pretty strong market. Don’t really play as it’s hard to understand and the supply factors.
•    Have been buying in the tax free states.
•    Agnostic to where he invests – looks for best returns but spends most of his time in real estate.
•    Wants to add value no financial engineering.
•    Buy malls and re-tenants them, redesign, etc.
•    Favorite markets/asset classes in real estate? Thinks high rise residential in midtown will be in a free fall, Arabs and Russians are gone, Chinese are fickle. Wants to short it.
•    Thinks the apartments he bought from Zell are good, a single not a home run, double digit cash flow yields.
•    Slow growth is good for them, doesn’t induce new supply and move interest rates.
•    NYC hotels overbuilt.
•    Canadians bigger tourists versus Chinese. CAD decimated.
•    LT NYC great but short term is hard.
•    REITs aren’t trading well due to flow of funds.
•    Rates up, REITs get killed due to dividend chasers.
•    Credit guys tend to be smarter, focused on cash flow versus equity guys focused on the multiple to put on cash flow which is subjective.
•    Thinks Japan is a big Ponzi scheme. ETF volume in Japan driven by government.
•    Real risk in world is central banks printing money. Printing money and buying real assets doesn’t seem kosher to him.
•    Correlations in stock market picking up.
•    Likes natural gas. Will displace coal.
•    Thinks you’ll see incredible crashes in HY market.
•    All bad actors in the world need higher oil prices.
•    Double digit cash yield on the box, bet on the demographics half of it was south Florida. Miami is the Singapore of the USA.
•    Denver as well, young people like Denver and bought Seattle. Americans not buying houses. Ppl marrying later.
•    Trillion dollars of student debt can’t afford houses.
•    Don’t intend to own those apartments purchased from Sam for 30 years just 5. Highest quality apartments in the class.


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Sam Zell & Andrew Litt on Real Estate: Invest For Kids Chicago

We're posting up notes from the Invest For Kids Chicago conference 2015.  Next up is Sam Zell (Equity Group) and Andrew Litt (Land & Buildings) who talked about real estate.


Sam Zell & Andrew Litt at Invest For Kids Chicago 2015

•    Andrew met Sam 22 years ago while on the road show for Manufactured Home Communities. He was employed on the sell-side at that time.
•    Equity Residential recently sold $5B of real estate/apartments to Barry Sternlicht of Starwood.
•    Is Sam calling a top of the RE market?
•    Always been very disciplined and sold Equity Office before the last downturn as he thought someone offered him more than what they were worth. In case of apartments – different story.
•    Went public in 1993 - $800MM EV garden apartments.
•    Garden apartment – expressway visibility – “selling them shit”
•    Sam thinks the future was in high rise versus low rise, changing the company and upgrading portfolio. Suburbs sold, focus on 7 core markets. Envisioned selling it over 3 years, but had an opportunity to do it all at once at an attractive price and so he did it.
•    “Barry bought well maintained well occupied good assets which should be 75% leveraged versus 30%”.
•    Thinks it’s a win win for both.
•    Zell’s perspective concentrates them on where they want to be and return capital on a pro-rata basis.
•    On Equity Commonwealth – didn’t want to join activist campaign but said if they win, would take it over and finish it the last mile and got an option to purchase third of the activist’s position.
•    Didn’t buy/identify those assets and did analysis of opportunity – unusual situation as they could liquidate huge amounts of the portfolio without generating gains.
•    EQR had to distribute the proceeds, in Commonwealth’s case, liquidate assets pile up cash and keep control.
•    Purchased 10/15 years ago sold with no profits so that’s an indictment of the externally managed process (i.e. RMR’s management were terrible). Every day not buying their selling.
•    Didn’t have a hard time concluding that they should liquidate some of the assets.
•    Baseball adage – in the 8th inning on commercial real estate.
•    Once you get to the 9th inning – value dramatically dictated by quality of assets. High quality assets minor alterations but the marginal items in historical pricing is where you will see an impact in value.
•    US doing great today but the rest of the world isn’t. Starting to see the impact.
•    The disparity between B/A asset will increase.
•    Thoughts of activism? Thinks activism in most cases is another word for ownership. Biggest fallacy in capital markets is that companies are not “owned”.
•    Companies will be better out of activism. There are some good guys and some bad guys.
•    Not many viable opportunities as there is cash piling up.
•    Sending back $5.4B at EQR as they don’t think the cash can be invested at attractive returns. That is an ownership decision.
•    Where are you seeing opportunities? Difficult to broadly identify where there is significant demand.
•    Always steals/opportunities but don’t remember a signal period in his career where broad generalizations where irrelevant.
•    Investing in western Mexico – manufacturing is going there, other parts is weak.
•    Enormous amounts of liquidity and financing at attractive rates = lots of competition which is destructive.
•    Any place to use his grave dancer status? Energy sector. Haven’t seen all of the ramifications. Banks are just starting to redo their lines, and twill see the security they had wasn’t their anymore.
•    Most attractive at the moment.
•    You have to assume oil prices aren’t going to zero but you don’t need to bet that they go $70, don’t need that to win.
•    Looking for forced sellers – keep drilling or jettison midstream assets? Might find the midstream assets attractive (PARR)
•    Brazil? Went into Brazil early created a couple significant companies sold all buy one at higher prices. Brazil 180MM people, still growing although slowing.
•    PBR/scandals and political situation is the elephant in the room.
•    Less competition there now.
•    Institutions there are prepared to take discounts to clear the market.
•    Single bank hasn’t taken a single voluntary write off.
•    Thinks rates too low for too long.


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Stan Druckenmiller's Dealbook Conference Interview

Legendary investor/trader Stan Druckenmiller appeared at The New York Times Dealbook conference recently and was interviewed by Andrew Ross Sorking.  They talked about a myriad of topics related to the economy, markets, and investing.

He says he doesn't know what the Federal Reserve's endgame is, but that it's going to end badly.

"Everybody's managing for the short-term now, and that's the problem with the Fed."

Druckenmiller paid special attention to the elevated level of stock buybacks and noted that corporations buyback stock when speculation is rampant.

He says he's anticipating chaos but is "playing around like everybody else.  I'm watching and leery and ready to move."

In equities, he's "working under the assumption that we may have started a primary bear market in July."  He's said he was short value stocks and the Euro.

While it sounds like he covered shorts in the recent volatility, he has also been neutral/long the high beta and high growth plays; companies that he thinks will do well with low/nominal growth.  He pointed out his fondness for Amazon (AMZN) because they're constantly investing in their future and their dominating AWS platform.

On the market in general, he noted "I could see myself getting really bearish.  I can't see myself getting really bullish, so I'm kind of on the sidelines in equities in terms of exposure."

On being a successful investor, Druckenmiller says one of his biggest assets is his openness and ability to change his mind very quickly.

On shorting, he opined that "It's very hard to short stocks.  It sounds great in theory,  it's very difficult because you're basically playing against the house."

Embedded below is the video of Druckenmiller's interview:

Carl Icahn's Dealbook Conference Interview

Activist investor Carl Icahn recently appeared at The New York Times Dealbook Conference.  Andrew Ross Sorkin interviewed him and talked about markets and activist investing.

"The real money I've made over the years is holding companies for 7, 8, or 9 years.  You gotta buy them when nobody wants them, that's the real secret.  It sounds very simple, but it's very hard to do."

On the Fed, he said he agrees with Stanley Druckenmiller and we could be walking into a minefield there.

Icahn also talked about how 'easy money' is affecting companies.  They're buying back tons of stock, inflating their earnings and not in any way showing you the real earnings.  He also noted that certain less attractive companies have been getting access to cheaper capital.

We've highlighted some of Icahn's recent portfolio activity here.

Embedded below is the video of Carl Icahn's Dealbook conference interview:



For more from this conference, be sure to also check out Stan Druckenmiller's interview at the Dealbook conference.

What We're Reading ~ 11/4/15

Evaluating sustainable competitive advantages [Symantaka]

99% of long-term investing is doing nothing; it's the other 1% [Morgan Housel]

The third emotion of investing [Insecurity Analyst]

Daniel Kahneman on intuition and the outside view [Compounding My Interests]

Software is the new oil [AVC]

China's money exodus [Bloomberg]

The unbelievable power of Amazon Web Services [The Atlantic]

How to maximize value of using Finance Twitter [BarbarianCap]

Michael Wolf's predictions on tech and media [Business Insider]

Comcast's weapon to take on wireless giants: Wifi hotspots [Bloomberg]

Interview with Fox's James & Lachlan Murdoch [Hollywood Reporter]

Death rates rising for middle-aged white Americans [NYTimes]

Third Point's Q3 Letter on Baxter, Seven & i Holdings

Dan Loeb's hedge fund firm Third Point in its third quarter letter talks about its investments in Baxter and Seven & i Holdings in Japan.

Regarding Baxter, Third Point has joined the board and helped select the new CEO.  They see an execution and portfolio reshaping story as well as margin expansion.

Third Point also owns Japan's Seven & i Holdings (which owns the 7-11 convenience stores).  They think the company should get rid of its underperforming Ito Yokado stores to become a pureplay on convenience stores.  As with some of their other theses in Japan, they're also looking for the company to eventually focus on capital return via buybacks and dividends.

Embedded below is Third Point's Q3 letter:



We've also highlighted other recent shorting activity from Third Point.

Eminence Capital Ups Pandora Stake

Ricky Sandler's hedge fund firm Eminence Capital has filed a 13G with the SEC regarding shares of Pandora Media (P).  Per the filing, Eminence now owns 5.6% of the company with over 12 million shares.

This is up from the around 10 million shares Eminence owned at the end of the second quarter.  The new filing was made due to activity on October 23rd.

We've highlighted other recent portfolio activity from Eminence here.

Per Google Finance, Pandora is "a provider of Internet radio services. The Company offers personalized experience for each of its listeners wherever and whenever they want to listen to radio on a range of smartphones, tablets, computers and car audio systems, as well as a range of other Internet-connected devices. In addition, Pandora offers local and national advertisers to provide targeted messages to its listeners using a combination of audio, display and video advertisements. The Company has operations in the United States, Australia and New Zealand. The Company enables each of its listeners to create up to 100 personalized stations. Its technologies include Music Genome Project, Comedy Genome Project, Playlist Generating Algorithms, Pandora User Experience, Pandora Mobile Streaming, Automotive Protocol, Pandora API and Tv.pandora.com. The Company provides its services through two models, which include Free Service and Pandora One."

For more from this hedge fund manager, check out Ricky Sandler's appearance on Wall Street Week.

David Tepper's Latest Interview

CNBC's Kelly Evans sat down with David Tepper of Appaloosa Management at Carnegie Mellon University recently.

Tepper said that the ECB and China surprisingly eased but his firm has been cautious on the stock market because of margins and other things.

He said that, "You have to keep some cash on the sidelines, have a diversified portfolio."  He also noted he doesn't love the bond market right now.

On General Motors (GM), Tepper said that it's leveraged to the US economy and they're doing better than other folks in China.  He thinks management is doing a good job there.

Tepper also likes HCA (HCA) adding to the position recently as he thinks it's been hit too hard.

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



If you missed it, be sure to check out Tepper's previous interview from a few months ago where he said he was "not as bullish as I could be."

Viking Global Increases Pioneer Natural Resources Position

Andreas Halvorsen's hedge fund firm Viking Global has filed a 13G with the SEC regarding its position in Pioneer Natural Resources (PXD).  Per the filing, Viking now owns 6% of PXD with over 8.96 million shares

This is up from the 6.39 million shares Viking owned at the end of the second quarter.  The filing was made due to activity on October 20th.

On the other side of this trade of course has been David Einhorn who has been short PXD.

We've highlighted other recent portfolio activity from Viking Global here.

Per Google Finance, Pioneer Natural Resources is "an independent oil and gas exploration and production company with operations in the United States. The Company focuses on production of oil, natural gas liquid (NGLs) and gas through development drilling, production enhancement activities and acquisitions of producing properties. The Company's properties include Spraberry/Wolfcamp oil field located in West Texas; the liquid-rich Eagle Ford Shale field located in South Texas; Raton gas field located in southern Colorado; the West Panhandle gas and liquids field located in the Texas Panhandle, and the Edwards gas field located in South Texas. The Company's operations include well stimulation and hydraulic fracturing. The Company's proved reserves include approximately 89 million Bbls (MMBbl) of oil, 42 MMBbls of NGLs and 317 billion cubic feet (Bcf) of gas. The Company owns interests in six gas processing plants and eight treating facilities.."

SPO Advisory Trims Resolute Energy Stake

John Scully's investment firm SPO Advisory has filed a 13G with the SEC regarding its position in Resolute Energy (REN).  Per the filing, SPO now owns 19.3% of the company with 14.99 million shares.

This is less than the 17.11 million shares they reported owning at the end of the second quarter.  The filing notes they sold 2 million shares on October 28th at prices between $0.47 and $0.4991.  Shares of REN are down over 59% over the past six months.

Per Google Finance, Resolute Energy Corporation "is an independent oil and gas company. The Company is engaged in the exploitation, development, exploration for and acquisition of oil and gas properties. The Company's asset base consists primarily of properties in Aneth Field located in the Paradox Basin in southeast Utah (the Aneth Field Properties or Aneth Field), the Permian Basin in Texas and southeast New Mexico (the Permian Properties or Permian Basin Properties), and the Powder River and Big Horn Basins in Wyoming (the Wyoming Properties). Approximately 86% of its estimated net proved reserves were oil and approximately 92% were oil and natural gas liquids (NGL). The Company has an interest in gas gathering and compression facilities located within and adjacent to its Aneth Field Properties. Collectively called the Aneth Gas Processing Plant, the facility consists of an active gas compression operation operated by it and a dismantled gas processing facility."

Trian Partners Boosts Pentair & Bank of New York Mellon Stakes

Nelson Peltz's activist investment firm Trian Fund Management has submitted two filings to the SEC recently.

First, per a Form 4 filed with the SEC, Trian Fund Management has increased its stake in Pentair (PNR).  Per the filing, Trian acquired 265,000 shares on October 22nd at weighted average prices of between $54.7093 and $56.2684.

After these buys, Trian now owns over 13.27 million shares of PNR.

Second, per another Form 4, Peltz's firm has purchased 285,000 shares of Bank of New York Mellon (BK) on October 21st at a weighted average price of $41.3396.  After these purchases, Trian now owns over 30.51 million shares of BK.

For more on this fund, we also posted up Trian's presentation on its new stake in General Electric.

Per Google Finance, Bank of New York Mellon is "a provider of financial products and services in domestic and international markets. Through its two principal businesses, Investment Management and Investment Services, it serves institutions, corporations and high net worth individuals. For institutions and corporations, it provides investment management, trust and custody, foreign exchange, fund administration, global collateral services, securities lending, depositary receipts, corporate trust, global payment/cash management, banking services and clearing services. For individuals, it provides mutual funds, separate accounts, wealth management and private banking services. BNY Mellon’s investment management businesses provide investment products in different asset classes and investment styles."

Per the company's website, Pentair is "a global water, fluid, thermal management, and equipment protection partner."

Kingstown Capital Files 13D on Aerojet Rocketdyne

Michael Blitzer's hedge fund firm Kingstown Capital has filed a 13D with the SEC regarding shares of Aerojet Rocketdyne (AJRD).  Per the filing, Kingstown now owns 5.5% of the company with 3.5 million shares.

This is up slightly from the 3.4 million shares they owned at the end of the second quarter.  The 13D filing contains the standard boilerplate that they purchased shares because they thought it was undervalued and they may talk to management from time to time.

We've posted previous portfolio activity from Kingstown here.

Per Google Finance, Aerojet Rocketdyne Holdings, Inc., formerly GenCorp, Inc., "is a manufacturer of aerospace and defense products and systems. The Company develops and manufactures propulsion systems for defense and space applications, and armaments for precision tactical and long-range weapon systems applications. It has two operating segments: Aerospace and Defense, and Real Estate. Its Aerospace and Defense segment includes the operations of its subsidiary Aerojet Rocketdyne, Inc., which is engaged in designing, developing and manufacturing aerospace and defense products and systems for the United States Government, including the United States Department of Defense (DoD), the National Aeronautics and Space Administration (NASA), aerospace and defense prime contractors, as well as portions of the commercial sector. Its real estate segment includes activities of its subsidiary Easton Development Company, LLC related to the re-zoning, entitlement, sale, and leasing of its excess real estate assets."

Broyhill's Research Notes on Time Warner (TWX)

Broyhill Asset Management about a month ago penned research notes on shares of Time Warner (TWX).  With all the talk of the content bundle coming apart, Broyhill sees downside risk around $65-70 per share, while TWX trades around $72 currently.

They take a look at the company's Turner division, Warner Brothers, HBO, and subscriber losses to outline the various risks in the investment.

They conclude that, "Putting it all together, we see $40B of value at Turner even assuming that accelerating subscriber losses result in significant earnings shortfalls and continued multiple compression. We see $20B of value at WB backed by attractive intellectual property and broader distribution driving pricing for content. At almost any reasonable multiple for HBO, we have a very difficult time justifying today’s $80B enterprise value of Time Warner even under very challenging assumptions."

Embedded below are Broyhill's research notes on Time Warner:

Point72's Doug Haynes on Wall Street Week

Point72 Asset Management's President Doug Haynes just appeared on Wall Street Week.  Point72, of course, is Steve Cohen's latest investment vehicle after he closed SAC Capital.  While SAC managed outside money, Point72 emerged as a family office to manage internal assets.

Point72's mission statement is threefold: to be the premier asset management firm (generate highest risk adjusted returns), have the highest ethical standards, and offer the best opportunities for the brightest talent.

Haynes said that the proliferation of hedge funds has really ratcheted up competitiveness in the market and has also increased crowding.  He mentioned they looked at the amount of alpha available and over the last 20 years it's down by half.  He notes, "The cost of being excellent in the industry keeps going up."

We previously linked to how Point72 has started an academy for analysts.

Haynes said that they like the healthcare sector and retail/consumer sectors now.  He notes they're looking at the innovation pieces of the economy.

Embedded below is the video of Haynes' interview on Wall Street Week:



Be sure to also check out Donald Drapkin's appearance on Wall Street Week as well as Ricky Sandler's interview.

Oaktree Capital's Howard Marks: Latest Memo

Oaktree Capital's Chairman Howard Marks has released his latest memo.  It is entitled "Inspiration from the World of Sports" and obviously highlights the parallels between investing and sports.

This is a concept Marks has touched on before, where he talked about how they're similar: both competitive, both quantitative (can see results), meritocracies, team-oriented, and satisfying when you win.

Tiger Management's Julian Robertson has identified competitiveness as one of the top attributes he looks for in hedge fund managers.

Other similarities can be made when comparing poker to investing/trading as well. 

In the end, Marks concludes that one of the key lessons from sports is that, "For most participants, success is likely to lie more dependably in discipline, consistency and minimization of error, rather than in bold strokes - high batting average and an absence of strikeouts, not the occasional, sensational home run."

Embedded below is Marks' latest memo, "Inspiration from the World of Sports:



You can download a .pdf copy here.

For more from this manager, head to Mark's memo on

Glenview Capital Adds To FMC & Tenet Stakes, Trims Flextronics & Community Health Stakes

Larry Robbins' hedge fund firm Glenview Capital has made numerous portfolio adjustments recently.  Below are the details of the various SEC filings they've made.

Increases FMC Position

Glenview has filed a 13G with the SEC on shares of FMC Corporation (FMC).  Per the filing, Glenview now owns 5.01% of the company with over 6.69 million shares.

This is up from the 4.8 million shares they owned at the end of the second quarter.  The filing was made due to activity on October 12th.

Per Google Finance, FMC is "a diversified chemical company. The Company serves agricultural, consumer and industrial markets with solutions, applications and products around the world. The Company operates in three business segments: FMC Agricultural Solutions, FMC Health and Nutrition, and FMC Lithium. The Company's FMC Agricultural Solutions segment develops, markets and sells three classes of crop protection chemicals, which include insecticides, herbicides and fungicides. The FMC Health and Nutrition segment focuses on food, pharmaceutical ingredients, nutraceuticals, personal care and similar markets. The pharmaceutical additives are used for binding, encapsulation and disintegrant applications. The Company's FMC Lithium segment manufactures lithium products."


Reduces Flextronics Exposure

Second, the hedge fund has also filed a Form 4 with the SEC regarding its position in Flextronics (FLX).  Per the filing, Glenview sold 20 million shares at $11.1 on October 22nd.  After this transaction, they still own 55.13 million shares.

Per Google Finance, Flextronics is "a Singapore-based provider of global supply chain solutions. The Company designs, builds, ships and serves packaged electronic products for its original equipment manufacturers (OEMs) in various groups. The Company offers a range of design and engineering services that relate to manufacturing (including enclosures, metals, plastic injection molding, precision plastics, machining, and mechanicals), system integration and assembly and test services, materials procurement, inventory management, logistics and after-sales services (including product repair, warranty services, re-manufacturing and maintenance), supply chain management software solutions and component product offerings (including rigid and flexible printed circuit boards and power adapters and chargers)."


Trims Community Health Systems Stake

Third, Larry Robbins' hedge fund has filed a Form 4 with the SEC indicating they've reduced their stake in Community Health Systems (CYH).  Per the filing, Glenview sold 279,074 shares on October 22nd at weighted average prices of $27.7284 and $26.8947 with about a third of the sales occurring at $30.08.

After these sales, Glenview still owns 11.81 million shares of CYH.

Per Google Finance, Community Health Systems is "a hospital company and an operator of acute care hospitals in communities across the United States. The Company provides healthcare services through the hospitals that it owns and operates in non-urban and selected urban markets throughout the United States. It operates in two operating segments: hospital operations and home care agencies operations. Its hospital operations include the Company's acute care hospitals and related healthcare entities that provide inpatient and outpatient healthcare services. Its home care agencies operations provide in-home outpatient care. Services provided through its hospitals and affiliated businesses include general acute care, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic, psychiatric and rehabilitation services. It provides a range of hospital healthcare services and other outpatient services to patients in the communities in which the Company is located.."


Adds to Tenet Healthcare Position

Last, Glenview also increased its holdings of Tenet Healthcare (THC).  Per a Form 4 filed with the SEC, Glenview acquired 500,000 shares total on October 22nd at weighted average prices of $28.8656 and $29.8034.  After these buys, Glenview now owns over 16.99 million shares of THC.  As we've detailed previously, Glenview has previously been out buying THC in October.

Per Google Finance, Tenet Healthcare is "a healthcare services company. The Company operates regionally focused, integrated healthcare delivery networks in large urban and suburban markets. As of December 31, 2014, it operated 80 hospitals, 210 outpatient centers, six health plans and Conifer Health Solutions, LLC (Conifer), which provides healthcare business process services in the areas of revenue cycle management, value-based care and patient communications. It provides operational management for revenue cycle functions, including patient access, health information management, revenue integrity and patient financial services. It also offers communications and engagement solutions to optimize the relationship between providers and patients. Conifer operates a management services business that supports value-based performance through clinical integration, financial risk management and population health management. It has two operating segments: Hospital Operations and other, and Conifer.."

What We're Reading ~ 10/22/15

10 poor investment theses [Irrelevant Investor]

The case against short selling [Long Short Trader]

The five "why's" in problem solving [Wallbuilder]

The danger of 1-year performance numbers [A Wealth of Common Sense]

Latest post from the Valeant (VRX) bear camp [Bronte Capital]

How bad will it get for American Express? [Bloomberg]

China is not collapsing [Project Syndicate]

Kingmakers of China's internet: Baidu, Alibaba and Tencent [WSJ]

A look at wireless tower stocks [Barrons]

Tribune Media shares at a 50% discount [Barrons]

Fossil Group (FOSL): a value stock with temporary problems? [Value & Opportunity]

Netflix is creating a cordless nightmare for traditional media [Institutional Investor]

Light beer gets in touch with serious side [WSJ]

Auto parts retailers' immunity to Amazon drives stock surge [Bloomberg]

Why investors don't fund dating [Andrew Chen]

Robots and us [MIT]

Notes From Lee Ainslie's Talk at Citi Australia Conference

Maverick Capital's founder Lee Ainslie recently presented at the Citi Conference in Australia and below are some notes from the event.

Notes From Lee Ainslie's Talk at Citi Australia Conference 2015

Founded Maverick in 1993
Ex Tiger Cub
Engineering degree
$10bn FUM
Typically 100 positions, 37 investment staff
2/3 of capital is from the profits they have made
Med and Large cap, 75% gross in US
The hedge fund targets 135% long 90% short
Focusses on stock specific risk and portfolio risk
Don't think looking at net long, gross, volatility, beta etc is that useful for them. They used to do that, but it changed 4 yrs ago as it doesn't adequately look at the risk
Constantly stress test portfolio - how would it have performed in 08 or other crises?
Invest in stocks that perform well in bad markets
Very atuned to what their peers are doing so they don’t get caught up in HF loved stocks (MF note: Their Q2 13F as of June 30th shows they held positions in some hedge fund hotels such as VRX (though they were reducing the stake), AGN, CHTR, PCLN, LBTYK, FLT, TDG and a few others ~ but obviously their portfolio might have changed since then)

Focus on 3 factors: Stock dispersion,  intra stock correlation, equity volatility 

Volatility has been subdued for a while now but sudden spike last 2 months
BUT even with spike still below LT avg, can go much higher
Went 49yrs never hit that level from 1939-1988?
10 yrs 1988 - 98
4yrs 98-02
6yrs 02-06
Volatility spikes are becoming more frequent which is good for HF's 

Volatility of other asset classes running above LT avg - 10yr trading 199% of LT avg vol. Oil 126%
Dispersion of stock prices has been very low for 5yr period.. not good for HF's
When dispersion is high HFs outperform 

Stock correlation is very high - meaning stocks reacting more to macro than fundamental
Lower correlations equal better returns
Country policy convergence is widening which is good for HFs.. eg China vs Europe vs US
First time Eu and Fed have had conflicting policy = lower correlation 

They see these headwinds as becoming tailwinds - i.e. vol will go up, dispersion will increase, stock correlation will reduce.
HF's have been poor performers in recent times, but that could change as environment will help them 

HFs reduce gross in high vol but they are such a large % of mkt they all take off gross at same time and hence large moves 

Thinks the 3 key things that happened in fin crisis 
1. Short bans
2. Worries about PB's not having stock available
3. Survival of financial institutions called into question 

All 3 unlikely to happen again in next crisis  

HFs are currently very defensive... good contrarian indicator
Stocks always over-react on down side so need to be in a position to buy the crisis sell offs
Risky stocks sell off first.. avoid them   

Question & Answer Session  

Where has his performance come from?  

In early may net and gross was on their LT avgs
Indicator of changing risk was peaking which set off alarm bells
HFs had high exposure to stocks which don’t perform well in down mkts, so they pulled back risk
Stuck to stocks which outperform in down mkts
Looked at which stocks did well in crisis
Always debate merits of individual positions weekly - 3hr meeting
Also have a top down meeting once a week with chief PMs on where their risks are
Returning money when don't see opportunities builds confidence within investor base.. don't want to be too large and damage performance if you can’t use it. Wont be better off in the long run 

Thoughts on China? 

Cautious view, worse than ppl think. More than half of every listed company delisted themselves(?) The damage to investor confidence in that scenario is bad. Too many rules, scares investors, people dont want to put their money in as risk it gets locked up. Less tools for them now to be reponsive and hence why the devaluing is continuing. They are neutrally postured. Have equal amount long and short in terms of revenue from China. No active bets 

Has he found Australia good for alpha? Best idea here? 

No exposure currently due to Superannuation - so much capital trapped domestically so valuations are too high on global standards. Not short though as doesn't think that is a bubble that will burst soon. (For those unfamiliar: Superannuation is an Australian pension system where employers take 9% of gross wage and it goes into a regulated pension saving on behalf of the employee.  Most of it typically goes into Australian listed shares and property, so for that reason these assets are often overvalued when looking at global multiples so it's harder for offshore funds to invest as they have to pay up.)  

View on liquidity? 

On fixed income side scares him to death. The day Gross left Pimco he tried to make a few changes and it moved treasury markets big time. The % Maverick trade electronically has sky rocketed  

View on ETFs? 

ETFs can be big problem for investors but doesn't worry about them as much as most. Can create dynamics that are not good in the short term but can create opportunities. Some don’t work as advertised under periods of stress. Possibly an opportunity when it happens 

Fed rates? 

Surprised they didn't raise in Sept - unless data weakens will be very surprised if they dont raise in the 1st 6 months next yr. Holds consensus view 

Portfolio weighting US vs Asia? 

Portfolio very heavily weighted to US vs Asia - always been there, better relationships with mgmt etc. Quality of companies very high in US. 3/4 of port is in US which is LT avg (that is % of gross)


For more on this manager, we've posted up some of Maverick Capital's recent activity.

Pennant Capital Reduces Universal Stainless & Alloy Stake

Alan Fournier's hedge fund firm Pennant Capital has filed an amended 13G with the SEC regarding its position in Universal Stainless & Alloy (USAP).  Pennant now owns 9.9% of the company with 703,219 shares. 

This is down from the 1.14 million USAP shares they owned at the end of the second quarter.  The filing was made due to activity on October 21st.

As we've highlighted previously, Pennant has been slowly trimming its USAP stake for a while now and shares are down around 56% over the past six months.

Per Google Finance, Universal Stainless & Alloy "manufactures and markets semi-finished and finished specialty steel products, including stainless steel, nickel alloys, tool steel and certain other alloyed steels. The Company's manufacturing process involves melting, remelting, heat treating, hot and cold rolling, forging, machining and cold drawing of semi-finished and finished specialty steels. The Company's products are sold to service centers, forgers, rerollers, original equipment manufacturers (OEMs) and wire redrawers. The Company also performs conversion services on materials supplied by customers. The Company's products are manufactured in a range of grades and melt qualities, including argon oxygen decarburization (AOD), electro-slag remelted (ESR), vacuum induction melting (VIM) and vacuum-arc remelted (VAR)."

Invest For Kids Chicago Conference 2015 ~ Discount For Readers

The seventh annual Invest For Kids Chicago Conference is coming up in a few weeks and space is limited.  The event features prominent hedge fund managers sharing investment ideas to benefit underprivileged children in Chicago.

Discount For Our Readers

Readers receive $100 off the price of a Professional Ticket using discount code MARKETFOLLY (it's case sensitive.)  This discount expires November 2nd.  Click here to register.

Event Details

When: November 4th, 1:30-5:30 PM
Where: Harris Theater, Chicago

Speakers List

John Burbank, Passport Capital
Ricky Sandler, Eminence Capital
Steve Tananbaum, GoldenTree Asset Management
Sam Zell, Equity Group Investments
Andy Hall, Astenbeck Capital
James Flynn, Deerfield Capital
N. David Samra, Artisan Partners
Barry Sternlicht, Starwood Capital Group
Soren Aandahl, Glaucus Research
Rupal Bhansali, Ariel Investments
Jonathan Litt, Land and Buildings Investment Management
Michael Sacks, GCM Grosvenor
Emerging Managers: Andy Greenberg, Saker Management & David Heller, Cloud Gate Capital

You can learn more about the event and buy tickets at www.investforkidschicago.org

Lee Cooperman's 7 Reasons For Market Upside

Omega Advisors founder Lee Cooperman recently appeared on Bloomberg TV and outlined seven reasons for market upside.  Here's his rationale:

1. This would be the first market peak that occurred without one Fed tightening.  He says on average, the market went up for 2.5 years after the first rate hike.

2. Bear markets come due to recession, overvaluation, hostile Fed, or a geopolitical event.  Those don't really seem to be present, with the caveat of the last one.

3. Markets usually peak during euphoria and he doesn't see any signs of that.

4. The stock market has already corrected recently.

5. What's the alternative to stocks... bonds yielding 2% or cash earning zero?

6. There's enormous substitution taking place of debt for equity.  Corporations are announcing big buybacks and that supports the market.

7. Valuation is reasonable

Embedded below is the video of Cooperman's Bloomberg appearance:



You can view recent portfolio activity from Cooperman here.

Tiger Global Files 13G on Pure Storage

Chase Coleman's hedge fund Tiger Global has filed a 13G with the SEC regarding its position in Pure Storage (PSTG).  Per the filing, Tiger Global now owns 17.9% of the company with over 5.24 million shares (represented by 1 million shares of Class A stock and 4.24 million shares of Class B stock which may be converted into Class A stock at 1:1 ratio at the option of Tiger.)

The filing was required due to activity on October 7th.  The company recently went public, however Tiger Global had already invested in the company when it was still private.  Tiger participated in a $225 million Series F round at a pre-money valuation of over $3 billion back in 2014, per the company's website but was also an investor prior to that round too.

Per Google Finance, Pure Storage is "a United States-based flash enterprise storage array company. The Company enables the deployment of flash in the data center. The Pure Storage FlashArray is ideal for high performance workloads, including server virtualization, desktop virtualization (VDI), database (OLTP, real-time analytics), and cloud computing. Its application includes VMware, Virtual Desktop Infrastructure (VDI), Oracle Database and structured query language (SQL) Server. Its vSphere Web Client plugin enables complete management of storage within VMware: automatically create, expand or shrink datastores, see array-side capacity and performance of each datastore, and understand real storage usage through deduplication."

Hedge Fund Links ~ 10/16/15

Thoughts on hedge funds [A Wealth of Common Sense]

A profile of Al Gore's Generation Investment Management [The Atlantic]

Inside Steve Cohen's Point 72 academy program [Business Insider]

Why people invest in hedge funds [A Wealth of Common Sense]

Big name hedge funds hit by performance woes [Bloomberg]

A September to forget for many managers [ii alpha]

Fortress plans to close flagship macro fund [WSJ]

Renaissance Technologies to shut down small fund [Reuters]

The Stanford endowment experiment [ai cio]

Hedge funds hit by fall in management fees [EuroMoney]

Six funds fined by SEC on short selling rule violations [ii alpha]

Stockpickers fail to shine in downturn [FT]

Cargill to wind down hedge fund arm [FT]

CFA, MBA, CAIA, PhD or Masters: what do hedge funds want? [eFinancial Careers]

ION's Short Altice Presentation From Sohn Conference Tel Aviv

The Sohn Conference in Tel Aviv just took place and at it Stephen Levey and Jonathan Half's ION Asset Management laid out their case for shorting Altice.

We thought it'd be relevant to highlight given that numerous hedge funds had been involved on the long side in either Numericable/Altice or both over the past year in varying capacities.

The crux of ION's thesis is that Altice has overpaid for assets and its margin targets are skeptical.  Patrick Drahi's company recently announced the acquisition of Cablevision (CVC) in the US.

Embedded below is ION's short Altice presentation from the Tel Aviv Sohn Conference:



For more on hedge fund short positions, we've posted up recent short selling activity by hedge funds as well as a recent interview with Jim Chanos.

Meritage Group Increases Axalta Coating Systems Stake

Jim Simons, founder of quant Renaissance Technologies, also has a family investment vehicle called Meritage Group managed by his son Nathaniel.  Meritage has filed a 13G with the SEC regarding its position in Axalta Coating Systems (AXTA).  Per the filing, Meritage now owns 5% of AXTA with over 12 million shares.

This is an increase of over 3.22 million shares in their position size since the end of the second quarter when they owned 8.78 million shares.  The filing was made due to activity on October 2nd.

Warren Buffett's Berkshire Hathaway is also involved in AXTA and bought around $28, slightly below where the stock is trading now.  Our most recent Hedge Fund Wisdom newsletter highlighted the thesis on AXTA if you want to catch up quickly on the name.

Carlson Capital Ups Vitamin Shoppe Position

Clint Carlson's hedge fund firm Carlson Capital has filed an amended 13D with the SEC regarding its position in Vitamin Shoppe (VSI).  Per the filing, Carlson now owns 6.94% of the company with over 2 million shares.

This is an increase from the 1.86 million shares they owned at the end of the second quarter.  The filing shows they were out buying in late July, sporadically throughout August and September, and most recently on the first two days in October at $31.70-$32.48.

Their 13D also notes they intend to continue to have discussions with management and the board about reducing the company's expenses, altering the company's capital allocation and buyback policies and the composition of the board.

Per Google Finance, Vitamin Shoppe is "a multi-channel specialty retailer and contract manufacturer of vitamins, minerals, herbs, specialty supplements, sports nutrition and other health and wellness products (VMS). The Company operates through three segments: retail, which includes Vitamin Shoppe, Super Supplements and Vitapath retail store formats; direct, which consists of its e-commerce and catalog formats, and manufacturing, which consists of the Nutri-Force manufacturing operations. The Company operates through its wholly owned subsidiary, Vitamin Shoppe Industries Inc. and Vitamin Shoppe Industries Inc.s' wholly owned subsidiaries, VS Direct Inc., Vitamin Shoppe Mariner, Inc. (VSM), VS Hercules LLC (VSH), Vitamin Shoppe Global, Inc. (VSG) and Vitapath Canada Limited (VCL)."

What We're Reading ~ 10/14/15

The psychology of risk and reward [Farnam Street]

The (non) velocity of money [Reformed Broker]

The CFA vs MBA decision [A Wealth of Common Sense]

Latest market commentary from Byron Wien [Blackstone]

The king of online gambling [Forbes]

Thoughts on Fastenal (FAST) [Base Hit Investing]

A look at Air Products & Chemicals (APD) [Bear of Burrard Street]

Stock picks from Marty Whitman's successor [Barrons]

Why interest rates could stay lower for longer than previously thought [Market Anthropology]

The social network illusion that tricks your mind [Technology Review]

Venture capital and the internet's impact [Stratechery]

Move over Louis Vuitton, here's LFX [Bloomberg]

Secrets to building a mighty network [Backchannel]

The Collected Wisdom of Seth Klarman ~ Compilation By Santangel's Review

Santangel's Review has recently compiled an excellent resource on Baupost Group's Seth Klarman.  They've gone through and compiled quotes from letters, articles, interviews, transcripts and more to highlight Klarman's views on various investing topics.

Given that Klarman is considered one of the best investors of our time, this is certainly well worth your time.

Embedded below is The Collected Wisdom of Seth Klarman:



You can download a copy here.

Thanks to Santangel's Review for compiling such an excellent resource.

New Graham & Doddsville Issue: Interviews With Alex Sacerdote & Ed Bosek

Columbia Business School's investment newsletter Graham & Doddsville is out with its latest edition.  It features interviews with Whale Rock Capital's Alex Sacerdote, BeaconLight Capital's Ed Bosek, Jane Siebels of Siebels Asset Management, as well as the gentlemen from Global Endowment Management.

Sacerdote talks about his focus on the technology sector and the 'S curve' of inflection points that is so critical to his process of finding successful tech investments.  He also lays out his thesis on Amazon (AMZN) and NetEase (NTES),

Bosek previously worked at Atticus Capital, a fund we highlighted on the site numerous times before it eventually closed. He talked about how deregulation and demutualization are big drivers of his idea generation and pitched China Resource Enterprises (SEHK:291) and Daqin Railway (SHSE:601006).

The issue also features two student pitches: a long of Tenneco (TEN) and a merger arbitrage/special situation pair of long RNF / short UAN.

Embedded below is the latest issue of Graham & Doddsville:



Be sure to also check out the previous issue of Graham & Doddsville.

Viking Global Starts Laboratory Corp Stake

Andreas Halvorsen's hedge fund firm Viking Global has filed a 13G with the SEC regarding shares of Laboratory Corp (LH).  Per the filing, Viking now owns 5.3% of LabCorp with over 5.39 million shares.

This is a newly disclosed stake for the firm and the filing was made due to activity on October 1st.

We also posted up other recent portfolio activity from Viking Global here.

Per Google Finance, LabCorp is "an independent clinical laboratory company in the United States. Through a national network of laboratories, the Company offers a range of clinical laboratory tests that are used by the medical profession in core testing, patient diagnosis, and in the monitoring and treatment of disease. The Company manages its operations through two segments: the Clinical diagnostics laboratory segment, which includes core testing, as well as genomic and esoteric testing; and the Other segment, which consists of the Company's non-United States clinical diagnostic laboratory operations in Ontario, Canada. It also provides specialty testing services in the areas of allergy, clinical trials, diagnostic genetics, women's health, cardiovascular disease, identity, forensics, infectious disease, endocrinology, oncology, coagulation, occupational testing and pain management."

Robin Hood Investors Conference 2015: Discount For Our Readers

Robin Hood invites you to the Third Annual Investors Conference.

Join us in New York City on November 16-17 for the 3rd Annual Robin Hood Investors Conference presented by J.P. Morgan and hosted by Hyatt.

Over the past two years, the Robin Hood Investors Conference has brought together the most influential policy experts, hedge fund managers, financial leaders, tech innovators, and real estate investors to share market insights and provide actionable, money-making ideas.  Their stock picks have collectively outpaced the S&P 2:1.


2015 Robin Hood Speakers List

Paul Tudor Jones, Tudor Investment Corp
John Griffin, Blue Ridge Capital
Dan Loeb, Third Point
Philippe Laffont, Coatue Management
Bill Ackman, Pershing Square
David Einhorn, Greenlight Capital
T. Boone Pickens, BP Capital
Larry Robbins, Glenview Capital
Anthony Bozza, Lakewood Capital
Jamie Dimon, J.P. Morgan
Mike Cagney, SoFi
Mary Erdoes, J.P. Morgan Asset Management
Barry Sternlicht, Starwood Capital Group
Whitney Tilson, Kase Capital
Tim Ferriss, Angel Investor/Author
Roland Fryer, Harvard University
Dave Giroud, UpStart
Sam Hodges, Funding Circle


Discount For Our Readers

As in years' past, the conference will sell out so we urge you to click here to purchase tickets now as seats are limited.

Discount: Use code "market folly 15" to get 10% off your total ticket price.

As with all things Robin Hood, 100% of ticket sales go to helping our New York City neighbors living in poverty build better lives for themselves and their families.  We hope you will join us for this exciting event.
 



For more information and to register, head to Robin Hood's website.

Sohn Conference San Francisco: Excellence In Investing For Children's Causes

The 6th annual Sohn Conference San Francisco is coming up in two weeks.  It brings together some of the world's top investors to share their ideas in order to benefit the Excellence in Investing for Children's Causes Foundation.


Conference Details

When: Tuesday, October 27th, 2015 (Registration at 10 a.m.)
Where: Hyatt Regency San Francisco
Website: https://www.excellencesf.org


Sohn San Francisco Speakers List

Jeffrey Ubben, ValueAct Capital
Mick McGuire, Marcato
J. Kyle Bass, Hayman Capital
Kurt Billick, Bocage Capital
Gil Simon, Apex Capital
William Duhamel, Route One Investment Company
Mike Wilkins, Kingsford Capital
Malcolm Fairbairn, Ascend Capital
Carl Kawaja, Capital World Investors
Marc Schneidman, Aquilo Capital
Christopher Chabris, author of The Invisible Gorilla


Next Wave Sohn Speakers 

New this year, the event also features a 'Next Wave Sohn' event, held at 10:30 a.m. before the main conference.  It features emerging managers sharing their best ideas.  Speakers include:

David Brown, Hawk Ridge Management
Jonathan Goldberg, BBL Commodities
Steven Landry, Eastbay Asset Management
Richard Merage, MIG Capital
Moderator: George Fox, Titan Advisors



Event Flyer & Registration

You can register for the event by clicking here or you can call 415-728-4455

It should be a fantastic day full of investment ideas and also includes a buffet lunch and cocktail reception afterwards.

Remember, conference proceeds support Bay Area organizations focused on improving educational opportunities and life outcomes for underserved youth.  A portion of the proceeds also benefit their partner, The Sohn Conference Foundation to treat and cure pediatric cancer and childhood diseases.

For more information, head to https://www.excellencesf.org