Carl Icahn Files 13D on Freeport McMoRan (FCX)

Activist investor Carl Icahn has filed an amended 13D with the SEC regarding his stake in Freeport McMoRan (FCX). The filing's main purpose was to send a statement from Icahn:

"This is a classic example of activists working constructively with an existing Board and management.  Since the Company announced the "Review of Strategic Alternatives" for its Oil & Gas business in October 2015 (not coincidentally the date of our arrival on the Board), the analyst community has heavily doubted the Company's ability to execute asset sales in this environment (particularly the Deepwater Gulf of Mexico assets along with all liabilities and potential future bonding obligations).  Yesterday's announcement demonstrates the Company is making good on its stated goal of deleveraging and is on track to cut its net debt by half, from year end 2015 through the end of next year, at current copper prices.  I applaud management and the whole Board of Directors for all steps taken in this regard.     

In light of the Company's recent initiatives, and as a large shareholder with two representatives on the Board of Directors, I completely endorse CEO Richard Adkerson's recent comments that Freeport is "…open for all strategic moves, whether that means selling assets, [or] selling the company" to create value for all shareholders."

For more on this investor, we just highlighted Icahn's talk at the Delivering Alpha conference yesterday.

Per Google Finance, Freeport McMoRan is "a natural resource company with a portfolio of mineral assets, and oil and natural gas resources. The Company's segments include the Morenci, Cerro Verde, Grasberg and Tenke Fungurume copper mines, the Rod & Refining operations and the U.S. Oil & Gas Operations. It has organized its operations into five primary divisions: North America copper mines, South America mining, Indonesia mining, Africa mining and Molybdenum mines. Its portfolio of assets includes the Grasberg minerals district in Indonesia, mining operations in North and South America, the Tenke Fungurume (Tenke) minerals district in the Democratic Republic of Congo (DRC) in Africa, and oil and natural gas assets in the United States. Its Atlantic Copper smelts and refines copper concentrates, and markets refined copper and precious metals in slimes. It has a smelter at its Miami, Arizona, mining operation, and molybdenum conversion facilities in the United States and Europe."

Delivering Alpha Conference Notes 2016: Singer, Dalio, Chanos, Miller & More

CNBC & Institutional Investor's Delivering Alpha Conference is underway and below are some notes.  This post will be updated throughout the day as the various speakers/panels are ongoing:


Delivering Alpha Conference Notes 2016

Paul Singer (Elliott Associates):  Said that it's a "very dangerous time in global markets" right now.  Argued central bank independence doesn't really exist.  Noted that Bank of Japan is basically a top-10 shareholder of various Japanese corporations but the economy hasn't rebounded.  Called it insane, "It's not working, but they keep going."  Feels that investors are careless about inflation threat.  Says sell long-term bonds.    "There will come a time when inflation, despite growth suppressive policies can blow through targets and surprise everyone."  Says we're basically in the middle of close to a 40 year experiment in how leveraged a system can be, and in how many ways.  Thinks gold as a directional asset is underrepresented in portfolios "as the only money and store of value that has stood the test of time that is, in my view, undervalued and underpriced in today's world and sort of is the opposite of confidence in central banks."


Ray Dalio (Bridgewater Associates):  Discussed ways to spur economic growth with Timothy Geithner.  Dalio says, "We're in a situation where central banks want to drive you out of cash and out of bonds."  Called it a dangerous situation, as central banks run out of assets to buy and push investors into riskier assets.  Dalio thinks raising rates is risky as it's not priced into the yield curve.  "There's only so much you can squeeze out of a debt cycle and we're there, globally."


Jim Chanos (Kynikos Associates):  Still short Alibaba (BABA), says they're "buying anything that's for sale, just burning cash."  He's also still short Tesla (TSLA) and SolarCity (SCTY).  Says the two companies combining basically puts TSLA on a path to potential bankruptcy.


Carl Icahn (Icahn Capital): Said he's requesting from the FTC the right to own up to 50% of Herbalife's (HLF) outstanding shares.  Currently has the right to around 35% of the company.  Re: the market, "I think it's very dangerous in the market right now.  If they don't raise rates, I think we're in a major bubble."  There's a problem either way with a dilemma if you raise rates or if you don't.  Says the economy is messed up because of people like Janet McCabe at the EPA.  Also: "I hate to be immodest but I've returned 28% annualized since inception."


Marc Lasry (Avenue Capital):  Said that you can "make a lot of money on direct lending," stepping in for reluctant banks.  On investing - find people who are talented / engaged / who care and invest with and then don't worry about daily/monthly liquidity.


Bill Miller (Legg Mason):  Likes Amazon (AMZN) or Facebook (FB) compared to Alphabet (GOOG/L) due to the growth rates and margins.  Thinks AMZN doubles in 3 years.  Also likes Valeant Pharmaceuticals (VRX) long, one of his larger positions.  His main trade idea was long S&P 500, short 10-year Treasury (dividend yield on S&P is higher).


Robert Bishop (Impala Asset Management):  Best idea was Teck Resources (TCK): improving China demand, management has cut costs, end of metals 5-year downtrend.  Says Freeport McMoran (FCX) still has a worrisome debt picture.


Barry Sternlicht (Starwood):  Real estate in New York City is "a disaster" with rents at the high-end down 15%.  Noted the problem many investors face: "you have to invest in something, you can't just sit in cash."  On Tesla, says he loves the car but would probably be short the company.  Questioned Pinterest's valuation, arguing it seemed like a lot of money for a bulletin board.  Said Doppler Labs could be like the next Oculus Rift.


Mary Erdoes (JPMorgan):  "They're called crowded trades when they don't work and momentum trades when they do work."  Says it's time to weed out the stock pickers who aren't the best. 


Dawn Fitzpatrick (UBS):  Likes merger-arbitrage, argues that bank prop trading desks exiting keeps spreads attractive and wide on bigger deals.  Said short-term alpha is harder and that investors need to be more patient.  Says women are less emotional investors and better at cutting losers.

Passport Capital Ups Habit Restaurants Stake

John Burbank's hedge fund firm Passport Capital has filed a 13G with the SEC regarding shares of Habit Restaurants (HABT).  Per the filing, Passport now owns 5.6% of HABT with 1 million shares.

This is up from the 429,257 shares they owned at the end of the second quarter.  The filing was made due to activity on August 22nd.

For more from this manager, we've previously posted up notes from Burbank's talk at the SALT Conference.

Per Google Finance, The Habit Restaurant is "a fast casual restaurant company. The Company is engaged in preparing made-to-order char-grilled burgers and sandwiches featuring tri-tip steak, grilled chicken and sushi-grade albacore tuna cooked over an open flame. In addition, it offers salads, sides, shakes and malts. The Company prepares its burgers with char-grilled preparation, topped with caramelized onions, melted cheese, lettuce and tomatoes. The Company's Char burgers menu includes Double Char burger, Mushroom Char, Teriyaki Char burger, BBQ Bacon Char Burger and Santa Barbara Style. Its Sandwich menu includes Chicken, Tri-tip, Albacore Tuna, Veggie burger, Chicken club and Pastrami. The Company operates at over 140 locations in over 10 markets in approximately nine states. It operates a variety of restaurant formats, including end-cap, free-standing, inline and drive-in, primarily within suburban shopping centers and retail settings."

Bow Street Increases Adamas Pharmaceuticals Position

Akiva Katz and Howard Shainker's hedge fund Bow Street has filed a 13G with the SEC regarding its position in Adamas Pharmaceuticals (ADMS).  Per the filing, Bow Street now owns 5.3% of Adamas with over 1.15 million shares.

This is up from the 486,747 shares they owned at the end of the second quarter.  The filing was made due to activity on September 2nd.


About Bow Street

Prior to founding Bow Street, Katz worked Brahman Capital and Shainker worked at Third Point.  Bow Street was originally seeded by Blackstone Group.


About Adamas Pharmaceuticals

Per Google Finance, Adamas Pharmaceuticals is "a pharmaceutical company. The Company is focused on the development and commercialization of therapeutics targeting chronic disorders of the central nervous systems (CNS). Its segment focuses on the development and commercialization of therapeutics targeting chronic disorders of the central nervous system. Its ADS-5102 is an extended-release version of amantadine that is intended for once daily administration at bedtime. It is developing ADS-8704, which is a fixed-dose combination of its controlled release version of memantine and donepezil for the treatment of moderate to severe dementia related to Alzheimer's disease. Its ADS 8902, a triple combination antiviral drug therapy for influenza. It also offers Namzaric (memantine hydrochloride extended-release and donepezil hydrochloride) capsules (formerly MDX-8704) and Namenda XR (memantine hydrochloride) extended release capsules."

Baupost Group Adds To PBF Energy, Trims SunEdison Semiconductor & Innoviva

Seth Klarman's investment firm Baupost Group has filed three 13G's with the SEC recently.  Here's the summary:

Baupost Group Adds To PBF Energy Stake

First, Seth Klarman's firm has filed with the SEC indicating they now own 16.07% of PBF Energy (PBF) with over 15.72 million shares.

This is an increase of over 5 million shares as they previously owned 8.37 million shares at the end of the second quarter.  The filing was made due to activity on August 31st.

To see the rest of Baupost's equity portfolio, check out the brand new issue of our newsletter.

Per Google Finance, PBF Energy is " is an independent petroleum refiner and supplier of unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the United States. The Company operates through two segments: Refining and Logistics. The Refining segment produces a range of products at each of its refineries, including gasoline, ultra-low-sulfur diesel (ULSD), heating oil, jet fuel, lubricants, petrochemicals and asphalt. The Logistics segment includes PBF Logistics LP (PBFX), which engages in the receiving, handling and transferring of crude oil and the receipt, storage and delivery of crude oil, refined products and intermediates. It sells its products throughout the Northeast, Midwest and Gulf Coast of the United States, as well as in other regions of the United States and Canada, and ships products to other international destinations."


Trims SunEdison Semiconductor Stake

Second, Baupost Group has also disclosed a reduction in its SunEdison Semiconductor (SEMI) stake.  They now own 5.6% of the company with over 2.37 million shares

This is a decrease of 6 million shares as they previously owned 8.37 million shares at the end of the second quarter.  The filing was made due to activity on August 31st.

Per Google Finance, SunEdison Semiconductor is "engaged in the development, manufacture and sale of silicon wafers to the semiconductor industry. The Company also develops advanced substrates, such as epitaxial (EPI) wafers and wafers for the silicon-on-insulator (SOI) market, which enable computing and communications applications. Its products include polished wafers, EPI wafers and SOI wafers. The Company sells its products to the semiconductor manufacturers around the world, including integrated device manufacturers, pure-play semiconductor foundries and companies that specialize in wafer customization. It operates facilities in semiconductor manufacturing regions throughout the world, including Taiwan, Malaysia, South Korea, Italy, Japan, and the United States. Its wafers are used as the base substrate for the manufacture of various types of semiconductor devices, including microprocessors, memory, analog, mixed-signal and radio frequency (RF) integrated circuits, discrete and image sensors."


Also Reduces Innoviva Position

Lastly, Baupost Group has also disclosed a reduction in their Innoviva (INVA) position.  They now own 15.29% of the company with 17.37 million shares.

This is down from the 17.61 million shares they previously owned at the end of the second quarter.  The filing was made due to activity on August 31st.

Per Google Finance, Innoviva "focuses on bringing new medicines to patients in areas of unmet need. The Company is engaged in the development, commercialization and financial management of bio-pharmaceuticals. Its portfolio focuses on the respiratory assets partnered with Glaxo Group Limited (GSK), including RELVAR/BREO ELLIPTA (fluticasone furoate/vilanterol (FF/VI)) and ANORO ELLIPTA (umeclidinium bromide/vilanterol (UMEC/VI)). It operates in providing capital return to stockholders by maximizing the potential value of its respiratory assets partnered with GSK segment. RELVAR/BREO is a once-a-day combination inhaled respiratory medicine consisting of VI, a LABA and FF, an inhaled corticosteroid (FF/VI) delivered via the ELLIPTA dry powder inhaler. ANORO ELLIPTA is a dual bronchodilator consisting of UMEC, a long-acting muscarinic antagonist (LAMA) and VI, a LABA for the treatment of chronic obstructive pulmonary diseases (COPD)."

ValueAct Capital Builds Seagate Stake, Sells More MSCI

Per a Seagate Technology (STX) press release, Jeff Ubben's ValueAct Capital has become one of the company's largest shareholders.  They now own 9.5 million STX shares, up from the 3 million shares they owned at the end of the second quarter.

ValueAct participated in a secondary transaction and has also been invited to join as an observer on Seagate's board.

Partner Mason Morfit said that, "Seagate has a strong storage technology portfolio and is well positioned to benefit from attractive long-term secular trends.  We are excited about the opportunity to work with the Seagate team, at both the Board and management level, to help increase long-term value for all shareholders."

The brand new issue of our Hedge Fund Wisdom newsletter recently analyzed Seagate's main competitor, Western Digital.

Per Google Finance, Seagate is "a provider of electronic data storage technology and solutions. The Company's principal products are hard disk drives (HDDs). In addition to HDDs, it produces a range of electronic data storage products, including solid state hybrid drives, solid state drives, peripheral component interconnect express (PCIe) cards and serial advanced technology architecture (SATA) controllers. Its storage technology portfolio also includes storage subsystems and high performance computing solutions. Its products are designed for applications in enterprise servers and storage systems, client compute applications and client non-compute applications. It designs, fabricates and assembles various components found in its disk drives, including read/write heads and recording media. Its design and manufacturing operations are based on technology platforms that are used to produce various disk drive products that serve multiple data storage applications and markets."


ValueAct Sells More MSCI

Also, per a Form 4 filed with the SEC,  ValueAct has sold some more shares of MSCI (MSCI).  They sold 450,000 shares in total on September 6th-8th at prices of $88.4, $88.5, and $87.6.

After these transactions, Jeff Ubben's firm now only owns 850,900 shares of MSCI.

Per Google Finance, MSCI "offers content, applications and services to support the needs of institutional investors throughout their investment processes. The Company's operating segment includes Index, Analytics and All Other segment. All Other segment comprises ESG and Real Estate segments. The Index operating segment is a provider of investment decision support tools, including equity indexes and equity index benchmarks. The Analytics operating segment consists of products and services used for portfolio construction, risk management and reporting. The ESG operating segment offers products institutional investors use for assessing risks and opportunities arising from environmental, social and governance issues. ESG tools are used to evaluate both individual securities and investment portfolios. The Real Estate operating segment is a provider of real estate performance analysis for funds, investors, managers, lenders and occupiers."

Hedge Fund Links ~ 9/9/16

Survivorship bias explained [A Wealth of Common Sense]

The hedge fund trader who beat the feds [Fortune]

David Tepper is 'on guard' [CNBC]

Hedge funds suffer biggest redemptions since 2009 [Bloomberg]

Tiny satellites: the latest innovation hf's are using to get a leg up [WSJ]

The hedge fund industry is shrinking [TIME]

Smaller reigns supreme in hedge funds [NYPost]

Brevan Howard & Tudor battle losses [WSJ]

How this hedge fund robot outsmarted its human master [Bloomberg]

The hedge fund industry has a problem [Business Insider]

Hedge fund managers are waiting for the world to change [Yahoo Finance]

Lessons from a trading great: Bruce Kovner [Deflation.Market]

Paulson & Co exec to launch own firm [Reuters]

Warren Buffett Continues Buying Phillips 66

As we've detailed previously, Warren Buffett's Berkshire Hathaway has been continuously buying Phillips 66 (PSX) shares.  They've filed yet another Form 4 with the SEC indicating they've purchased even more PSX.

The latest filing shows Berkshire purchased 82,361 shares at a weighted average price of $77.8617 on September 1st.

After this round of buying, Berkshire now owns over 79.65 million shares of PSX.

Per Google Finance, Phillips 66 is "an energy manufacturing and logistics company with midstream, chemicals, refining and marketing, and specialties businesses. The Company operates its business through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment includes its equity investment in DCP Midstream , LLC (DCP Midstream) and its investment in Phillips 66 Partners LP. The Midstream segment consists of three business lines: Transportation, DCP Midstream and NGL. The Midstream segment also transports crude oil and other feedstocks to refineries and other locations, and delivers refined and specialty products to market, and provides storage services for crude oil and petroleum products. The Chemical segment manufactures and markets petrochemicals and plastics. The refining segment buys, sells and refines crude oil and other feedstocks into petroleum products. The M&S segment purchases for resale and markets refined petroleum products."

What We're Reading ~ 9/8/16

In-depth pitch on Liberty Global Latin America (LILA/K) [Find Me Value]

A second look at Amerco (UHAL) [Punch Card Research]

WD-40 (WDFC): a case study of the bubble in 'safe' stocks [Intrinsic Investing]

Analysis of Dell Technologies new VMWare tracking stock [Clark Street Value]

Morris Mark on four stocks he likes [Barrons]

Uber: from zero to seventy billion [Economist]

Google, Uber and the evolution of transportation [Stratechery]

Why electric cars will be here sooner than you think [WSJ]

How Apple's car could crack the automotive industry [Autocar]

Old article on capital allocator Henry Singleton [BrianLangis]

A look at the online travel industry [Phocuswright]

Why walking helps us think [New Yorker]

Inside Dyson's reinvention factory [Forbes]

Will Amazon kill FedEx and UPS? [Bloomberg]

On subscription retail [The Robin Report]

Theranos: how Elizabeth Holmes's house of cards fell [Vanity Fair]

Pershing Square Builds Chipotle Stake

Bill Ackman's activist firm Pershing Square has filed a 13D with the SEC regarding Chipotle (CMG).  They've disclosed a new position in the company and now own 9.9% of CMG with over 2.88 million shares.

We've highlighted recently how Ackman has been selling various stakes and raising cash and now we know where some of that cash was allocated to.

Chipotle has slowly been trying to recover from a series of food poisonings that severely affected the company's results.  As shares have fallen, some value investors have started to poke around and Ackman has joined the cause as an activist voice.  The 13D notes he'll meet with management.

To build the stake, Pershing bought and sold various options and you can view the full list of transactions here.

While some people have given Ackman grief for the saga with Valeant Pharmaceuticals (VRX), the quick service restaurant space is something he absolutely has experience with.  It will be interesting to see how he tries to help them recover from their troubles given he feels the company has an excellent brand.

Per Google Finance, Chipotle is "together with its subsidiaries operates Chipotle Mexican Grill restaurants. The Company's Chipotle Mexican Grill restaurants serve a menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads. The Company operates approximately 1,970 Chipotle restaurants throughout the United States, over 10 in Canada, seven in England, four in France and one in Germany. The Company's restaurants include over 10 ShopHouse Southeast Asian Kitchen restaurants, serving Asian-inspired cuisine. The Company owned and operated approximately three Pizzeria Locale restaurants, a fast casual pizza concept, resulting in a totaling of approximately 2,010 restaurants. The Company sells gift cards which do not have an expiration date.."

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Glenview Capital Boosts Computer Sciences Stake

Larry Robbins' hedge fund firm Glenview Capital has filed a 13G with the SEC regarding its position in Computer Sciences Corp (CSC).  Per the filing, Glenview now owns 5.26% of the company with over 7.38 million shares.

This is an increase over the 6.87 million shares they owned at the end of the second quarter.  The filing was made due to activity on August 23rd.

You can see the rest of Glenview's portfolio in the brand new issue of our newsletter.

Per Google Finance, Computer Sciences Corp is "a global provider of information technology (IT) and professional services and solutions. The Company operates through two segments: Global Business Services (GBS) and Global Infrastructure Services (GIS). The GBS segment provides various technology solutions, including consulting, applications services and software. GBS has three primary growth engines: end-to-end applications services, consulting services, big data services and industry-aligned software and solutions. The GIS segment provides managed and virtual desktop solutions, unified communications and collaboration services, data center management, cyber security, compute and managed storage solutions to commercial clients across the globe. GIS also delivers CSC's various cloud offerings, including Infrastructure as a Service (IaaS), private cloud solutions, CloudMail and Storage as a Service (SaaS). The Company has operations throughout North America, Europe, Asia and Australia."

Kingstown Capital Sells Some Ocwen Financial Equity, Buys Senior Notes

Michael Blitzer hedge fund firm Kingstown Capital Management has filed an amended 13D with the SEC regarding its position in Ocwen Financial (OCN).  Per the filing, Kingstown now owns 7.66% of the company with 9.5 million shares.

This is a decrease in their common stock position compared to the 11.35 million shares they owned at the end of the second quarter.  The filing was made due to activity on August 31st. 

It also indicates they purchased 6.625% Senior Notes due 2019.

Per Google Finance, Ocwen Financial is "a financial services holding company. The Company, through its subsidiaries, operates as a mortgage company. The Company's segments include Servicing, Lending, and Corporate Items and Other. The Company's Servicing segment consists of its core residential servicing business. The Company's Lending segment is focused on originating and purchasing conventional and government-insured residential forward and reverse mortgage loans. The Company's Corporate Items and Other segment includes business activities that include providing secured floor plan lending to used car dealerships through its Automotive Capital Services (ACS) venture and providing financing to investors to purchase single-family homes and apartments for lease through its Liberty Rental Finance venture. The Corporate Items and Other segment also includes the diversified fee-based businesses, which provide property valuation, real estate owned (REO) management, title and closing services."

Three Bays Capital Trims Cypress Semiconductor Holdings

Matthew Sidman's hedge fund Three Bays Capital has filed an amended 13D regarding its position in Cypress Semiconductor (CY).  Per the filing, Three Bays owns 7% of the company with 22.53 million shares.  This includes 7 million shares underlying call options.

This is a slight decrease compared to the net position they owned at the end of the second quarter.  The 13D disclosed their most recent transactions where they bought 168,373 shares on July 11th but then sold shares on July 19th and August 30th (500,000 total shares at prices of $11.34 and $11.71).

Prior to founding Three Bays in 2013, Sidman worked at Highfields Capital.

Per Google Finance, Cypress Semiconductor is "delivers solutions from automotive, industrial and networking platforms to interactive consumer and mobile devices. The Company's segments include Programmable Systems Division, Memory Products Division, Data Communications Division and Emerging Technologies Division. The Programmable Solutions Division designs and develops solutions for end-product manufacturers. The Memory Products Division designs and manufactures portfolio of high-performance memories for embedded systems. The Data Communications Division focuses on solutions for industrial, handset and consumer applications. The Emerging Technologies Division consists of its subsidiaries, AgigA Tech, Inc. and Deca Technologies, Inc. Its product portfolio includes NOR flash memories, Traveo microcontrollers, programmable system-on-chip solutions, CapSense capacitive touch-sensing controllers, and Wireless Bluetooth Low-Energy and universal serial bus (USB) connectivity solutions."

What We're Reading ~ 8/31/16

Jesse Livermore: The man who sold America short in 1929 [Tom Rubython]

50 of the best investing blogs [Acquirers Multiple]

Why value investors are different [Seth Klarman]

Paul Tudor Jones and the nature of the beast [A Wealth of Common Sense]

Be mindful of rich valuations in low volatility stocks [Morningstar]

What are interest rates forecasting for stocks? [Cordant]

Are you smarter than an algorithm? [Financialist]

A new payoff to risky decisions [Psychology Today]

Don't let what you cannot do interfere with what you can [Tony Isola]

German savers lose faith in banks, stash cash [WSJ]

Coach's brand transformation fake-out [Glenn Chan]

Can TripAdvisor turn things around? [Skift]

Dollar Stores' startling admission: half of US consumers are in dire straits [Zero Hedge]

Tencent: WeChat's world [Economist]

The twilight of China's online consumer paradise [Bloomberg]

Why Amazon is suddenly swimming in cash [Internet Retailer]

The war on cash [The Long and Short]

Ruane Cunniff (Sequoia Fund) Investor Day Transcript 2016: Rolls Royce, Valeant & More

Ruane Cunniff Goldfarb, managers of the Sequoia Fund, recently released the transcript from its investor day.  In it, they talk about many of their investments.

Their top ten holdings as of the end of the second quarter were:  Berkshire Hathaway (BRK.A/B), TJX Companies (TJX), MasterCard (MA), Alphabet (GOOG/L), O'Reilly Auto (ORLY), Mohawk Industries (MHK), Fastenal (FAST), Rolls Royce (RR.L), Constellation Software (CSU.T), and Dentsply Sirona (XRAY).

They outline their thinking on Rolls Royce and also address the Valeant Pharmaceuticals (VRX) saga, which they no longer own.

Embedded below is the transcript of Ruane Cunniff's 2016 Investor Day:



You can download a .pdf copy here.

Hound Partners Boosts Media General Stake

Jonathan Auerbach's hedge fund firm Hound Partners has filed a 13G with the SEC regarding its position in Media General (MEG).  Per the filing, Hound now owns 5.63% of MEG with over 7.28 million shares.

This is an increase of over 5.14 million shares since the end of the second quarter when they owned 2.13 million shares.  The filing was made due to activity on August 18th.

You can view the rest of Hound Partners' portfolio in the brand new issue of our newsletter.

Per Google Finance, Media General is "is a connected-screen multimedia company. The Company provides news, information and entertainment. The Company's operating segments include Broadcast and Digital. Its Broadcast segment includes over 70 television stations that are either owned, operated or serviced by the Company in approximately 48 United States markets, all of which are engaged principally in the sale of television advertising. The Company's Digital segment includes the operating results of the Company's digital businesses, as well as the business operations related to the television station companion Websites. Digital segment includes LIN Digital, LIN Mobile, LLC (LIN Mobile), HYFN, Inc. (HYFN), Dedicated Media, Inc. (Dedicated Media), BiteSize TV and Federated Media, as well as the business operations related to the television station companion Websites. LIN Digital provides display and video advertising on LIN Digital's advertising network."

Warren Buffett Files Another Form 4 on Phillips 66

Warren Buffett last week indicated he had bought more Phillips 66 (PSX) for Berkshire Hathaway.  That trend continued with the filing of yet another Form 4 with the SEC.

The latest filing notes he purchased another 83,466 shares at a weighted average price of $78.2878 on August 25th.  This brings his total PSX ownership up to over 79.56 million shares.

You can view the rest of Buffett's latest investment activity in the brand new issue of our newsletter.

Per Google Finance, Phillips 66 is "an energy manufacturing and logistics company with midstream, chemicals, refining and marketing, and specialties businesses. The Company operates its business through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment includes its equity investment in DCP Midstream , LLC (DCP Midstream) and its investment in Phillips 66 Partners LP. The Midstream segment consists of three business lines: Transportation, DCP Midstream and NGL. The Midstream segment also transports crude oil and other feedstocks to refineries and other locations, and delivers refined and specialty products to market, and provides storage services for crude oil and petroleum products. The Chemical segment manufactures and markets petrochemicals and plastics. The refining segment buys, sells and refines crude oil and other feedstocks into petroleum products. The M&S segment purchases for resale and markets refined petroleum products." 

Warren Buffett Buys More Phillips 66

Warren Buffett's Berkshire Hathaway has filed a Form 4 with the SEC regarding his stake in Phillips 66 (PSX).  Per the filing, Buffett acquired more shares on August 22nd, 23rd, and 24th.

In total, he purchased 704,181 shares at weighted average prices of around $77.04 - $78.15.  After these transactions, Berkshire now owns 79.48 million shares of PSX.

We've highlighted in the past how Buffett has been acquiring PSX shares in recent months.

Per Google Finance, Phillips 66 is "an energy manufacturing and logistics company with midstream, chemicals, refining and marketing, and specialties businesses. The Company operates its business through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment includes its equity investment in DCP Midstream , LLC (DCP Midstream) and its investment in Phillips 66 Partners LP. The Midstream segment consists of three business lines: Transportation, DCP Midstream and NGL. The Midstream segment also transports crude oil and other feedstocks to refineries and other locations, and delivers refined and specialty products to market, and provides storage services for crude oil and petroleum products. The Chemical segment manufactures and markets petrochemicals and plastics. The refining segment buys, sells and refines crude oil and other feedstocks into petroleum products. The M&S segment purchases for resale and markets refined petroleum products.."

ValueAct Capital Adds to Alliance Data Systems, 21st Century Fox Stakes

Jeff Ubben's activist firm ValueAct Capital has submitted a few filings to the SEC recently regarding his positions.

ValueAct Adds To Alliance Data Systems

First, Ubben's firm has filed an amended 13D regarding their newer position in Alliance Data Systems (ADS).  Per the filing, ValueAct now owns 8.5% of the company with 5 million shares.

This is an increase over the 3.28 million shares they owned at the end of the second quarter.  They've been buying as recently as late August at prices of $199.13 - $204.07.

The 13D also notes that ValueAct intends to have conversations with management and the board on ways to enhance shareholder value.

We recently detailed the rest of ValueAct's portfolio (and 24 other hedge funds) in the brand new issue of our newsletter.

Per Google Finance, Alliance Data Systems is "is a provider of data-driven marketing and loyalty solutions serving consumer-based businesses in a range of industries. The Company offers a portfolio of integrated outsourced marketing solutions, including customer loyalty programs, database marketing services, end-to-end marketing services, analytics and creative services, direct marketing services, and private label and co-brand retail credit card programs. The Company operates through three segments: LoyaltyOne, which provides coalition and short-term loyalty programs through the Company's Canadian AIR MILES Reward Program and BrandLoyalty; Epsilon, which provides end-to-end, integrated marketing solutions, and Card Services, which provides risk management solutions, account origination, funding, transaction processing, customer care, collections and marketing services for the Company's private label and co-brand retail credit card programs."


Jeff Ubben Buys More 21st Century Fox

Second, ValueAct Capital has filed a Form 4 with the SEC regarding its stake in 21st Century Fox (FOX / FOXA).  Per the filing, ValueAct was out buying FOX shares on August 16th - 18th.

Ubben purchased 3 million shares in total at prices ranging from $25.86 - $26.13.  After these buys, they now own over $47.3 million shares.  Ubben is on FOX's board and it seems they want the company to go more direct to consumer with their media offerings.

You can view the rest of Jeff Ubben's portfolio here.

Per Google Finance, 21st Century Fox is "a media and entertainment company. The Company operates through segments: Cable Network Programming, Television, Filmed Entertainment, and Other, Corporate and Eliminations. The Company produces and licenses news, business news, sports, general entertainment, factual entertainment and movie programming for distribution primarily through cable television systems, direct broadcast satellite operators, telecommunications companies and online video distributors in the United States and internationally. The Company is engaged in the operation of broadcast television stations and the broadcasting of network programming in the United States. The Company is engaged in the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media, and the production and licensing of television programming around the world."

Howard Marks' New Memo "Political Reality"

Oaktree Capital's Chairman Howard Marks has been busy writing memos these days.  We posted his most recent note, Economic Reality recently.  Now he's released another missive, entitled "Political Reality."

As the title implies, this one is less investing related and more about the political and economic environment.  

Embedded below is Howard Marks' memo:



You can download a .pdf copy here.

For more from Marks, be sure to also check out his highly praised book on investing, The Most Important Thing.

What Stocks Have Top Hedge Funds Been Buying & Selling?

Want to know what stocks hedge funds have been buying & selling?  Our 82-page quarterly newsletter summarizes the latest 13F filings of 25 top funds.  The brand new Q2 issue of Hedge Fund Wisdom is now available.  Subscribers please go to www.hedgefundwisdom.com and login to download.

Inside The New Issue

- Investment thesis summaries on ServiceMaster (SERV) and Western Digital (WDC).  Catch up quickly on why hedge funds have been active in these stocks.

Last quarter's issue featured write-ups on Yelp (YELP) and AmerisourceBergen (ABC) which are up 53% and 18.75% respectively since then (versus 6.4% for the S&P 500).  When you sign up below, you'll also get immediate access to the full archive of issues too.

- New consensus buy/sell lists: see what the most popular trades are

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- Commentary on each fund's moves including short sale positions in European markets when applicable

- New fund added this quarter: the newsletter now also tracks Glenn Greenberg's Brave Warrior Advisors


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So You Want To Start A Hedge Fund By Ted Seides Book Review

Ted Seides has written an instrumental book that assuredly is applicable to a large portion of our readers: So You Want To Start A Hedge Fund: Lessons For Managers and Allocators.

Seides is the former President and co-CIO of Protégé Partners, which specialized in seeding and investing in hedge funds.  Prior to that, he worked under David Swensen in the Yale University Investment Office.   

The book greets potential fund managers with an assault of reality, but also a roadmap to success.  True investors love to learn from the mistakes of others, and that's where this book excels.

Seides profiles various funds but instead of doing a deep dive on the manager, he isolates which factors contributed to either the success or failure of the fund and outlines them as lessons for both a prospective manager and prospective allocator.  This dual-viewpoint focus allows the reader to learn from the perspective of differing lenses, offering a glimpse inside the thought process of those sitting opposite them at the sales table.

At the end of each chapter, there's a brief summary of "Lessons For Managers" as well as "Lessons For Allocators" directly targeted at each audience, which are incredibly useful.  People short on time could merely skip to the end of each chapter to quickly digest the lesson.  But pay heed: the context provided in each chapter paints a picture as to *why* that lesson was learned, which is the crux of learning from successes / mistakes of others to begin with.  

While the vast majority of chapters are aimed at the manager crowd, there's also a separate chapter dedicated to investing in start-up hedge funds.  Allocators get a lucid look at how to spot potential developing red flags as well as a tidy list comprised of traits and intricacies that can lead to manager success.

The book highlights lessons learned from funds such as:  Eton Park Capital, Senator Investment Group, Tourbillon Capital, Whitebox Advisors, Scion Capital, Brenner West Partners, Sabretooth Capital, and Signpost Capital.  Many other funds are also featured under pseudonyms, but the lessons remain the same.


Examples Of Lessons Learned In The Book 

Here's a brief sample: one manager left a pedigree fund and launched his own firm.  His stock picks performed well and assets under management rose.  The manager tried to establish a positive, collaborative culture.  He allowed analysts to source and research ideas.  While he ultimately made the buy/sell decisions, the performance of analyst picks lagged the manager's considerably.

Seides' lesson for managers?  "Put your destiny in your own hands."  The manager had good intentions of building a collaborative environment, but performance suffered because of it.  He then let analysts go and added more hierarchy to the investment process.  In an industry where performance is constantly under a microscope, one mistake can cost a fund its entire existence.

One other quick example from the book: a manager started a fund and instead of getting invested in a rising market, tried to wait and time the market for better value.  His performance lagged initially, investors never really took an interest, and eventually the fund closed down.

Seides articulated the lesson as follows: "When getting started, don't let perfect be the enemy of good."  He adds, "Even if a new fund starts slowly and preserves capital better than others in a tough tape, it must demonstrate the ability to then turn and make money for its clients before prospects will get interested.  Getting one market call correct is difficult enough; getting two right consecutively requires twice as much luck." 

While we highlighted two mistakes as examples, the book also offers a myriad of success stories that outline how various funds attracted capital, built their brand, refined their strategy, and more.

While some might say that the title is perhaps slightly corny, consider this:  So You Want To Start A Hedge Fund has already been endorsed by numerous prominent hedge fund managers themselves.  Bill Ackman (Pershing Square), Scott Bessent (Key Square Group, ex-Soros Fund), Jason Karp (Tourbillon), and Jonathan Auerbach (Hound Partners) all praise the book.   

It also includes a Foreword by Steve Galbraith (ex-Maverick Capital, Herring Creek Capital).


Who should read this book?  

There are two types of people especially who will benefit from reading: those that have even the slightest desire to manage their own fund (obviously) and allocators who invest (or are looking to start investing) in hedge funds.  There are hardly any books on the topic of how to select hedge funds and what to look for, so anyone even remotely interested in that subject would benefit immensely (high net worth investors, nascent family offices, financial advisors, aspiring fund-of-funds, etc).


How long is the book?  

This is a perfect fit for those who believe that time is our most valuable asset.  It's an incredibly swift read at only 195 pages (with pages that are much smaller than normal).  You can easily finish it in 2-3 hours or one sitting.  This is a huge asset when you consider just how much practical advice is distilled.  In other words, it gets straight to the point.


What this book is not

It's not a step-by-step list of how to setup a fund.  So if you're expecting that, you'll be disappointed (there's plenty of other resources out there on that subject).  This is not a guide on legal structures, service providers, prime brokers, infrastructure, etc. 


Final Word

Simply put, So You Want To Start A Hedge Fund offers a very high insights-gleaned to time-spent ratio.  If you have any desire whatsoever to start your own fund, read this book.  If you have any desire to invest in hedge funds whatsoever, read this book.  Given the high stakes involved in the industry, it's probably not hyperbolic to say that the lessons learned could potentially help make (or save) millions.
 

What We're Reading ~ 8/10/16

When you don't know what you don't know [Medium]

The mirage of relative performance [ai-cio]

On investing and getting comfortable with being uncomfortable [Cordant Wealth]

Jim Grant: negative interest rates will end badly [CFA Institute]

Mark Hart bets China's currency will collapse [Bloomberg]

Interview with Daniel Kahneman [The Big Picture]

Daniel Dennett's most useful critical thinking tools [Farnam Street]

A look at Jefferies [Dealbook]

Coho Capital's pitch on Amazon [ValueWalk]

Think Amazon's drone delivery is a gimmick? Think again [NYTimes]

An e-commerce business' experience with the Amazon behemoth [Medium]

What happens to tons of jobs with autonomous vehicle disruption? [NPR] 

Why we pine for manufacturing [New Yorker]

Mark Zuckerberg on the next 10 years [The Verge]

Playing the long game inside Tim Cook's Apple [FastCompany]

Google and Facebook killed free media [Bloomberg]

What disruption really means [Hardbound]

ValueAct Capital Buys More CBRE Group Shares

Last week, we highlighted how Jeff Ubben's activist firm ValueAct Capital added to its CBRE Group position.  They've filed another Form 4 indicating they acquired some more shares recently.

The filing notes ValueAct bought 182,060 CBG shares on August 4th at a price of $28.50.  This brings their total ownership up to over 34.62 million shares.

Per Google Finance, CBRE Group is "a holding company that conducts all of its operations through its subsidiaries. The Company is a commercial real estate services and investment company. The Company operates through the segments: The Americas; Europe, Middle East and Africa (EMEA); Asia Pacific; Global Investment Management, and Development Services. It offers services to occupiers, owners, lenders and investors in office, retail, industrial, multifamily and other types of commercial real estate. It offers commercial real estate services under the CBRE brand name, investment management services under the CBRE Global Investors brand name and development services under the Trammell Crow Company brand name. It is focused on several competencies, including commercial property, corporate facilities, project and transaction management, tenant/occupier and property/agency leasing, capital markets solutions, real estate investment management, valuation, development services and proprietary research." 

Tybourne Capital Ups Boston Beer Stake

Eashwar Krishnan's hedge fund firm Tybourne Capital has filed a 13G with the SEC regarding shares of Boston Beer (SAM).  Per the filing, Tybourne now owns 10.1% of SAM with 911,613 shares.

This is an increase of 152,202 shares since the end of the first quarter.  The filing was made due to activity on July 31st.  This is the second time Tybourne has upped its SAM stake in recent months.

Prior to founding Tybourne, Krishnan worked at Lone Pine Capital.

Per Google Finance, Boston Beer is "a craft brewer in the United States. The Company is engaged in the business of producing and selling alcohol beverages primarily in the domestic market and in international markets. The Company operates through two segments: Boston Beer Company segment and A&S Brewing Collaborative segment. The Boston Beer Company operating segment comprises of the Company's Samuel Adams, Twisted Tea and Angry Orchard brands. The A&S Brewing Collaborative operating segment comprises of The Traveler Beer Company, Coney Island Brewing Company, Angel City Brewing Company and Concrete Beach Brewing Company. It sells over 60 beers under the Samuel Adams and the Sam Adams brand names, over 10 flavored malt beverages under the Twisted Tea brand name, over 10 hard cider beverages under the Angry Orchard brand name and approximately 40 beers under over four of the brand names of its subsidiary, A&S Brewing Collaborative LLC, under its trade name Alchemy & Science."

Ten Attributes of Great Investors By Michael Mauboussin

Michael Mauboussin and Credit Suisse have put out a piece entitled "Reflections on the Ten Attributes of Great Investors."  It's basically a clinic on being an investor, it's fantastic.

There are so many quotable passages that you really should just read the whole document.  Each underlying attribute has multiple paragraphs of rationale behind it.  But here's a quick summary:

Mauboussin's 10 Attributes of Great Investors

1.  Be numerate (and understand accounting).

2.  Understand value (the present value of free cash flow).

3.  Properly assess strategy (or how a business makes money).

4.  Compare effectively (expectations versus fundamentals).

5.  Think probabilistically (there are few sure things).

6.  Update your views effectively (beliefs are hypotheses to be tested, not treasures to be protected).

7.  Beware of behavioral biases (minimizing constraints to good thinking).

8.  Know the difference between information and influence.

9.  Position sizing (maximizing the payoff from edge).

10.  Read (and keep an open mind).     


Embedded below is Mauboussin's 10 Attributes of Great Investors:





Mauboussin is an excellent resource for investors looking to refine their approach and process.  We highly recommend his books such as, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing as well as Think Twice: Harnessing the Power of Countertuition.

Market Strategist Jeff Saut's Latest Commentary: "Deja Vu"

It's been a while since we checked in on market strategist Jeff Saut of Raymond James.  His latest piece is entitled "Deja Vu."  In it, he touches on the fact that many market participants are flagging various bearish signals and expecting a big pullback.  He lays out his response given that he's been bullish since the February low this year.

Embedded below is Jeff Saut's latest market commentary, Deja Vu:



You can download a .pdf copy here.

Third Point Discloses Kadmon Holdings Equity Stake

Dan Loeb's hedge fund Third Point has filed a 13G with the SEC regarding its position in Kadmon Holdings (KDMN).  Per the filing, Third Point now owns 17% of the company with over 7.61 million shares.

This is a newly disclosed equity position for the fund and the filing was made due to activity on July 26th.  The company recently completed its initial public offering (IPO).

Third Point was originally a 'second lien' debt holder of Kadmon prior to its IPO.  This debt converted into common shares at an 80% discount to the IPO price.  Third Point was the largest holder of second lien debt.

For more on this hedge fund, head to Third Point's Q2 letter which talks about some of their latest investments.

Per Google Finance, Kadmon Holdings is "a biopharmaceutical company, which is engaged in the discovery, development and commercialization of small molecules and biologics. The Company is developing product candidates within autoimmune and fibrotic diseases, oncology and genetic diseases. The Company offers KD025, Tesevatinib in Oncology, Tesevatinib in polycystic kidney disease (PKD) and KD034. It offers tablets and capsules, such as Ribasphere RibaPak, Ribasphere tablets, Ribasphere, Qsymia, Tetrabenazine and Valganciclovir. KD025 is its candidate in its rho-associated coiled-coil kinase 2 (ROCK2) platform, which is an oral, selective ROCK2 inhibitor. Tesevatinib is an oral tyrosine kinase inhibitor (TKI) designed to block molecular drivers of tumor growth, metastases and drug resistance. KD034 is its portfolio of formulations of trientine hydrochloride, a chelating compound for the removal of excess copper from the body, for the treatment of Wilson's disease."

Wall Street Journal 50% Discount Expires Tonight

Just a reminder that the big Wall Street Journal 50% discount expires tonight (Sunday, August 7th).  It applies to whatever format you want: print, digital, or both. 

Here's the link to the offer: Save 50% off The Wall Street Journal

If you're interested, be sure to sign up before it expires tonight!

Hedge Fund Links ~ 8/5/16

Excerpts from Raging Capital's latest letter [ValueWalk]

Thoughts from Lee Cooperman in his Q2 letter [Business Insider]

Carlson Capital Q2 letter excerpts [Business Insider]

Steve Cohen's performance coach on the trait of successful traders [Yahoo Finance]

Jim Simons: computer trading is good for markets [CNBC]

Howard Marks says hedge fund 'geniuses' spawned too many firms [Bloomberg]

Howard Marks' Addendum to 'Economic Reality' Memo

Howard Marks of Oaktree Capital released his most recent memo entitled 'Economic Reality' a few months ago.  However, we forgot to post the addendum he added to it.  The original piece is insightful so definitely check it out if if you haven't already via the link above.

Here's what he added:

"There’s been a lot of response since the memo that follows was originally published on May 26.  In the discussions that have ensued, I realized that I should have led with something like this:  

Ultimately, economics is the study of choice.  Because choices range over every imaginable aspect of human experience, so does economics. . . .  

How do individuals make choices:  Would you like better grades?  More time to relax?  More time watching movies?  Getting better grades probably requires more time studying, and perhaps less relaxation and entertainment.  Not only must we make choices as individuals, we must make choices as a society.  Do we want a cleaner environment?  Faster economic growth?  Both may be desirable, but efforts to clean up the environment may conflict with faster economic growth.  Society must make choices. . . .  

We would always like more and better housing, more and better education – more and better of practically everything.  

If our resources were . . . unlimited, we could say yes to each of our wants – and there would be no economics.  Because our resources are limited, we cannot say yes to everything.  To say yes to one thing requires that we say no to another.  Whether we like it or not, we must make choices.  

Our unlimited wants are continually colliding with the limits of our resources, forcing us to pick some activities and to reject others.  Scarcity is the condition of having to choose among alternatives.  (Macroeconomics Principles, Libby Rittenberg and Tim Tregarthen.  Emphasis added)  

Because of the above, we make economic choices every day.  Everyone knows choices like these are inescapable.   

Everyone, that is, except for politicians.  The politician promises better grades and more leisure time.  A cleaner environment and faster economic growth.  That’s what caused me to write the memo: in politics and government – unlike the real world – the word “or” often goes out the window, replaced by “and.”  No choices are necessary.   

A few months ago I saw a cartoon featuring caricatures of two primary opponents.  Under one it said “bulls**t” and under the other it said “free s**t.”  There’s bound to be a lot of the former in any election season, but economics tells us the latter is unrealistic.  I wrote this memo to help readers understand why."

You can read the rest of Howard Marks' memo 'Economic Reality' here.


For more on this investor, check out Howard Marks' presentation at the London Value Investor Conference.

ValueAct Capital Buys More CBRE Group

Jeff Ubben's activist firm ValueAct Capital has filed a Form 4 with the SEC regarding their position in CBRE Group (CBG).

Per the filing, ValueAct was buying shares on August 1st, 2nd, and 3rd at prices around $28.40.  In total, they bought 1,502,200 shares.  After these purchases, they now own over 34.43 million shares of CBG.

You can view other recent portfolio activity from ValueAct here.

Per Google Finance, CBRE Group is "a holding company that conducts all of its operations through its subsidiaries. The Company is a commercial real estate services and investment company. The Company operates through the segments: The Americas; Europe, Middle East and Africa (EMEA); Asia Pacific; Global Investment Management, and Development Services. It offers services to occupiers, owners, lenders and investors in office, retail, industrial, multifamily and other types of commercial real estate. It offers commercial real estate services under the CBRE brand name, investment management services under the CBRE Global Investors brand name and development services under the Trammell Crow Company brand name. It is focused on several competencies, including commercial property, corporate facilities, project and transaction management, tenant/occupier and property/agency leasing, capital markets solutions, real estate investment management, valuation, development services and proprietary research."

Pershing Square To Sell Entire Canadian Pacific Stake

Bill Ackman's Pershing Square has announced with Canadian Pacific (CP) that the hedge fund will be selling the rest of its remaining CP stake with a public offering of just over 9.84 million shares.

Apparently Ackman will be using the proceeds to deploy into one or more new positions.  He will also stay on CP's board until the next annual meeting.

You can view other recent portfolio activity from Pershing Square here.

Per Google Finance, Canadian Pacific "together with its subsidiaries, operates a transcontinental railway in Canada and the United States. The Company operates in rail transportation segment. The Company's business mix includes bulk commodities, merchandise freight and intermodal traffic over a network of approximately 12,500 miles, serving the principal business centers of Canada from Montreal, Quebec, to Vancouver, British Columbia, and the United States Northeast and Midwest regions. The Company transports bulk commodities, merchandise freight and intermodal traffic. Bulk commodities include Canadian grain, U.S. grain, coal, potash, and fertilizers and sulfur. Merchandise freight consists of finished vehicles and automotive parts, as well as forest and industrial and consumer products. Intermodal traffic consists of retail goods in overseas containers that can be transported by train, ship and truck and in domestic containers and trailers that can be moved by train and truck.."

What We're Reading ~ 8/3/16

Ego is the enemy [Ryan Holiday]

Is active management dead? Not even close [CFA Institute]

When is a 'value' company not a value? [Investing Research]

Interview with Time Warner CEO Jeff Bewkes [Bloomberg]

On Tiger Global's bet on Flipkart [LiveMint]

Amazon's ascent in India shows that price isn't everything [Nikkei]

On capital light compounders [Base Hit Investing]

Why is the stock market so high? Ask the bond market [NYTimes]

US homeownership rate falls to five-decade low [WSJ]

How China became the world's e-commerce king [TheDrum]

Didi schools Uber on doing business in cutthroat China [Bloomberg]

Uber finds passage to India blocked by Ola [Bloomberg]

What happened to Yahoo? [Waiters Pad]

Google plots cheaper wireless future to expand fiber project [Bloomberg]

Here comes 5G wireless, but first a reality check [Recode]

Big US brokerages chase the rich [Reuters]

App coins and the dawn of the decentralized business model [Medium]

How free mobile games are designed to make money [Vox]

Corvex Management Trims Fidelity National Financial Position

Keith Meister's activist firm Corvex Management has filed an amended 13D regarding their position in Fidelity National Financial (FNF).  Per the filing, Corvex now owns 4.8% of FNF with over 13.19 million shares.

This is a decrease of over 5.93 million shares from the end of the first quarter.  They were selling at various points in June, July, and as late as August 2nd.  The bulk of their sale came at a price of $36.58.

You can view other recent activity from Corvex here.

Per Google Finance, Fidelity National Financial is "is a provider of title insurance, technology and transaction services to the real estate and mortgage industries. The Company's segments include Title, Black Knight, FNF Core Corporate and Other, Restaurant Group, and FNFV Corporate and Other. Its business is organized into groups, including FNF Core Operations and FNF Ventures (FNFV). The Company offers title insurance through its title insurance underwriters: Fidelity National Title Insurance Company, Chicago Title Insurance Company, Commonwealth Land Title Insurance Company, Alamo Title Insurance and National Title Insurance of New York Inc., which collectively issue more title insurance policies than any other title company in the United States. The Company, through its subsidiary, ServiceLink Holdings, LLC (ServiceLink), provides mortgage transaction services, including title-related services and facilitation of production and management of mortgage loans."

Pennant Capital Discloses Gores Holdings Stake

Alan Fournier's hedge fund firm Pennant Capital has filed a 13G with the SEC regarding Gores Holdings (GRSHU).  Per the filing, Pennant now owns 5.87% of Gores Holdings with 2.2 million shares. 

This is a newly disclosed stake and the filing was made due to activity on July 19th.

Per Google Finance, Gores Holdings is "a blank check company. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. The Company focuses to effect its business combination using the proceeds held in the Trust Account from its Public Offering and the sale of the Private Placement Warrants, its capital stock, debt or a combination of these as the consideration. The Company has no operations. The Company has not generated any revenue."

Soros Fund Ups Quantum Corp Position

George Soros' family office Soros Fund Management has filed a 13G with the SEC regarding its stake in Quantum Corp (QTM).  Per the filing, Soros now owns 5.27% of Quantum with over 14 million shares.

This is up significantly from the 1.66 million shares they owned at the end of the first quarter.  The filing was made due to activity on July 22nd.

Per Google Finance, Quantum Corp "focuses on scale-out storage, archive and data protection, providing solutions for capturing, sharing, managing and preserving digital assets over the entire data lifecycle. The Company's end-to-end tiered storage solutions enable users to maximize the value of their data by making it accessible whenever and wherever needed, retaining it indefinitely and reducing total cost and complexity. It works with a network of distributors, value-added resellers (VARs), direct marketing resellers (DMRs), original equipment manufacturers (OEMs) and other suppliers to meet customers' evolving needs. Its scale-out storage portfolio includes StorNext software, appliances and full systems called StorNext Pro Solutions, as well as Xcellis workflow storage, QXS disk storage, Lattus extended online storage and Q-Cloud Archive and Vault services. Its StorNext offerings enable customers to manage large unstructured data sets in an information workflow."

Claire Barnes' Investment Philosophy (Apollo Investment Management)

From time to time we highlight various investment approaches by investors.  Here is the investment philosophy by Claire Barnes, Apollo Investment Management.  H/T thefatmargin for the find.


Claire Barnes Investment Philosophy

1.  We value businesses as would a long-term private buyer, and generally ignore the short term views and price influence of other market participants, except in so far as these create opportunities.  In Benjamin Graham's classic analogy, the investor is in business with a manic depressive partner, Mr. Market, who obligingly sets a two-way price every day.  Most of the time, the investor will listen to Mr Market, politely decline to take action, and get on with real life.  Sometimes however, Mr Market's price is wildly in excess of any intrinsic value, and the investor may take these opportunities to sell, perhaps even to retire.  At other times, Mr Market's price is ludicrously low; we have at times in the past been able to buy good businesses with honest management for less than their net cash balances.  At such times, the sober investor will buy, without worrying unduly about whether Mr Market's price may be even lower tomorrow.


2.  We like value - buying a dollar of assets for 50 cents, for example - but never at the expense of quality.  In developed markets, legal protection may (perhaps) be good enough to base decisions on numbers alone.  In Asia, management integrity is paramount.  We also prefer 'operating assets', which generate cash or will do so in future, rather than 'dead assets' reliant on the price someone else may pay.


3.  We like growth as much as value - but "growth at a reasonable price".  One of the easiest mistakes is to overpay for a good company, or a good story.


4.  Given the impossibility of infinite growth on a finite planet, and a suspicion that growth may in future be harder to find, "sustainable income at a reasonable price" is attractive too.


5.  Sustainability is never absolute.  We value resilience.


6.  We seek good businesses: internal returns are important.  Deep value buys may arise from very cheap to somewhat cheap and remain illiquid.  The managers of our holdings do most of the work for us when they continue to generate good returns internally, and this reduces reinvestment risk.


7.  Free cashflow is good; sensible capital allocation is key.


8.  We like dividends - especially in those parts of Asia where there are no tax disadvantages, but anyway it is generally a good idea that excess cash be returned to the shareholders.  (If companies with a good value-adding record want cash for expansion, investors can be relied upon to stump up enthusiastically for a rights issue.)  We dislike buyback-and-issuance schemes designed to enrich insiders, but buybacks shrinking the capital base at discounts to intrinsic value are sometimes constructive.


9.  We try to know our companies inside out.  We visit the companies, try to read their annual reports and announcements from cover to cover, talk to their competitors, and so on.  The longer we've known them, the better.


10.  We don't worry about missed opportunities.  Most companies are too complicated: we look for businesses we like and think we can understand, and focus on relatively few.


11.  We buy securities on a 3-5 year time horizon.  (Maybe even more - ideally we would like to buy good companies at good prices and hold forever, but in an ever more volatile world, 3-5 years may be as far ahead as one can realistically hope to see, and certainly we need to keep reassessing.)  However, if a security appreciates rapidly to the point where it no longer represents reasonable value in absolute terms or relative to prospective purchases, or if new information comes to light which causes us to reevaluate, we may sell with alacrity.  Restraining fund size helps us to maintain selling discipline.


12.  The emphasis has changed slightly over the years, due to changing market conditions and sometimes-painful experience.  Our style will, we hope, continue to evolve:  in a changing world, we see no point in narrowing options unnecessarily.



For more on the investment process of other successful investors, check out:

- Andreas Halvorsen (Viking Global) on investment process

- Seth Klarman's value investing lessons

- Investing lessons from KKR's Henry Kravis

- Donald Yacktman on viewing stocks as bonds 

ValueAct Takes Trinity Industries Stake, Trims Microsoft

Jeff Ubben's activist firm ValueAct Capital has filed two disclosures with the SEC today.


ValueAct Shows New Trinity Industries Stake

First, the investment firm has filed a 13D with the SEC regarding shares of Trinity Industries (TRN).  Per the filing, ValueAct now owns 6.8% of the company with over 10.39 million shares.

The filing shows ValueAct was out buying July at prices between $18.69 and $21.50.  Also, in June they entered into Equity Forward Transactions with Societe Generale.

The 13D also notes that ValueAct intends to have conversations with members of the company's management and board of directors to enhance shareholder value.

Per Google Finance, Trinity Industries is "a diversified industrial company that owns a range of businesses providing products and services to the energy, transportation, chemical and construction sectors. The Company's products and services include railcars and railcar parts; parts and steel components; the leasing, management and maintenance of railcars; highway products; aggregates; inland barges; structural wind towers; steel utility structures; storage and distribution containers, and trench shields and shoring products. The Company's segments include the Rail Group, Railcar Leasing and Management Services Group, Construction Products Group, Energy Equipment Group, Inland Barge Group and All Other Groups. Its Rail Group is a manufacturer of freight and tank railcars in North America used for transporting a range of liquids, gases and dry cargo, through Trinity Rail Group. The Company's Railcar Leasing and Management Services Group is a provider of rail industry services in North America."


Ubben's Firm Trims Microsoft Stake

Second, in a Form 4 filed with the SEC, ValueAct has sold shares of Microsoft (MSFT).  Per the filing, ValueAct sold 18 million shares in total on July 27th and 28th at prices of $56.38 and $55.95.

After these sales, they still own over 38.62 million shares.

Per Google Finance, Microsoft is "is engaged in developing, licensing and supporting a range of software products and services. The Company also designs and sells hardware, and delivers online advertising to the customers. The Company operates in five segments: Devices and Consumer (D&C) Licensing, D&C Hardware, D&C Other, Commercial Licensing, and Commercial Other. The Company’s products include operating systems for computing devices, servers, phones, and other intelligent devices; server applications for distributed computing environments; productivity applications; business solution applications; desktop and server management tools; software development tools; video games; and online advertising. It also offers cloud-based solutions that provide customers with software, services and content over the Internet by way of shared computing resources located in centralized data centers. It provides consulting and product and solution support services."

For more from this investor, we've also highlighted another position they've been buying recently.

Hedge Fund Links ~ 7/29/16

At world's largest hedge fund, sex, fear and video surveillance [NYTimes]

Investors say stop paying fund of hedge funds [NYPost]

How solo fund managers stack up against the team players [FT]

The strategy of hedge fund selection [Global Investor Magazine]

Profile of Bronte Capital's John Hempton [Bloomberg]

The optimal size of hedge funds [Harvard Law]

Inside McKinsey's private hedge fund [FT]

The hedge fund industry needs a makeover [FT]

ValueAct to pay record $11 million to settle antitrust lawsuit [WSJ]

After Brexit, Steve Cohen doubles down [NYTimes]

10 tips for new Wall Street interns from Citadel [Business Insider]

A hedge fund or a fraud? [Bloomberg]

Corsair Capital Q2 Letter: Quintiles Transnational / IMS Health Thesis

Jay Petschek and Steven Major's hedge fund Corsair Capital is out with its second quarter letter. 

In it, they touch on the unique world of negative interest rates we now live in and how investors are reacting:

"The U.S. stock market is currently trading at approximately 16x-17x next year’s earnings. This equates to an earning’s yield of approximately 6% after-tax and 8% on a pre-tax basis - a big gap to 10-year treasury bonds yielding just 1.5%. As long as investors believe that stocks will generally continue to earn what they currently do (even with zero growth), equities will seem to be mathematically quite cheap compared to bonds. Of course, just because bonds are expensive doesn't mean investors have to invest in stocks. However, if not stocks, where will investors turn? It just seems the answer is TINA – there is no alternative – as all assets are historically expensive and stocks may prove to be the proverbial 'best house in a lousy neighborhood.'"

They also provide updates on numerous positions, including Diamond Resorts International (DRII), Olin Corp (OLN), Clearwater Paper (CLW), Voya Financial (VOYA), Countrywide plc (CWD),  and IAC/InterActive (IAC).


Lastly, they feature a write-up on Quintiles Transnational (Q) which is set to merge with IMS Health (IMS).


Embedded below is Corsair's Q2 letter:



For more recent hedge fund letters, we've also posted:

- Third Point's Q2 letter

- Greenlight Capital's Q2 letter