Notes From Sohn San Francisco 2016: Morfit, McGuire, Palihapitiya & More

Below are notes from the 2016 Sohn San Francisco investment conference where investment managers presented their latest ideas to benefit charities.  We also posted up notes from the Next Wave Sohn San Francisco conference as well that featured emerging managers.

Notes From Sohn San Francisco 2016 Conference


Mason Morfit, ValueAct Capital

• Idea: Long Morgan Stanley (MS)
• Try to find businesses with enduring franchise value
• 3 defined business units
• 7 defined revenue types
• Did a lot of work to understand the unit economics
• 75% of the revenue and 85% of the profit come from asset light fee based businesses (not capital intensive businesses)
• Long term trend is very positive
• MS has maintained and in some cases grown its share in wealth management and investment banking advisory 
• Risk factors: earnings decline, principal loss, liquidity/access to capital

Mick McGuire, Marcato Capital Management

• Idea: Long Buffalo Wild Wings (BWLD)
• Owns 5% of the company
• Differentiated concept focused on wings, beers, sports
• ~1,200 units with potential to grow to 1,700 units
• Long history of industry leading same store sales (SSS) growth
• Central component of investment thesis:
• Differentiated concept with long runway for growth
• SSS declines and capital allocation missteps have hurt shares
• Opportunity to create shareholder value by: transitioning to a 90%+ franchised model by 2020, improve 4 wall margins (several hundred bps opportunity), and optimize capital structure
• Multiple has compressed as traffic has slowed and costs continue to rise
• When growth slowed, BWLD acquired franchised stores for high multiples
• Average replacement cost is ~$2.3mm per unit but in 2015, spent $3.5mm per unit - overpaid; bad use of capital
• Incentives are weighted singularly towards growth, not ROI
• While unit volumes have increased significantly since IPO, ROI has decreased because the cost to build a unit has increased
• Franchised businesses command higher multiples; higher franchise mix correlated with higher multiples
• BWLD is 50/50 today but recommending that they go to 90% franchised model by refranchising units at multiple of 6.0x EBITDA
• Valuation: if they can move to a higher franchised model range of value from $218 to $311 (versus ~$141 today)

Chamath Palihapitiya, Social Capital

•  Primarily invests in fast growing private tech companies
• Multi-trillion dollar opportunity hiding in plain sight
• Retail will be a $1T business by 2025
• Every company succeeds based on three factors: build a great product with great market fit, develops adjacent products in deep verticals, invests in features to drive ARPU
• Amazon (AMZN) thesis based on AWS and outsourcing infrastructure spending and moving it to the cloud; reshaping economics by taking out costs
• Similar concept for software that will move to the cloud

• Idea: Long Workday (WDAY) 
• $100bn opportunity in 10 years; 20% IRR
• Workday is the system of record for HR and is viewed as the best in class product among CIOs
• Leading market share supporting the largest global employee bases including Samsung, McDonalds, IBM
• HCM product manages 19mm employees on behalf of its employers
• Adjacent products in deep verticals: Workday Financials - system of record to manage financials; now manages financials for global companies
• Invest in features to drive ARPU (payroll and many other features)
• Rapid pace of innovation
• Workday competes against Oracle (ORCL) and SAP (SAP)
• Lowest spend on M7A over the last 5 years
• "M&A is what you do when what you do doesn't work anymore."
• Done< $0.3bn over last 5 years, SAP and Oracle have had a lot of M&A
• Netflix ability to close the books and file with the SEC went down significantly with Workday versus Oracle
• Workday is an enterprise product company
• Best management team in software
• Fully aligned, long term oriented
• 97% customer satisfaction; very high consistent with consumer tech like Facebook, Google, Apple but this is enterprise tech
• Following the Salesforce playbook but doing it better
• $100bn company in 10 years

Carson Block, Muddy Waters Capital

• Idea: Short Tutor Perini (TPC)
• Construction company
• Nearly all analysts have the stock as a buy
• FCF is the Achilles heel - the company bleeds cash in working capital driven by growing accounts receivable
• Loan agreement has been amended 6 times in 5 years and there is a chance that banks could pull RC facility; Business has $94mm of cash on BS but 79% of cash sits in JV so it could run into a major liquidity problem
• 4 CFOs over 9 years
• Summary: business can't consistently generate cash, projected earnings growth highly questionable, lack of management credibility, and liquidity could become challenged

Mihir Wohra, PIMCO

• Idea #1: Rates trade - Hawkish Fed
• Market is currently underpricing the possibility of a Fed hike or that there will just be one hike
• Buy a pair: buy a put on the 1 year rate

• Idea #2: Dovish Fed - Buy REITs
• REIT prices tend to be correlated to equities over the short-term but underlying economic factors prevail over the long term
• Will do well if Fed doesn't raise rates or cuts

• Idea #3: Commodities trade: Long call options on 2018 Natural Gas - No Fed correlation
• In the midst of global price convergence that will pull US natural gas prices higher while lowering global prices; US is opening new LNG export terminals and US nat gas is the cheapest in the world so there are buyers
• Buying 2018 at a discount to 2017 is attractive given US LNG exports are only increasing over the next few years

• Idea #4: Bonus trade: sell puts / buy calls on October VIX Futures
• Volatility should rise towards long term averages if election stays close
• Volatility could rise more if Trump probability of winning increases

• Idea #5: Bonus trade: Currencies - works if Trump win probability decreases
• Mexican peso has significantly underperformed other EM and commodity currencies in 2016 due to possibility of Trump victory and tougher US policies toward Mexico

Jeff Osher, Harvest Capital Strategies

• Idea: Long Echostar (SATS)
• Global provider of satellite services, video, delivery solutions and broadband satellite technologies
• Echostar Technologies: set top box business with $1.3bn revenue; $100mm EBITDA, 7.6% EBITDA margins
• Satellite services: $445mm revenue; 84% EBITDA margins; very good business with long dated contracts
• HughesNet: $1/4bn revenue; provide consumer broadband for households that can't get wired broadband
• Duopoly: Hughes and Viasat
• Hughes has 1mm subscribers with 30% EBITDA margin
• Business is capacity constrained
• 2016 launches will drive 50% revenue growth for Hughes within 3 years.  Given higher incremental margins, EBITDA should nearly double
• Sum of the parts valuation results in target price of $71.76 (versus today at ~$44)
• Other actions could result in homerun scenarios: Echostar Technologies divestiture, Echo Mobile, Dish Mexico, Sling TV, Brazil orbital slot, Pay TV, positioning for opportunistic M&A

Joseph Lawler MD, JFL Capital Management

• Idea: Short IP Group (IPO.LSE)
• Publicly traded fund that invests in healthcare companies
• Most publicly traded investment firms trade at a discount to NAV but IPO trades at a premium
• Adverse selection process - they seem to invest in companies that other VCs have passed on
• Investments are overvalued especially investment in Oxford Nanopore.  It's a DNA sequencing company; the cost of DNA sequencing has gone down significantly and has become commoditized

Arjun Divecha, Grantham May Van Otterloo & Co

• Idea: Investing in Indian financials (non state-owned banks)
• Never think of an emerging market as a place to permanently put capital
• India from a long term point of view looks pretty good as a place to invest - well positioned for economic growth over next 5 years
• Private sector financials are taking market share away from state owned banks
• Dependency ratio looks pretty good in the future versus other countries like US, Japan, and China.  Dependency ratio = ratio of non-working to working people
• India looks good because of improving fiscal discipline, improving inflation, current account benefiting from oil windfall (big importer of oil), capacity utilization is very low
• India is massively under-urbanized
• Household debt to GDP is 9% versus US where it is ~100%
• Huge scope for increase in consumer loans
• Pitch was about investing in non state-owned banks, like publicly traded ones such as HDFC Bank, Axis Bank, IndusInd Bank and Yes Bank; State owned banks can't make loans anymore due to loan issues
• The private banks are very well run; 3-6-3 banks
• Not easy for foreign investors - must have access to local market
• HDFC Bank (HDB) and ICICI Bank (IBN) are listed on the NYSE 
• 4-5% net interest margins
• Valuations are high but earnings growth has historically justified high valuation
• HDFC trading at 4.5x price to book
• 26.7% earnings growth over 20 years
• Thesis summary: well positioned for economic growth, low penetration of financial sector, well run financials are taking market share from well run banks

Peter Palmedo, Sun Valley Gold

• Idea: Gold: data and dogma
• Discovered Summers-Barsky Gold Thesis: price of gold is driven by the real return in capital markets
• From 2002 to 2015 gold real return was 7.9% versus a blended real return of 4.5%
• China gold demand in excess of domestic supply
• Most PMs hold unsubstantiated beliefs about gold but the algorithmic, data driven models will get it
• Own gold in the simplest form
• Cheap, safe and stable; think about gold in the context of portfolio insurance and risk diversification 
• Buy gold if you think we are in a low real return world

Be sure to also check out the presentations from the Next Wave Sohn San Francisco conference as well, which featured emerging fund managers.

Notes From Next Wave Sohn San Francisco 2016: Rende, Kaufman, Drescher, Melsom

Today we're posting up notes from the Next Wave Sohn San Francisco 2016 investment conference that just took place.  This features emerging fund managers presenting investment ideas to benefit charities.  We've also posted notes from the main Sohn San Francisco 2016 conference as well.


Notes From Next Wave Sohn San Francisco 2016

John Rende, Copernicus Capital Management

• Focused on life sciences and services
• Manages $85mm AUM
• Positive performance 15 out of 16 years

• Idea: Biomarin Pharmaceuticals (BMRN)
• Enzyme replacement therapies for rare diseases 
• $16bn market cap
• 5 commercialized drugs = $1.1bn in product sales in 2016
• Thearpeutics category
• Leader in orphan drugs (affecting less than 200k people in the US)
• Why we like orphan drugs?
• Expedited regulatory path
• Limited competition
• Small sales force needs
• Motivated patient population
• Business model advantage
• 7 year marketing exclusivity 
• Tax credits
• FDA motivated to approve these drugs
• 2014-2020 CAGR of ~17%
• Biomarin makes 5 orphan drugs; Strength in Vimizim and Kuvan - raised revenue guidance recently
• Sustainability of revenues for rare diseases
• Vimizim - treats Morquio A disease - impacts population of 3,000 in the developed world with 20 births/year in the US
• Annual price/patient = ~$350k
• Kuvan - Phenylketonuria - inherited disorder which caused the buildup of the amino acid
• Works in conjunction with a low phe diet
• Annual price/patient =~$150k 
• Three near term pipeline products expected to add $400mm in product revenue by 2020
• Corporate pricing strategy has always been conservative; they've been kept out of the crosshairs because they don't represent a large portion of a given insurance company's costs given low number of patients impacted; also FDA understands that orphan drug companies need a financial incentive to continue to develop orphan drugs
• Over $4bn invested in R&D over past decade
• Base case = $130 price target; Upside case = $170 price target; Downside case = $80 price target

Neal Kaufman, Hillair Capital Management

• From a non-traditional background - formerly operated businesses - CEO of publicly traded small cap company - a supplier to the railroad industry
• Invests in publicly traded small companies

•  Idea: Sysorex (SYRX)
• Value added reseller transitioning into a product company 
• Moving to Saas/recurring revenue business model
• Hillair has $5mm invested in fixed price convertible debenture with preferred share equity kicker 
• Convertible at price significantly above current market
• Technologies
• Airpatrol: Detects cellular, Wifi, RFID, and Bluetooth deices, applications
• Lightminer: World's fastest analytics platform
• VAR business comprises the lionshare of revenue
• Announcement on contract with Top US mall operator and Airpatrol installations
• Valuation
• VAR business worth $14bn based on comps
• Security business is worth $26mm based on comps
• Value per share of $0.89 versus current price of $0.31

Joel Drescher, Drescher Capital

• Focused on TMT and consumer
• BA from Stanford and MBA from Cal Berkeley

• Idea: Signet Jewelers (SIG) 
• 15% ROE, 7 year of double
• Owns Kay, Jared and Pagoda and Zales store brands
• Three divisions
• Market for wedding and engagement rings is very stable
• 15% market share in the mass jewelry category; no competitor has more than 1%
• Zales had 3% operating margin before it was purchased versus Kay and Jared at 17%
• Stock beaten down due to a diamond swap scandal that was published on Buzzfeed, concerns around rising charge-offs
• Credit is an asset not a liability; can be sold off
• 62% of sales done on credit at an average FICO score of 660
• Mid-teens yield on credit portfolio
• Signet could get $1.1bn for the sale of their credit portfolio; could sell it with a minimal impact to EPS, proceeds can be used to buy back stock
• Third party would have more stringent credit standards but would result in minimal loss of sales
• Company announced that it is exploring the sale of its receivables
• $139 per share fair value; 85% increase from current market price based on $7.40 EPS x 10% growth, +1.13 EPS from credit sale portfolio x 15 P/E multiple

John Melsom, Omni Event Fund

• Risk/merger arbitrage fund; 20-25 names in portfolio
• $350mm AUM; launched three years ago
• Investment criteria: hard catalyst, low correlation to equity markets, liquid
• Focused on N. America, Western Europe and Asia
• Beta to the S&P of 0

• Idea: Syngenta (SYT) ~ $40bn market cap 
• One of the big six agro chemical firms
• Focused on crop protection and seeds
• Agricultural input sector facing headwinds; costs are increasing in R&D and crop prices are in decline
• A lot of consolidation in the sector
• ChemChina has a deal to acquire Syngenta
• ChemChina is China's largest chemical company - state owned 
• Terms of the deal: $465 USD + CHF 5/share special dividend
• Expect broad shareholder support for the deal, need Chinese regulatory approvals - but it is a very strategic deal for China given China's desire to increase agriculture output significantly 
• Swiss government has blessed the deal; CFIUS - US body has approved the deal
• Potential 20% return before CFIUS deal; Post CFIUS approval, there is a 7% spread - annualizes to 28% based on closing date
• Spread driven by concerns of antitrust and Chinese buyer.  Market share issues can be easily solved
• Highly confident that the deal will close

Be sure to also check out the presentations from the main Sohn San Francisco 2016 conference as well.

What We're Reading ~ 10/5/16

Michael Lewis' upcoming book on the decision making process [Amazon]

How interest rates affect stock market returns [A Wealth of Common Sense]

The difference between a bubble and a cycle [Collaborative Fund]

Practicing a 'punch card' approach to investing [Base Hit Investing]

Silicon Valley's secrets are hiding in Marc Andreessen's library [Wired]

This is where your smartphone battery begins [Washington Post]

Some big US cities see apartment rents fall for first time in years [WSJ]

Advertising's century of flat-line growth [Bloomberg]

What the next few years looks like for virtual reality [Medium]

Interview with Benchmark's Bill Gurley [Recode]

The scientists who make apps addictive [1843 magazine]

Moleskine turns paper into big profit for private equity [WSJ]

71 million hogs are crushing US meat prices [WSJ]

When going to college becomes a financial risk [Marketplace]

Marcato Capital Sells Some Sotheby's Shares To Company

Mick McGuire's activist firm Marcato Capital Management has filed an amended 13D on its position on Sotheby's (BID).  Per the filing, Marcato now owns 4.9% of BID with 2.62 million shares.

This is a change from the 5.27 million shares they reported on their 13F filing at the end of the second quarter.

The filing notes that Marcato entered into a share repurchase agreement with Sotheby's where BID agreed to purchase 2.05 million shares of BID from Marcato at $36 per share on October 4th.

For more on this fund, we've highlighted other recent portfolio activity from Marcato.

Per Google Finance, Sotheby's is "a global art business company. The Company operates in two segments: Agency and Finance. The Agency segment earns commissions by matching buyers and sellers of authenticated fine art, decorative art, jewelry, wine and collectibles (collectively, art or works of art or artwork or property) through the auction or private sale process. Agency segment activities also include the sale of artworks that are principally acquired incidental to the auction process and the activities of RM Sotheby's. The Finance segment earns interest income through art-related financing activities by making loans that are secured by works of art. Its activities include Sotheby's retail wine operations, Acquavella Modern Art, an equity investee, and sales of the remaining inventory of Noortman Master Paintings, an art dealer that was owned and operated by Sotheby's are reported within all other segment."

Exclusive Branding/Design Package For Investment Firms: Our Readers Save 50%

Our friends at Board Studios have put together a design/branding package with an exclusive 50% discount for MarketFolly readers.  They do fantastic work and we really can't recommend them enough.

In a "Google it" world, your firm's online presence, message, and branding are critical to attracting potential clients.  This package is perfect for readers who run a hedge fund, investment partnership, registered investment adviser (RIA), private equity firm, or financial advisory.

If your firm needs a website, wants to modernize your design, or better communicate your investment philosophy to investors, Board Studios is your ideal partner.  This is because the founder is an investor with 10+ years of experience on Wall St, including investment banking, private equity, and hedge funds.

Board Studios was founded 4 years ago and they're building *the* digital agency for financial services.  They know the industry inside-out so you won't be dealing with junior account managers or people that don't understand investing or your product.


Exclusive Discount For Readers

Normally priced at $20,000 MarketFolly readers get an exclusive 50% discount.  We fought hard to get this price and the offer is limited to the first 20 who reach out to Board Studios' founder at: kosta@boardstudios.com

For $10,000 you get all of the below:

- Visual identity (logo, branding, and presentation design)
 - Web design & development (up to 5 separate pages)
 - Video on your investment philosophy (1 minute duration: filmed live in NYC or whiteboard-animated
 - Call with the founder for advice on crafting the right message

As investors, you're often so focused on your portfolio that you forget to invest in something just as important: your own firm.  The guys at Board Studios are great and they've been extremely generous by giving our readers this exclusive deal.

Email Kosta at kosta@boardstudios.com with the subject line "MarketFolly Offer" to lock-in your savings before it's too late.  And even if you don't need the services right away, you can secure the savings for anytime during the rest of 2016.

ValueAct Capital Reduces Baker Hughes Stake

Jeff Ubben's activist firm ValueAct Capital has filed an amended 13D with the SEC regarding its stake in Baker Hughes (BHI).  Per the filing, ValueAct now owns 7% of BHI with over 29.88 million shares.

This is down from the 38.88 million shares they owned at the end of the second quarter.  The filing indicates they sold shares in early August and at the very end of September.  Most of the transactions were at weighted average prices between $49.60 and $50.71.

Ubben's firm has been busy lately and we've highlighted how ValueAct recently filed 13D's on Trinity Industries and CBRE Group as well.

Per Google Finance, Baker Hughes is "engaged in the oilfield services industry. The Company is a supplier of oilfield services, products, technology and systems used in the oil and natural gas industry around the world. The Company also provides industrial products and services for other businesses, including downstream chemicals, and process and pipeline services. It conducts its operations through its subsidiaries, affiliates, ventures and alliances. The Company has four geographical operating segments: North America, Latin America, Europe/Africa/Russia Caspian and Middle East/Asia Pacific. The Company also has an Industrial Services segment, which includes the downstream chemicals business and the process and pipeline services business. The Company's oilfield products and services are of approximately two categories, Drilling and Evaluation or Completion and Production. The Company's Industrial Services consists of its downstream chemicals and process, and pipeline services businesses."

Third Point Files Amended 13D on Enphase Energy Holdings

Dan Loeb's hedge fund firm Third Point has filed an amended 13D with the SEC regarding its stake in Enphase Energy (ENPH).  Per the filing, Dan Loeb now has exposure to 11.2% of ENPH with over 6.7 million shares. 

Per the filing, 6.28 million shares are owned by Third Point funds (including 34,101 shares of common stock issuable upon exercise of warrants). and 423,684 shares are owned directly by Loeb. 

Third Point's last 13F filing detailing positions as of the end of the second quarter had them previously owning 6,248,987 shares.

Per Google Finance, Enphase Energy is "a provider of energy management solutions. The Company is engaged in designing, developing, manufacturing and selling microinverter systems for the solar photovoltaic industry. Its semiconductor-based microinverter system converts direct current (DC) electricity to alternating current (AC) electricity. Its microinverter system consists of three components: Enphase microinverters, an Envoy gateway and Enlighten cloud-based software. Its Enphase microinverters provide power conversion at the individual solar module level by a digital architecture that incorporates custom application specific integrated circuits (ASIC), specialized power electronics devices, and an embedded software subsystem. Envoy bi-directional communications gateway provides collecting and sending data to Enlighten software. Enlighten cloud-based software provides the capabilities to remotely monitor, manage, and maintain an individual system or a fleet of systems."

Paulson & Co Trims Trilogy Metals & Synergy Pharma Positions

John Paulson's hedge fund firm Paulson & Co has filed two Form 4's with the SEC.

First, Paulson has reduced his stake in Trilogy Metals (TMQ), formerly known as NovaCopper.  On September 27th and 28th, Paulson sold 11,173 shares at prices of $0.5594 and $0.5503.  After these sales, Paulson still owns over 11.61 million shares.

Per Google Finance, Trilogy Metals is "a Canada-based metals exploration company. The Company is engaged in exploring and developing the Ambler mining district located in northwestern Alaska. The Company's segments are Alaska, USA; Antioquia, Colombia, and Corporate and other. The Company focuses on the Arctic deposit, which is a volcanogenic massive sulfide deposit located approximately 470 kilometers northwest of the City of Fairbanks, Alaska. The Company's Arctic deposit focuses on engineering and environmental site investigation studies. The Company's Bornite deposit is a carbonate-hosted copper deposit located approximately 25 Kilometers southwest of the Company’s Arctic project. The Company's Bornite deposit focuses on exploration, with mineralization and opens to the north, northeast and south."


Second, Paulson & Co also filed another Form 4 regarding its stake in Synergy Pharmaceuticals (SGYP).  On September 27th and 28th, Paulson sold 54,300 shares in total at prices of $5.7458 and $5.6041.  After these transactions, Paulson still owned 24.22 million shares.  We've highlighted how Paulson has been selling SGYP shares recently.

Per Google Finance, Synergy Pharmaceuticals is "a biopharmaceutical company focused on the development and commercialization of gastrointestinal (GI) therapies. The Company's GI platform includes two lead product candidates: plecanatide and dolcanatide. It is engaged in the discovery, research and development involving uroguanylin analogs for the treatment of functional GI disorders and inflammatory bowel disease. Plecanatide is the Company's uroguanylin analog being evaluated for use as a once-daily tablet for two functional GI disorders, chronic idiopathic constipation (CIC) and irritable bowel syndrome with constipation (IBS-C). Plecanatide is a 16-amino acid peptide that is structurally identical to uroguanylin with the exception of a single amino acid change. Dolcanatide is also its uroguanylin analog being explored for inflammatory bowel disease (IBD). Dolcanatide is designed to be an analog of uroguanylin with resistance to standard digestive breakdown by proteases in the intestine." 

Invest For Kids Chicago 2016: Brosens, Zell, Grant & More

The eighth annual Invest For Kids Chicago conference is coming up soon on October 26th, 2016.  It will feature presentations from elite investment managers in concise 15 minute presentations in order to benefit underprivileged kids in the Chicago area.  You can register for the conference here.


Speakers List: Invest For Kids 2016

- Frank Brosens, Taconic Capital
- Ed Garden, Trian Partners
- Jim Grant, Grant's Interest Rate Observer
- Sam Zell, Equity Group Investments
- Jonathan Gray, Blackstone
- John Lykouretzos, Hoplite Capital
- Matt Halbower, Pentwater Capital
- Michael Sacks, GCM Grosvenor
- Debra Cafaro, Ventas
- Josh Wolfe, Lux Capital
- Leah Joy Zell, Lizard Investors
- William Heard, Heard Capital
- Arthur Kaz, Greenbriar Asset Management


Event Details

When: October 26th, 2016 from 1:30pm to 5:30pm

Where: Chicago, Illinois at the Harris Theater

Registration:  https://investforkidschicago.org


The 2016 conference's beneficiaries include: College Possible, Urban Initiatives, The People's Music School, The Posse Foundation, North Chicago Community Partners, Perspectives Charter Schools, and Chicago Children's Advocacy Center.


This is always an excellent event so we highly recommend attending, especially if you're in the Midwest. Click here to register for the event.

Hedge Fund Links ~ 9/30/16

Perry Capital closing flagship fund [Bloomberg]

A highly anticipated hedge fund launch that might not actually happen? [ii alpha]

John Thaler considers hedge fund return [Reuters]

Chris Hohn's TCI targets excessive executive pay [FINalternatives]

Steve Eisman assails 'clueless' Silicon Valley over online lending [Chicago Tribune]

The hedge fund fee structure just took another blow [CNBC]

Tom Russo's Q2 letter [Gurufocus]

Carl Icahn Reduces Transocean Stake

Activist investor Carl Icahn has filed an amended 13D with the SEC regarding shares of Transocean (RIG).  Per the filing, Icahn now owns 1.5% of RIG with over 5.47 million shares.

This is way down from the previous 21.47 million shares he owned at the end of the second quarter.  The 13D notes that he was selling on September 23rd and 28th at prices of $9.92 and $9.26.

Icahn has been quite busy drastically reducing his energy exposure.  We highlighted how he also dumped over half of his Chesapeake Energy position recently as well.

Per Google Finance, Transocean is "an international provider of offshore contract drilling services for oil and gas wells. The Company's primary business is to contract its drilling rigs, related equipment and work crews primarily on a day rate basis to drill oil and gas wells. The Company operates through the contract drilling services segment. The Company specializes in technically demanding regions of the global offshore drilling business with a particular focus on deepwater and harsh environment drilling services. Its mobile offshore drilling fleet consists of floaters and high-specification jackups used in support of offshore drilling activities and offshore support services across the world. The Company owns or has partial ownership interests in and operates over 60 mobile offshore drilling , including approximately 30 ultra‑deepwater floaters, over seven harsh environment floaters, over five deepwater floaters, over 10 midwater floaters and approximately 10 high-specification jackups."

Julian Robertson: Stocks & Bonds in Bubble, Especially Bonds

Julian Robertson of legendary hedge fund Tiger Management appeared on Bloomberg late yesterday in an interview with Tom Keene.  In it, they touched on a myriad of topics, including the hedge fund industry, which Robertson said was facing the most challenging time ever.  He also said a bubble is brewing in financial assets.


Here's a quick summary with the video below:


- While interest rates aren't negative in the US yet, thinks it's tragic they're down this far

- Says Janet Yellen's not willing to see the American public take pain

- Robertson said negative and near-zero rates from central banks have sped up borrowing at low costs and money is flowing into financial assets.  Thinks bubble in equities and when it bursts, will spread to real estate. 

- "I would tell them (investors) in my opinion, there's going to be chaos created by the negative and low interest rates."

- Thinks investors should have at least some money allocated to hedge funds, so that they can truly be hedged and have some protection

- That said, thinks some great companies are undervalued, cited healthcare, biotech, and technology stocks specifically.  "A company like Celgene is very reasonably priced.  The Google's, those type things, Microsoft.  They're available at very reasonable multiples."

- Invests his own money but the rest is allocated to Tiger Cub hedge funds, or funds founded by managers that used to work for him (you can see many of those funds' portfolios in our quarterly newsletter).

- Specifically called out bonds as stretched with all the bond-buying programs.  Yields at record lows has forced prices to levels that aren't sustainable

- Thinks China will come out with a strong program against hydrocarbons

- Feels there's already a lot of regulation in the hedge fund industry, especially compared to what it used to be.  But says that's normal as an industry grows.

- "It's the most difficult time I've ever seen in the (hedge fund) business.  Because there are a lot of people who are squeezing shorts and they make a business of doing that.  Furthermore, I don't quite know how the quants work, but I think they have a way of squeezing shorts that is very tough too.  At any rate, I think it's tougher to be a hedge fund investor than ever before.  Hedge funds ordinarily don't outperform the markets except when the markets go down.  But right now it's a very difficult time for them."

- "There's a distinct drift occurring in the fee structure." (2% management fee and 20% performance fee)

- Says you make every effort to avoid any areas where insider trading could be possible:  "It's very difficult to determine whether something is an excellent job of research or is in fact inside information."

- On the UK: "I think London is gonna be durable, but this gonna be tough on the UK.  I think it's gonna be very tough."

- On Europe: "I'm reasonably pessimistic on Europe.  But I think the immediate problem is probably rougher in the UK.  George Soros has written a lot about this and I have a lot of respect for him."

- On America: "I'm extremely optimistic because I think we have really great young people and I've always worked with young people."


Embedded below is the video of Robertson's interview:




You can view somewhat recent portfolio activity from Tiger Management here.

What We're Reading ~ 9/28/16

Investing to avoid the consequences of being wrong [aaii]

Comments on investment philosophy [Bronte Capital]

9 ways to improve investing performance [Livewire Markets]

The traits and processes that lead to better forecasts [aaii]

Cognitive bias cheat sheet [Better Humans]

How to build a business that lasts 100 years [TED]

KLX shares could lift off [Barrons]

Why the great divide is growing between affordable and expensive US cities [WSJ]

Amazon's latest ambition: competing with UPS and FedEx [WSJ]

Why video games could be causing a big problem in America [Washington Post]

Jack Ma's grand ambitions [Fortune]

Negative rates nails savers [Mauldin Economics]

When restaurants ditch the dining room [Eater]

Darsana Capital Ups Spirit Aerosystems Stake

Anand Desai's hedge fund firm Darsana Capital Partners has filed a 13G with the SEC regarding its stake in Spirit Aerosystems (SPR).  Per the filing, Darsana now owns 5.4% of SPR with 7 million shares.

This is up from the 5.25 million shares they owned at the end of the second quarter.  The filing was made due to activity on September 16th.

SPR has been a favorite among a few other hedge funds we cover as well: Hound Partners, Marble Arch Investments, Aravt Global, and Newtyn Management, among others.

About Darsana Capital

Prior to founding Darsana, Desai worked with Eric Mindich at Eton Park Capital.  Darsana's most recent 13F filing showed $1.9 billion in assets but keep in mind that doesn't include international positions, or cash.

About Spirit Aerosystems

Per Google Finance, Spirit Aerosystems is "a non-original equipment manufacturer (OEM) aircraft parts designer and manufacturer of commercial aero-structures. The Company is a supplier of aero-structures to The Boeing Company (Boeing) and Airbus S.A.S (Airbus). The Company operates through three segments: Fuselage Systems, Propulsion Systems and Wing Systems. It is engaged in production, including the majority of the airframe content for the Boeing B737. It is also a content supplier of wing systems for the Airbus A320 family. It is a supplier for the Airbus A380 and Airbus A350 XWB (Xtra Wide-Body). Its products include Fuselage Systems, Propulsion Systems and Wing Systems. The Company offers spares and replacement parts for B737 Classic, B737NG, B747, B757, B767, B777, Rolls-Royce BR725, A320, A330, A340 and A380. Its Maintenance, Repair and Overhaul at repair stations provide complete on-site repair and overhaul to support MRO services for B747, B767, B777, B787 and Rolls-Royce BR725.."

Complimentary Equity Reports From Boyar Research

Boyar Research has generously offered to give Market Folly readers complimentary in-depth equity research on three stocks they feel have multi-bagger potential.

You can receive your free reports by clicking here.

Since 2009, over 25% of the companies featured in Boyar Research's Asset Analysis Focus have achieved multi-bagger status within 3 years of publication.  Over the same period, the average stock Boyar profiled increased 73% compared to the S&P 500's 45% gain.*

Average 3 Year Performance of Companies Profiled by Boyar Research

Some of Boyar Research's multi-baggers include:

Find out what companies Boyar Research believes could be next by requesting complimentary reports on three companies, exclusively for Market Folly readers.  Click here to receive the reports.


Since 1975 Boyar Research has been providing independent research utilizing a business person's approach to stock market investing.  They take a company's financial statement and tear it apart, and then reconstruct it in accordance with economic reality - as opposed to generally accepted accounting principles.  Their various publications provide in-depth reports on companies they believe to be selling below their estimate of intrinsic or private market value.


To learn more about Boyar Research visit www.boyarresearch.com


Past performance is no guarantee of future results.  These results are unaudited.  The results represent the 3 year performance from the date of publication and takes into account spinouts and special dividends but not regular dividends.  These are the results of companies profiled in all issues of Asset Analysis Focus excluding The Forgotten Forty.

Steve Eisman Thinks US Destined For Slow Growth: Jeff Saut Market Commentary

Market strategist Jeff Saut of Raymond James has put out his latest piece entitled, "Schadenfreude."  In it, he talks about his recent meeting with Steve Eisman.

Here's what Eisman is thinking these days, according to Saut:  "Steve concluded that Europe is currently sick, the U.S. is likely destined for slow growth because there is not a big enough mortgage refi pipeline to boost the economy, and that Italy is in big trouble.  Steve said to bea short seller you need to embrace 'Schadenfreude.'"

Eisman, of course, was famously profiled in the book The Big Short that subsequently was turned into a movie where he was played by Steve Carrell.

Eisman also walked Saut through the financial crisis, noting that for a crisis like that to happen, you need 3 things: too much leverage, a big asset class that blows up, and then large institutions holding most of the asset class that blows up.

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



You can view Saut's previous market commentary here.

Senator Investment Group Takes Comstock Resources Stake

Alex Klabin and Doug Silverman's hedge fund Senator Investment Group has filed a 13G with the SEC regarding shares of Comstock Resources (CRK).  Per the filing, Senator now owns 7.32% of the company with 922,754 shares (including 93,500 shares issuable upon exercise of warrants).

This is a newly disclosed equity position for the firm as they did not own any at the end of the second quarter.  The filing was made due to activity on September 13th.

For more from this fund, check out Alex Klabin on the intangibles of building a great hedge fund.

Per Google Finance, Comstock Resources is "an energy company engaged in the acquisition, exploration, development and production of oil and natural gas in the United States. The Company operates in the segment of exploration and production of oil and natural gas. The Company's oil and gas operations are concentrated in Texas and Louisiana. Its operations are focused in two operating areas: East Texas/North Louisiana and South Texas. The Company's properties in the East Texas/North Louisiana region include approximately 80,660 acres in the Haynesville or Bossier shale formations. The Company's Eagleville field includes approximately 30,220 acres located in the oil window of the Eagle Ford shale in South Texas. The Company owns interests in over 1,575 producing oil and natural gas wells, and operates over 950 of these wells. The Company owns interests in over 20 wells in the Rosita field, located in Duval County, Texas."

Paulson & Co Trims Synergy Pharmaceuticals Position

John Paulson's hedge fund firm Paulson & Co has filed a Form 4 with the SEC regarding its stake in Synergy Pharmaceuticals (SGYP).  Per the filing, Paulson sold over 3.47 million shares in total on September 16th and 19th at prices around $5.61. 

After these transactions, Paulson & Co is left with exposure to SGYP of over 24.28 million shares.

A previously filed Form 3 with the SEC indicates that they had notional principal amount derivative agreements in place as well in the form of cash settled swaps representing share equivalents of 2.21 million shares with strikes ranging from $3.31 to $6.347 and expiration dates ranging from November 4th, 2016 to October 5th, 2017.

You can view other recent portfolio activity from Paulson & Co here.

Per Google Finance, Synergy Pharmaceuticals is "a biopharmaceutical company focused on the development and commercialization of gastrointestinal (GI) therapies. The Company's GI platform includes two lead product candidates: plecanatide and dolcanatide. It is engaged in the discovery, research and development involving uroguanylin analogs for the treatment of functional GI disorders and inflammatory bowel disease. Plecanatide is the Company's uroguanylin analog being evaluated for use as a once-daily tablet for two functional GI disorders, chronic idiopathic constipation (CIC) and irritable bowel syndrome with constipation (IBS-C). Plecanatide is a 16-amino acid peptide that is structurally identical to uroguanylin with the exception of a single amino acid change. Dolcanatide is also its uroguanylin analog being explored for inflammatory bowel disease (IBD). Dolcanatide is designed to be an analog of uroguanylin with resistance to standard digestive breakdown by proteases in the intestine."

Hedge Fund Links ~ 9/23/16

SEC charges Leon Cooperman with insider trading [SEC]

Hedge fund performance fees: the days of 2/20 are over [ValueWalk]

Dan Loeb: BOJ move will be 'positive' for markets [Reuters]

More hedge fund firms seeing a decline in assets [PIonline]

Perry Capital's assets plunge as wagers backfire [Bloomberg] 

The beginning of the end for high hedge fund fees? [Institutional Investor]

Some of the best known hedge funds can't hang on to client capital [Bloomberg] 

Funds across globe cut fees in battle for investors [Reuters]

Mark Okada says surge in passive strategies will be boon [Reuters]

Star names struggle as smaller hedge funds make hay [WSJ]

The guru who only talks to the hedge fund elite [Bloomberg]

Berkshire Hathaway Symposium Panel Videos

The Museum of American Finance has posted videos of the Berkshire Hathaway Symposium Panel.  It features Jason Zweig moderating a discussion between Tom Russo (Gardner Russo Gardner), Paul Lountzis (Lountzis Asset Management), and Whitney Tilson (Kase Capital).

The panel examines topics such as: what's the best advice you received from Warren Buffett?  What are the flaws in the Berkshire model?  Why did you buy Berkshire Hathaway stock? What aspects of Berkshire Hathaway can be emulated?  And then audience Q&A.

Embedded below are the videos from the Berkshire Hathaway Symposium Panel:

What's the best advice you received from Warren Buffett?




What are the flaws in the Berkshire model?




Why did you buy Berkshire Hathaway stock?




What aspects of Berkshire Hathaway can be emulated?




Audience Q&A.

What We're Reading ~ 9/21/16

But What If We're Wrong?: Thinking About the Present As If It Were the Past [Klosterman]

Profile of Alphabet's CFO Ruth Porat [Fortune]

The third transportation revolution [Lyft's CEO]

Electric vehicles: it's not just about the car [Bloomberg New Energy Finance]

US setting federal ground rules for self-driving car push [Forbes]

Profile of Ulta's CEO Mary Dillon [Fortune]

2016 US mobile app report [comscore]

On the inevitability of everything 'in the cloud' [Digits To Dollars]

8 price action signals every trader should know [Tradecity]

A look at Spanish banks [Exane]

Heavy equipment glut weighs on machine makers [WSJ]

Inside the cannibalistic culture of China's Tencent [Bloomberg]

Q&A with Chase Carey [Formula 1]

How Wells Fargo's high pressure sales culture spiraled out of control [WSJ]

A look through the eyes of beer wholesalers [Beverage World]

AT&T wants to blanket the country with gigabit wi-fi from utility poles [Gizmodo]

Capitalize For Kids Conference: Our Readers Save $500 on Tickets

On October 26th and 27th, Capitalize for Kids will present their 3rd annual Investors Conference at Arcadian Court in Toronto, in partnership with the Sohn Conference Foundation.  More than 20 world-renowned money managers will present their highest conviction ideas in front of 400 of the most prominent institutional investors in North America.  All proceeds are allocated to solving the toughest challenges in children's brain and mental health.

Discount for Market Folly readers:  Save $500 on individual tickets by registering here and using promo code: C4K2016MF

Capitalize For Kids Speakers List 2016

- Dan Loeb, Third Point
- Cliff Asness, AQR Capital
- Clint Carlson, Carlson Capital
- Jeff Smith, Starboard Value
- Thomas Russo, Gardner Russo & Gardner
- Ed Garden, Trian Fund Management
- Alexander Roepers, Atlantic Investment Management
- Dan Farb, Highfields Capital
- Aaron Cowen, Suvretta Capital
- Anna Nikolayevsky, Axel Capital
- Brad Dunkley, Waratah Capital
- Satish Rai, OMERS
- Tom Wagner, Knighthead Capital
- Michael Gentile, Formula Growth
- Brian D'Costa, Algonquin Capital
- Miguel Fidalgo, Triarii
- Hon. Michael Wilson, Former Ambassador for Canada to the US
- Aaron Klein, Former Chief Economist of the US Senate Banking, Housing & Urban Affairs Committee

Sessions include best ideas from prominent money managers, fireside chats with investment greats, implications of the US election, and investing in mental health.  Over the course of a day and a half, more than $1.5 million will be raised to help the toughest challenges in children's brain and mental health.

Event Details

When: October 26th & 27th, 2016

Where: Arcadian Court in Toronto, Canada

Registration:  http://www.capitalizeforkids.org/

Embedded below is the conference agenda:





Click here to get tickets and remember our readers save $500 with promo code: C4K2016MF

Carl Icahn Dumps Over Half of Chesapeake Energy Position

Activist investor Carl Icahn has filed an amended 13D with the SEC regarding his position in Chesapeake Energy (CHK).  Per the filing, Icahn now owns 4.55% of the company with 28.27 million CHK shares.

This means he sold over 44.77 million shares since the end of the second quarter as he previously owned over 73 million CHK shares.

Per the filing, he sold the bulk of the position on September 19th at prices of $7.06.

Icahn also issued this statement regarding Chesapeake:  "We believe that over the last few years Doug Lawler and his team have done an admirable job, especially in light of the circumstances. We reduced our position to recognize a capital loss for tax planning purposes."

For more on this investor, we recently posted up Icahn's talk at the Delivering Alpha conference.

Per Google Finance, Chesapeake Energy is "a producer of natural gas, oil and natural gas liquids (NGL) in the United States. The Company operates in two segments: Exploration and Production, and Marketing, Gathering and Compression. The exploration and production segment is responsible for finding and producing oil, natural gas and NGL. The marketing, gathering and compression segment is responsible for marketing, gathering and compression of oil, natural gas and NGL. It has positions in resource plays of the Eagle Ford Shale in South Texas; the Utica Shale in Ohio and Pennsylvania; the Anadarko Basin in northwestern Oklahoma and the Texas Panhandle, and the Niobrara Shale in the Powder River Basin in Wyoming. Its natural gas resource plays are the Haynesville/Bossier Shales in northwestern Louisiana and East Texas; the Marcellus Shale in the northern Appalachian Basin in Pennsylvania, and the Barnett Shale in the Fort Worth Basin of north-central Texas."

Jeff Saut's Latest Market Commentary

It's been a while since we checked in on Jeff Saut, market strategist at Raymond James.  His latest investment commentary is out.  He writes,

"Speaking to higher interest rates, while a quarter point increase in the Fed Funds rate would likely cause a stutter-step in the equity markets, the impact on the overall economy should be de minimis."

Embedded below is Jeff Saut's latest market commentary entitled "I Should Have!?"



You can download a .pdf copy here.

ValueAct Capital Files 13D's on Trinity Industries, CBRE Group

Jeff Ubben's activist firm ValueAct Capital has filed two amended 13D's with the SEC.

ValueAct Ups Trinity Industries Stake

First, Jeff Ubben's firm has disclosed it now owns 7.9% of Trinity Industries (TRN) with over 12 million shares.  This is up from the 10.39 million shares they owned as of July.

The filing indicates they were buying in mid August and early September at prices of $23.xx.  The 13D also says they intend to meet with management and the board about ways to enhance shareholder value.

For more from this firm, check out some of ValueAct's other recent portfolio activity.

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 Files 13D on CBRE Group

Second, ValueAct Capital has filed a 13D with the SEC on CBRE Group (CBG), which they own 10.3% of with over 34.6 million shares.  This stake remains unchanged from August when we reported that ValueAct added to its CBG position.

The 13D contains the standard boilerplate that they will talk with management and the board about enhancing shareholder value and also highlights that one of their partners, Brandon Boze, is on the board of directors.

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."

Marcato Capital Exercises Call Options on Buffalo Wild Wings

Mick McGuire's activist investment firm Marcato Capital Management has filed an amended 13D with the SEC regarding its stake in Buffalo Wild Wings (BWLD).  Per the filing, Marcato owns 5.2% of the company with 950,000 shares.

Their overall economic stake remains unchanged from when they originally filed their 13D back in August.  But the filing indicates they exercised their call options on September 12th at $114 per share.

Marcato has also put together a slide deck on its thesis on BWLD and you can view it here.

Per Google Finance, Buffalo Wild Wings is "an owner, operator and franchisor of restaurants featuring various menu items. The Company's restaurants feature a bar, which offers a selection of 20 to 30 domestic, imported and craft beers on tap, as well as bottled beers, wine and liquor. The Buffalo Wild Wings restaurants feature various menu items, including its Buffalo, New York-style chicken wings spun in one of its signature sauces from sweet to screamin' hot, which includes Sweet barbeque (BBQ), Teriyaki, Bourbon Honey Mustard, Mild, Parmesan Garlic, Medium, Honey BBQ, Spicy Garlic, Asian Zing, Caribbean Jerk, Thai Curry, Hot BBQ, Hot, Mango Habanero, Wild and Blazin', or signature seasonings, Buffalo, Desert Heat, Chipotle BBQ, Lemon Pepper, and Salt & Vinegar. Its restaurants include a multi-media system, a bar and an open layout. It operates Buffalo Wild Wings, R Taco and PizzaRev restaurants, as well as sells Buffalo Wild Wings and R Taco restaurant franchises."

Delivering Alpha Conference 2016 Speaker Transcripts

Last week we posted up notes from the Delivering Alpha Conference 2016.  It featured numerous prominent hedge fund managers and now CNBC has made transcripts from various talks available.  Click the links below to read each full transcript:


Delivering Alpha Conference 2016 Transcripts

Ray Dalio (Bridgewater) and Tim Geithner (Former Treasury Secretary): Transcript

Paul Singer (Elliott Management):  Transcript

Marc Lasry (Avenue Capital) and Barry Sternlicht (Starwood): Transcript

Carl Icahn (Icahn Enterprises): Transcript

Steve Schwarzman (Blackstone Group): Transcript

Jack Lew (Treasury Secretary): Transcript

David Ganek (Level Global): Transcript 

Joseph Tsai (Alibaba): Transcript

What We're Reading ~ 9/15/16

Pre-Suasion: A Revolutionary Way to Influence and Persuade [Robert Cialdini]

How to overcome the high cost of inconsistent decision making [HBR]

If you're buying, who's selling? [Irrelevant Investor]

On simplifying investment checklists [Base Hit Investing] 

Profile of a short seller [Barrons]

Simple rules of capitalism [Collaborative Fund]

On asking questions to get answers that matter [Medium]

A look at one of the country's biggest franchisees [Forbes]

Why you should hire people toughened by failure [Entrepreneur]

Middle class incomes had fastest growth on record last year [Washington Post]

Gloom descends on luxury goods industry [Bloomberg]

A look at Bank of the Ozarks (OZRK) [MicroCapClub]

Shenzhen is making hardware like Silicon Valley makes apps [Fusion]

Sohn Conference San Francisco 2016 Only A Few Weeks Away

The 7th Annual Sohn Conference San Francisco is coming up in a few weeks.  If you're on the West Coast, this is the premiere event that features prominent investors sharing investment ideas to benefit  various charities.   For more information on the event, head to www.excellencesf.org

The beneficiaries this year include SEO Scholars, First Place for Youth, Alive and Free, Squash Drive and Meritus College Fund.  Also, a portion of the proceeds benefit their partner the Sohn Conference Foundation in their dedicated efforts toward the treatment and cure of pediatric cancer and childhood diseases.

 
Speakers List: Sohn Conference San Francisco 2016

This year's event features:

- Mason Morfit (ValueAct Capital)
- Chamath Palihapitiya (Social Capital)
- Carson Block (Muddy Waters Capital)
- Mick McGuire (Marcato Capital)
- Arjun Divecha (Grantham, Mayo, Van Otterloo & Co)
- Joseph Lawler (JFL Capital)
- Christpher Lord (Criterion Capital)
- Jeff Osher (Harvest Capital Strategies)
- Peter Palmedo (Sun Valley Gold)
- Alvin Roth (Stanford University)
- Mihir Worah (PIMCO)


Event Details

When: October 5th, 2016  11:00 AM to 6:00 PM

Where: Hyatt Regency San Francisco

Agenda:  Includes access to the Next Wave Sohn Panel of rising investors, buffet lunch, the main Sohn Conference San Francisco conference, and cocktail reception

Registration:  Click here to register for the conference


Embedded below is the conference flyer:




This is always a fantastic event and it's for great causes.  Head to www.excellencesf.org to find out more about the conference and to get tickets before they're all gone.

Pershing Square Reduces Air Products & Chemicals Stake

Bill Ackman's Pershing Square has been busy in the markets lately.  The latest activity includes selling some shares of his stake in Air Products and Chemicals (APD).  This comes after Pershing recently acquired a new stake in Chipotle (CMG) as well.

Per an amended 13D filed with the SEC, Pershing Square now owns 7.8% of APD with over 16.97 million shares (via 4 million common stock and 12.9 million underlying call options).

This is down from the previous 9.5% of the company they owned (with 20.54 million shares exposure).  The 13D filing notes that on September 12th Pershing sold over 3.5 million shares. 

The rationale for this transaction was: "The three-year commitment period for Pershing Square's co-investment vehicles in the issuer ends on September 30th, 2016.  The Reporting Persons sold the Common Stock to return capital to the PSV Funds co-investors."

Per Google Finance, Air Products & Chemicals is "an industrial gases company. The Company's Industrial Gases business provides atmospheric and process gases and related equipment to manufacturing markets, including refining and petrochemical, metals, electronics, and food and beverage. The Company operates through seven segments: Industrial Gases-Americas, Industrial Gases-Europe, Middle East, and Africa (EMEA), Industrial Gases-Asia, Industrial Gases-Global, Materials Technologies, Energy-from-Waste, and Corporate and other. The Company is also a supplier of liquefied natural gas process technology and equipment. The Company's Materials Technologies business serves the semiconductor, polyurethanes, cleaning and coatings, and adhesives industries. The Company manufactures and distributes products in two lines of business: Industrial Gases and Materials Technologies."

ValueAct Capital Continues To Reduce MSCI Stake

Jeff Ubben's activist firm ValueAct Capital has been reducing its stake in MSCI (MSCI).  That trend continued with the latest Form 4 they filed with the SEC.

On September 9th, 12th, and 13th, ValueAct sold a combined 225,000 MSCI shares at prices of $85.78, $85.45, and $84.99.  After these sales, Ubben's firm only owned 625,900 shares of MSCI.

In other recent activity from the firm, ValueAct also built up its Seagate (STX) stake.

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." 

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)."