Aaron Cowen Long QSR & Adobe: Capitalize For Kids Conference

We're posting up notes from the Capitalize For Kids conference 2016.  Next up is Aaron Cowen of Suvretta Capital who pitched two long ideas: Restaurant Brands (QSR) and Adobe (ADBE)


Aaron Cowen's Presentation at Capitalize For Kids 2016

•    LONG Restaurant Brands (QSR). Franchiser of Burger King and Tim Hortons

•    Believes it can be a $75 stock (currently price of $44). Business model is a franchiser business model, it doesn’t own any stores.

•    3G is the management team behind this and has one of the best track records. Tim Hortons integration has been going very strong.

•    Believes it can do $3.00/sh in FCF going forward. Believes people are missing this because of all the merger accounting.

•    No real e-commerce threat at this point and believes e-commerce is a positive for the business.

•    Almost all of 3G’s platforms have compounded capital at very high rates.

•    They have dropped operating expenses by a significant amount at Tim Hortons (lowered costs by 60%).

•    Believes the company ramps up acquisition machine every 2-3 years and is likely due for one now. Targets could potentially be YUM, Dairy Queen, Popeyes, among others. Believes this is a free call option on management doing something smart.



•    LONG Adobe (ADBE). Largest SaaS business in the world. $50 billion market cap.

•    Adobe services two functions: Creative Cloud – used by 13 million users to create webpages and is growing 15-20% per year and essentially have a monopoly in this product. Second, Adobe does digital marketing. This helps companies place adds on website and measure ROI on marketing effects.

•    It went through a transformation to switch to SaaS from one-time sales in 2013 and believes the street still misunderstands this. Margins were impacted as all the upfront costs associated with SaaS business model. Believes margins will be mid-40s (base case assumption) in 2018 after the company completes its transition.

•    Assuming revenue grows at 20% plus margin expansion deserves a high multiple. Expecting EPS of $7/sh in 2018. Target price between $170-180 in base case scenario.


Be sure to check out the rest of the presentations from Capitalize For Kids/Sohn Canada Conference. 

Anna Nikolayevsky on Lower Oil Forever: Capitalize For Kids Conference

We're posting up notes from the Capitalize For Kids conference 2016.  Next up is Anna Nikolayevsky of Axel Capital who made a presentation about lower oil forever.


Anna Nikolayevsky's Presentation at Capitalize For Kids 2016

•    Current consensus is that current prices (which are in contango) are not sustainable and will increase in 2017, 2018 and 2019. More of these estimates are driven by marginal cost curve and well depletion analysis. However, nobody predicted the fall therefore why should any give value to analyst expectations?

•    Overall, the industry is much more productive now (US shale technology advancement). Anna believes $50 is the current ceiling.

•    Most forecasters focus on supply, but demand is much more important. Over 50% of oil demand is due to transportation. A few things can impact demand: Higher fuel efficiency (since 2007, fuel efficiency has increased by 22%), sharing economy is also a major risk (better it gets, the fewer cars we’ll need on the road), electric cars are also a serious threat.

•    Tesla, has been gaining market share relative to comparable car models.

•    Leading car companies and governments are looking to embrace electric or hybrid models. In fact, large car companies are setting high standards to have meaningful percentage of their overall fleet to be electric vehicles in the mid-2020s.

•    Regarding cost, combustible engines are becoming more expensive in terms of compliance/ regulatory standards while electric ones are only getting cheaper.

•    Interestingly Saudi Arabia is looking to diversify away from oil with long term clean energy targets and announcing it is selling Saudi Aramco.


Be sure to check out the rest of the presentations from Capitalize For Kids/Sohn Canada Conference. 

Credit Panel at Capitalize For Kids Conference 2016

We're posting up notes from the Capitalize For Kids conference 2016.  Next up is is the credit panel which featured KKR's Nat Zilkha, Centerbridge's Jonathan Lewinsohn, and ex-Apollo's Ted Goldthorpe.


Credit Panel at Capitalize For Kids Conference 2016

•    The asset origination market is very large. It possible to earn good returns in a fixed income environment where solid trading opportunities are more scarce than they were before the crisis, because of lower bank inventories. There is a trend of investors moving towards senior tranches (less risk).

•    Even so, the non-investment grade space is approximately $2 trillion. However, in an expensive market like this one, firms are increasingly focused on exiting investments vs looking for new ones.

•    Unrated products are harder to sell due to specific mandates. PE firms are now bundling numerous products, getting it rated by the agencies and then reselling it.

•    Even after the crisis, there is a notable duration mismatch between assets and liabilities. With rates so low, duration risk is exceptionally high (if you need longer duration assets).

•    Commodity cycles are long because of how much capital is invested and how long it takes to complete projects. Generally Public information on energy companies is not reliable since they choose to present the best wells, etc.

•    Believes places to look for opportunities are Asia, specifically India, but difficult due to poor regulatory structure.

•    Risks to credit investing are numerous (China, higher rates, etc).

•    Believes this environment forces investment firms to look for opportunities on a monthly/quarterly basis since they don’t want to miss out on moves (like the large sell-off in early 2016).


Be sure to check out the rest of the presentations from Capitalize For Kids/Sohn Canada Conference. 

Brad Dunkley Long Linamar: Capitalize For Kids Conference 2016

We're posting up notes from the Capitalize For Kids conference 2016.  Next up is Brad Dunkley of Waratah Capital who pitched a long of Linamar (LNR.TO).


Brad Dunkley's Capitalize For Kids Presentation 2016

•    Linamar makes engine parts, camshafts and transmissions. They have industry leading margins, and ROEs. They also have a construction equipment division, only 14% of sales.

•    Most of it revenues are the power train division which manufactures engine parts. Approximately 70% of revenues from North America and its mainly from the big 3 U.S. OEMs.

•    Linda, who is the daughter of the founder and has been running the company since its IPO and has established a very strong record: since 1986, stock price CAGR of over 16%.

•    Linamar does have a lost cost production, plants are mainly in Canada, lower healthcare costs, no unionized labour and lower CAD currently helps.

•    The alternative for customers is to manufacture these parts internally.

•    Believes market perception that peak SAAR will hurt Linamar is incorrect. Since 1996, SAAR has increased by a CAGR of 1% while Linamar has realized financial performance of 12% CAGR (revenue, EBIT, EPS, etc). Doesn’t believe SAAR will crash like the market is expecting (estimate 8% to 10% from peak levels). Thinks electric vehicle threat is overdone, only 1% of market in 2020.

•    The company has also does a good job of growing content per car (growing in Europe, NA and Asia).

•    Thinks ride-sharing economy will increase miles driven and lower the life of vehicle (current vehicle have an average life of 11yrs). All positives for Linamar going forward.

•    At ~5x earnings, don’t need to be worried of the terminal value of the company.


Be sure to check out the rest of the presentations from Capitalize For Kids/Sohn Canada Conference. 

Satish Rai's Talk at Capitalize For Kids Conference 2016

We're posting up notes from the Capitalize For Kids conference 2016.  Next up is Satish Rai of OMERS who had a fireside chat.


Satish Rai's Talk at Capitalize For Kids Conference 2016

•    Fixed income as an opportunity doesn’t make sense for OMERS as it’s not a good match to its liability stream.

•    Approximately 50% of OMERS balance sheet is outside of traditional public markets (stocks + bonds)

•    Believes opportunity set outside of public markets is very large and growing.

•    Talked about the "if and when" transaction completed with Great Plains Energy. Great Plains was looking for guaranteed equity financing regarding an acquisition. Structured the deal to be a convert.

•    OMERS has also started to provide debt financing to private equity firms. This business has grown from zero to $7 billion in 12 months. The opportunity set had been enormous given that banks aren't able to make some of these loans due to heightened regulation.


Be sure to check out the rest of the presentations from Capitalize For Kids/Sohn Canada Conference. 

Julian Robertson Likes Microsoft, Air Canada, Celgene

Hedge fund legend Julian Robertson of Tiger Management sat down with CNBC to talk about markets recently and what stocks he's fond of these days.

He really likes Microsoft (MSFT) and thinks its cloud exposure, new management has "brought a revival of Bill Gates' initial strategy."

Robertson also likes Air Canada and says they're doing all the right things, cheap at 3.5x earnings.  Thinks it's well-run at a very cheap price.

Looking at stocks selling at depressed levels, he pointed to biotech and particularly Celgene (CELG).  He noted the fear that Hillary Clinton would put some of these companies out of business.  Robertson says "a lot of them have a lot of promise" and he prefers ones that have sold off a lot.  He was a big holder of Gilead (GILD) but said he's basically 'given up' because the company hasn't put its massive cash pile to work.

Turning to media, he said that, "I have always regrets about selling anything of Reed Hastings."  He regrets not being in Netflix (NFLX) but says "it's not the world's cheapest stock" so he says they 'removed' themselves. 

Turning to currencies, the hedge fund manager thinks the Peso is undervalued as it has largely been a 'Trump trade' recently.

On the hedge fund industry, he said "(The shakeout) is caused by increased competition from more hedge funds."

For young people in finance, he said he'd tell them to go to an industry that's lacking people.

For more from this hedge fund manager, we also posted another recent interview with Julian Robertson as well.

JANA Partners Files 13D on HD Supply Holdings

Barry Rosenstein's activist investment firm JANA Partners has filed a 13D with the SEC regarding shares of HD Supply Holdings (HDS).  Per the filing, JANA now owns 8.1% of the company with 16.25 shares.

This is an increase of over 13.25 million shares since the end of the second quarter when they owned 2.99 million HDS shares.  The filing was made due to activity on October 17th.

The 13D notes they were buying throughout September and into October mostly between $30-32 per share.  HDS currently trades around the $33 level.

JANA has already met with management to discuss strategic alternatives, as well as financial and operational means of maximizing value for shareholders.

For more from this manager, we posted up a recent interview with Barry Rosenstein here.

Per Google Finance, HD Supply Holdings is "an industrial distributor in North America. The Company provides a range of products and value-add services to approximately 500,000 customers in maintenance, repair and operations, water infrastructure and residential and non-residential construction sectors. The Company operates in three segments: Facilities Maintenance, Waterworks, and Construction & Industrial-White Cap. Facilities Maintenance distributes MRO products, provides value-add services and fabricates custom products. Waterworks distributes lines of water and wastewater transmission products, serving contractors and municipalities in the water and wastewater industries for non-residential and residential uses. Construction & Industrial-White Cap distributes specialized hardware, tools, engineered materials and safety products to non-residential and residential contractors."

Hedge Fund Links ~ 10/28/16

Excerpts from Viking Global's Q3 letter [ValueWalk]

Ray Dalio: 'big, bad outcomes' if ECB doesn't keep buying bonds [Business Insider]

Are sports betting hedge funds coming? [ESPN]

Former Corvex exec gets seed money [Reuters]

Tiger Global lifts net long exposure [ii alpha]

How Steve Cohen amassed a $1 billion art collection [Fortune]

Scrutinizing Sequoia Fund: are quality and value back in? [Citywire]

Notes From Invest For Kids Chicago 2016: Grant, Zell, Brosens, Lykouretzous

The 8th annual Invest For Kids Chicago investment conference just ended and below are notes from the event.  Just click each link to go to that presentation.  Enjoy!


Notes From Invest For Kids Chicago Conference 2016

- Jim Grant (Grant's Interest Rate Observer): Bearish on BlackRock (BLK)

- Sam Zell (Equity Group): Fireside chat

- John Lykouretzos (Hoplite Capital): Long Sealed Air (SEE)

- Frank Brosens (Taconic Capital): Long Kaupthing

- Ed Garden (Trian Partners): Long Bank of New York Mellon (BK)

- Jonathan Gray (Blackstone Group): On real estate

- Leah Zell (Lizard Investors): Long BIM, Short Woolworth's

- Josh Wolfe (Lux Capital): Long nVidia (NVDA), Short Intel (INTC)

- Matt Halbower (Pentwater Capital): 2 investment ideas

- William Heard (Heard Capital): Long Fair Isaac (FICO)

- Arthur Kaz (Greenbriar Asset Management): Long Avaya bonds



For more investment conference coverage, be sure to also check out our notes from the recent Sohn San Francisco conference as well as the Great Investors Best Ideas Dallas conference.

Jim Grant Bearish on BlackRock: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Jim Grant of Grant's Interest Rate Observer who was bearish on BlackRock (BLK).


Jim Grant's Presentation at Invest For Kids Chicago 2016 

•    So much data – how do we know what is true?

•    Easy to be overwhelmed

•    Narratives as a belief system

•    Active investors accept or reject narratives; passible investors always accept the narrative by default

•    Markets are episodically efficient; they are no more coolly analytical than the people in them or the algorithms they write

•    Interest rates are certainly low – not good for my business model

•    Since 1997, the number of public companies in U.S. has been cut in half

•    Now we have the first nominally negative bond yields in 5,000 years

•    If Fed were late to raise rates it wouldn’t be the first time; likewise wouldn’t be the first time the bond market underestimated the fallibility of human beings



•    Bearish on Blackrock (BLK) 

•    Its motto should be “built for a time of falling rates, rising asset prices, massive inflows…”

•    Tailor-made for the financial moment

•    Hand-in-glove with the Fed – Blackrock is the Federal Reserve’s Wall Street doppelganger

•    BLK took in 18% of all mutual fund and ETF inflows in 2015

•    Assets may come, assets may go

•    Margins? There is a price war in passive. Fees are ~69 bps at BLK versus 15 at Vanguard. Further compression is likely.

•    BLK is at 18x EPS vs. 14x industry average

•    Massive amounts of insider selling at BLK without any buys


Be sure to check out the rest of the presentations from Invest For Kids 2016.

Sam Zell's Presentation at Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Sam Zell of Equity Group Investments.  He had a fireside chat to talk real estate.


Sam Zell's Presentation at Invest For Kids Chicago 2016

•    70% of what we do is in assets other than real estate

•    We prefer a monopoly, but we’ll settled for an oligopoly; we look at costs to entry and barriers to entry and replacement cost

•    We’ve done a lot of roll-ups over the years, and each begins with the idea that we don’t necessarily believe in synergies

•    Domestic versus international investments: going outside of the U.S. means sacrificing the rule of law; trading growth for rule of law; tricky to weigh those considerations, but emerging markets are where the growth is; fertility and economic growth create demand; biggest challenge we have today is where the demand will come from:

o    International investments also bring the risk of currency volatility, which requires extra patience
o    Prefer inflation-sensitive asses when currency is an issue
o    Mexico, Brazil, Colombia, India are biggest markets for us; very optimistic about Latin America
o    We like investing in a country when it is on the cusp of reaching investment grade
o    Doesn’t always work; we’ve been fortunate to move in and out at good times; Brazil recently was like handing the car keys to a teenager…sometimes they wreck it
o    European demographics are horrible, and only Japan might be worse; hard to see growing demand

•    Why does negativity abound among the investing class? We’re only wealthier in the past few years in terms of a fiat currency – are we moving from a responsible developed world to one dominated by competitive devaluations? And where is the demand? Our compliance costs have gone up 5x over the past eight years. So productivity is at an all-time low while regulation is at all-time high – unlikely to make historical rates of return in such an environment.

•    Look at the stock market. One could say that given the level of investment and growth it is overpriced. Real estate assets are at an all-time high. Inflation is at all-time lows. The result is not likely to be long-term positive results. More likely to have a recession, a cleansing, a market clearing before U.S. can grow. We can’t pretend and extend our way to growth.

•    On being pessimistic compared to Jon Gray or Barry Sternlicht: “I’m not as optimistic, but then I use my own money.”

o    Not finding ways to deploy capital in CRE today. Happy to sell to Jon and Barry.

•    On the traits of a good leader: it starts with 11th commandment, which is thou shalt not take oneself too seriously. Smile, make fun of yourself. Lead by example, not pontification.

•    The definition of a schmuck is someone who has reached his goals.


Be sure to check out the rest of the presentations from Invest For Kids 2016.

Frank Brosens Long Kaupthing Icelandic Bank: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Frank Brosens of Taconic Capital who pitched long Kaupthing, one of three Icelandic banks.


Frank Brosens' Presentation at Invest For Kids Chicago 2016

•    $6 billion AUM, event-driven and multi-strategy

•    Risks are high due to central banks

•    We seek very low correlation in our investments; we want no beta or duration; look for non-economic actors and forced sellers

•    Angst in the hedge fund industry as high as ever, but the opportunity is actually pretty good •    Returns likely to be muted versus historical levels



•    Long Kaupthing, one of three Icelandic banks

•    Iceland’s banking industry swelled in the prior decade to unsustainable levels – assets/GDP of ~10x

•    We are largest Kaupthing creditor, having acquired most of the stake in 2012 and 2013

•    In 2015 our partner in London got restricted and entered the negotiations with Icelandic task force

•    In December 2015 the liquidation process finally commenced; payouts began in January 2016 but only 1/3 of proceeds distributed so far

•    >200 assets in 12 countries; disclosure is very opaque – have to be a detective

o    Our partner went person by person within Kaupthing, often using LinkedIn, to piece together relationships and affiliations; then talked to local businessmen and brokers to triangulate asset values

o    Today, 16% cash, 33% operating assets and real estate, 25% stake in stable Icelandic bank, 25% other/misc.

o    We believe our notes are worth par, with some upside beyond that, against a price of 86

o    Most asset sales are coming in the next few quarters, so time horizon should be one year or less


Be sure to check out the rest of the presentations from Invest For Kids 2016.

John Lykouretzos Long Sealed Air: Invest For Kids Presentation

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is John Lykouretzos of Hoplite Capital who pitched long Sealed Air (SEE).


John Lykouretzos' Presentation at Invest For Kids Chicago 2016

•    $2.6 billion AUM, Tiger Cub, equity long/short, established 2003

•    Largest holding is Sealed Air (SEE)

•    Started in bubble wrap, now has three businesses

•    Highly integrated into customers’ processes = good pricing power

•    History of management was very good and then quite bad; new CEO named in 2012 and turnaround, results have been impressive; overhauled strategy, executives, pricing, cost structure, compensation; focus now on FCF

o    Turnaround is far from over – [EBITDA] margins have another 400 basis points to expand

•    Pricing power remains, even after CEO has aggressively raised price multiple times in recent years; customers have no choice; also now getting paid as a percentage of the savings generated for the customer
o    Estimate 1-2% price increases per year through 2022; mix improving too; 2% volume growth

•    Limited capital intensity and no M&A appetite – 10% of shares likely to be repurchased each year

•    Normalized FCF per share going from ~$2.89 in FY16 to $4.49 in FY18

•    Diversey (cleaning and sanitation segment) is somewhat of a comp to Ecolab; acquired in 2012 in an ill-conceived move, leaving the company over-levered and lacking direction

o    Will spin off this business; it could grow faster as an independent company – it needs investment in its salesforce, whereas SEE’s other businesses do not

•    Target price: $60 in 2016, $70 in 2017, $84 in 2018, $102 in 2019


Be sure to check out the rest of the presentations from Invest For Kids 2016.

Jonathan Gray on Real Estate: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Jonathan Gray, head of real estate at Blackstone who talked about real estate.


Jonathan Gray's Presentation at Invest For Kids Chicago 2016

•    16% net return to Blackstone

•    Our edge is scale and conviction

•    We seek an opportunity to buy it, fix it, sell it

•    Timing on Hilton and EOP deals in 2007 was poor, but still made 3x our investors’ money because we had the right structure and we didn’t panic; both were good assets and while levered they had reserves and no covenants; key was not being forced to sell; and had 2/3 of EOP assets not been sold 90 days after closing to delever, we wouldn’t be sitting here

•    Airbnb has reduced hotels’ pricing power, but most are leisure travels; business travels often still want hotels

•    Record occupancy across hotel industry

•    Good opportunity in logistics but a real challenge for retail, especially “generic consumer supply” retail

•    We’re looking to own in areas that are exciting and driven by technology/innovation: Bay Area, Seattle, New York

•    Risks today: sharp jump in rates due to wage inflation; political crisis leading to economic crisis in Europe; China deceleration gets worse

o    All are risks but none are base case

•    Sam Zell says I’m too optimistic but I think we’re likely to continue slow growth; housing recovery has legs; banks are in good shape; realistic but trying to find opportunity in slow growth world

•    Powerful urbanization trend in Chicago – people want to come here and live in the city, with companies like McDonald’s and Conagra following them


Be sure to check out the rest of the presentations from Invest For Kids 2016.

Ed Garden Long Bank of New York Mellon: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Ed Garden of Trian Partners who pitched a long of Bank of New York Mellon (BK).


Ed Garden's Presentation at Invest For Kids Chicago 2016

•    Long Bank of New York Mellon (BK)

o    $1.3 billion invested; Garden on board since Dec. 2014

•    We invest in great companies when undermanaged, underperforming, underappreciated; we try to work with management to become best in class at everything; we usually take a board seat

o    Eliminate management’s information advantage over board

o    Find problems, identify opportunities to attack

•    No hedging, long only, dislike the activist label

o    Income statement focus, not balance sheet

•    BK fits our risk profile: provides critical infrastructure, has good capital, is fee-driven (not NIM driven), has huge scale, and has opportunity to improve operations with cyclical upside as a bonus

•    Progress so far: 9% reduction in real estate owned; leaner cost structure; five new board members; returning $2.75 per share to shareholders in 12 months ended 6/30/17; margins and EPS up

•    25% discount to the market valuation; hurts to have “bank” in our name; most earnings streams at cyclical trough


Be sure to check out the rest of the presentations from Invest For Kids 2016.

Leah Zell Long BIM, Short Woolworth's: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Leah Zell of Lizard Investors who pitched long BIM, short Woolworth's.


Leah Zell's Presentation at Invest For Kids Chicago 2016

•    “The Grocery War Zone”

•    Case study of Aldi’s amazing success over the years; see also “Bare Essentials” by Brandes

o    A limited product range of everyday basics that sell fast

o    Commitment tot be the price leader in the marketplace

o    Extensive use of private label offerings

o    Bare bonds no-frills operations

o    Straight dealings with customers, employees, and vendors

o    Decentralized management with minimal corporate overhead (cash management is only centralized function)


•    Long BIM  

•    Same ideas apply to BIM in Turkey, whose slogan translates to “retail at wholesale prices”

•    Very low operating expenses

•    Low share of fragmented Turkish market

•    All expansion funded with cash flow

•    Since 2005 IPO, 26% CAGR in revenue, 34% in net income; >40% ROIC and ROE; net cash balance sheet

•    Trades at 20x 2017 EPS now, but at 15% revenue growth, flat margins and no multiple expansion, still a double by 2020



•    Short Woolworth’s in Australia 

•    Largest grocer but weaker as compared to Coles

•    Aldi now competing with 400 stores too

•    Woolworth’s now pursuing a restructuring, but too little too late? Needs a 3G makeover a la Heinz Kraft

•    At 3.5% operating margin with single-digit sales declines worth AUD $14.50, down 40%

•    Consumers today want either a premium product or the lowest cost – everything in between is getting squeezed

•    Low cost is powerful (see Ryanair) but hard to execute

o    Need a simple concept, ruthless execution, and a loop wherein scale widens the moat

o    If you find a great business like this, hold on for the long term


Be sure to check out the rest of the presentations from Invest For Kids 2016.

Matt Halbower Long Turquoise Hill & VMWare Tracking Stock: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Matt Halbower of Pentwater Capital who pitched Turquoise Hill (TRQ) and VMWare tracking stock (DVMT).


Matt Halbower's Presentation at Invest For Kids Chicago 2016

•    $3.4 billion AUM

•    Long Turquoise Hill (TRQ) 

•    Copper and gold miner with one mine in Mongolia; 51% owned by Rio Tinto

•    Phase II development on underground mine that will increase output 4x; requires spending $5 billion over next five years

•    Balance sheet is attractive: no debt, $1.4 bn cash, $4.1 bn receivable from Rio Tinto

o    Negative $3.1 billion enterprise value

•    At 7x 2021 EBITDA, worth $8 per share, but likely taken private sooner

•    Rio Tinto has a new CEO, and he has made many public comments about his bullishness on copper; Rio Tinto has engaged bankers regarding its stake in TRQ; logical outcome to take private, likely around $6 per share



•    Long DVMT, VM Ware tracker issued by Dell 

•    VM Ware balance sheet is cash rich; stock is 20% cheap to peers; lots of FCF and buybacks

•    Tracker is trading at 35% discount to VM Ware, much wider than typical 10% discount

o    Discount likely due to Dell as non-investment grade issuer, even though Dell is generating a lot of cash and rapidly delivering – will be IG soon

•    Agreement gives Silver Lake ability to IPO its Dell shares under certain conditions at certain points over the next two years; if so, DMVT tracker can be taken out at a premium

•    IPO seems more likely than not, in which case we think the discount closes; if VM Ware also performs as expected opportunity to make 2x on DMVT


Be sure to check out the rest of the presentations from Invest For Kids 2016.

Josh Wolfe Short Intel, Long nVidia: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Josh Wolfe of Lux Capital who pitched short Intel (INTC) and long nVidia (NVDA).


Josh Wolfe's Presentation at Invest For Kids Chicago 2016

•    Founder of Lux Capital, $750 million VC fund

•    Science background

•    Has Bill Gates on one of his companies’ boards (only board other than Microsoft and Berkshire)

•    Seeks truly radical change and disruptive technology

•    Lux is differentiated by longer horizon of 10 years

•    Best way to predict the future is to invent it

•    Gap between sci-fi and sci-fact is shrinking

•    Companies

o    Kymeta: meta-physics in satellites for transportation applications; Gates on board of directors

o    Planet Labs: tiny satellites

o    Orbital Insight: data analytics and artificial intelligence using big data, often sold to hedge funds

o    Zoox: CPU (multi-cores) going to GPU (hundreds of cores); “these guys are the second coming of Jobs and Woz)

o    Nervana Systems: just sold to Intel

•    Short Intel (INTC) – it is a shell of its former self; it is trying to buy success via M&A; nobody coming out of top schools wants to work there

•    Long nVidia (NVDA), on the other hand, which is ascendant -- $850 million of FCF this year going to $1 billion next year

o    NVDA is the “arms dealer” to all of the companies we’re backing


Be sure to check out the rest of the presentations from Invest For Kids 2016.

William Heard Long Fair Isaac (FICO): Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is William Heard of Heard Capital who pitched long Fair Isaac (FICO).


William Heard's Presentation at Invest For Kids Chicago 2016

•    Long Fair Isaac (FICO)

•    Misunderstood, synonymous with credit scores but has a much broader, better business

•    60% applications, 25% credit scores, 15% tools

•    Valuation seems rich on P/E and P/BV but still a good opportunity

•    Not just levered to consumer credit and mature, saturated markets -- $8 billion total addressable market, so a move from current 3% share to 5% means hundreds of millions in revenues

•    Shrinking share count: -57% since 2004

•    Have beaten quarterly estimates more often than not in recent quarters

•    Only six analysts cover the company

•    $150 price target at 22x forward EPS


Be sure to check out the rest of the presentations from Invest For Kids 2016.

Arthur Kaz Long Avaya Bonds: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Arthur Kaz of Greenbriar Asset Management who pitched long Avaya bonds.


Arthur Kaz's Presentation at Invest For Kids Chicago 2016

•    Long Avaya bonds

o    7% senior secured 1st lien notes worth par within a year

o    Also buying 2nd lien notes at 43

•    Company likely to file for Chapter 11 protection as soon as next month

•    Revenue declining in shift from hardware to software, but margins are offsetting -- -7% sales but +7.7% EBITDA margins

•    Lots of special charges and add-backs that can soon be addressed

•    $200 million of interest expense

•    Believes there is $850 million of EBITDA

o    At 6x and with 4x leverage, believes first liens get 76 cents of cash and stock for ~2/3 of equity in reorganized company

o    Room to be wrong on both EBITDA and multiple


Be sure to check out the rest of the presentations from Invest For Kids 2016.

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Your week starts with an early arrivals cocktail reception on November 28th, a fully-catered conference session with multiple networking breaks on November 29th, and our final day on November 30th with panels, presentations, and a build your own Bloody Mary Bar to send you off to a week's worth of art, culture, and fun in Miami at the country's biggest private art festival, Art Basel.

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What We're Reading ~ 10/26/16

The $108 billion man who has beaten the market [WSJ]

Cash: the most hated asset class on the planet [Felder Report]

What you can learn from family business [HBR]


On the future of video [REDEF]

The intelligent industrial revolution [nVidia]

Five market insights from Peter Lynch [Ivanhoff]

Explaining what made the internet 'break' recently [Gizmodo]

U-Haul parent Amerco (UHAL): ready to move [Barrons]

Arbs stay on sidelines of AT&T, Timer Warner deal [WSJ]

Private equity is sitting a ton of cash [ai-cio]

Interview with CEO of new exchange IEX [Bloomberg]

Why negative churn is such a powerful growth mechanism [Tom Tunguz]

WeChat works to maintain startup culture as it matures [WSJ]

Pershing Square Exercises Chipotle Options

Bill Ackman's activist firm Pershing Square Capital Management filed an amended 13D with the SEC regarding their position in Chipotle (CMG).  Per the filing, Pershing's ownership stake remains unchanged at 9.9% of the company.

However, the filing notes that they exercised forward purchase contracts on CMG on October 20th.  Total trade amount was just over $947 million and yielded them over 2.32 million shares of Chipotle common stock.

Chipotle just reported earnings yesterday and the stock is trading down 8% today.

You can view other recent Pershing Square portfolio activity here.

Per Google Finance, Chipotle "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."

Notes From Great Investors Best Ideas Conference (GIBI) Dallas: Einhorn, Pickens, Gabelli

Below are some notes from the 2016 Great Investors Best Ideas (GIBI) conference in Dallas, TX.  It featured prominent investors sharing investment ideas to benefit the Michael J. Fox Foundation for Parkinson's research and Vickery Meadow Youth Development Foundation.


Notes From Great Investors Best Ideas (GIBI) Dallas Conference 2016

David Einhorn (Greenlight Capital):  Likes Mylan (MYL), thinks the Epipen situation is overblown relative to the rest of their business as they're mainly in generic drugs.  "So the earnings that we're looking at in 2018 are in the low $6's and we think only about 25 cents of it comes from EpiPen, so you're gonna earn something in the high $5s, excluding EpiPen and the stock's today in the mid $30's."

Contrasted the situation to that of Mallinckrodt (MNK) which bought QuestCor, a formerly highly shorted hedge fund name.  Their Acthar Gel drug has raised prices from $40 in 2001 up to a whopping $40,000 a dose but you don't hear about it as much because less people use it but says they're more exposed to potential health care focus on lowering drug prices given Acthar is a much larger portion of MNK's profit. 

Thinks General Motors (GM) is cheap and can earn its entire market cap before Tesla turns a profit.  Laid it out as follows:  stock could fall 3/4 and still has enough to pay the dividend.  Another quarter of the earnings are stock buybacks so you're basically getting a 5-6% share reduction, a 5% dividend so you're almost getting a 11% return just by sitting around. 

Thinks the Rite Aid (RAD) deal closes and separately also sees upside in Chemours (CC).  You can view his thesis on Chemours in Greenlight's Q2 letter.

Talked about the active vs passive investing debate.  Noted that "It seems to me that passive money management strategies are fundamentally momentum strategies.  In other words, the more the stock goes up, the more it becomes weighted in the index.  The more it becomes weighted in the index, the more important it becomes.  It continues going up, it doesn't ever revert."  Also called stocks like Apple (AAPL), Herc Holdings (HRI), and CIT (CIT) 'very cheap stocks.'



Boone Pickens (BP Capital):  Sees oil at $60 by the end of 2016 and up to $70 by the end of next year.  Likes EOG Resources (EOG) as well as Pioneer Natural Resources (PXD). Says 'you can't miss' on the later, argued that the only thing that can mess up his thesis is a recession.  Says PXD has a huge amount of oil.  (In the past we've posted how David Einhorn has/had been short PXD.)  Pickens says he's up 300% this year



Mario Gabelli (GAMCO Investors): Likes Herc Holdings (HRI), recent spin-off from Hertz Global (HTZ),  as a play on infrastructure: thinks EBITDA margins widen up to 1000 basis points.  Says the biz is growing 4-5% and is a highly fragmented biz but with 3 major players (other two being Ashtead (LSE:AHT) and United Rentals (URI).  Thinks stock triples over next 5 years.  He also posted about HRI on his Twitter account here.



Andy Beal (Beal Financial): He was pretty bearish and argued that government policies are basically depriving them of potential investment opportunities and basically said to get out of everything.  Talked up rental real estate.



Lisa Hess (SkyTop Capital):  Formerly of Loews, now manages SkyTop.  Her pick was Constellium (CSTM) as a proxy for more use of aluminum in automobiles etc.



Caroline Cooley (Crestline Investors):  Long Shutterfly (SFLY).  Says they have 60% market share and likes it as a growth play.  Said she's not worried about competition from the likes of Amazon (AMZN) and others like Snapfish.  Cited Apple trying and failing to compete with a similar service.  Says SFLY earns ten times that of its next biggest competitor, giving them a huge advantage.  Likes new CEO Chris North (previously of Amazon UK) and says company has some potential partnerships in the works and has bought back stock in the past.



Ray Nixon (Barrow Hanley Mewhinney & Strauss):  Talked about active vs passing investing.  Argued Buffett could potentially buy Phillips 66 (PSX) around $100 per share.  We've highlighted how Buffett has been accumulating PSX.


For more coverage of other recent investment conferences, head to our notes from the Sohn San Francisco conference.

Balyasny Asset Management Ups Oasis Petroleum Stake

Dmitry Balyasny's hedge fund firm Balyasny Asset Management has filed a 13G with the SEC regarding its stake in Oasis Petroleum (OAS).  Per the filing, Balyasny now owns 6% of OAS with over 13.75 million shares.

This is an increase of over 10.17 million shares since the end of the second quarter when they only owned 3.58 million shares.  The filing was made due to activity on October 18th.

We also just recently highlighted how SPO Advisory reduced its Oasis Petroleum stake this month as well.

Per Google Finance, Oasis Petroleum is "an independent exploration and production company. The Company is focused on the acquisition and development of unconventional oil and natural gas resources in the North Dakota and Montana regions of the Williston Basin. Its segments include Exploration and Production, which is engaged in the acquisition and development of oil and natural gas properties; Well Services, which performs completion services for the Company's oil and natural gas wells operated by Oasis Petroleum North America LLC (OPNA), and Midstream Services, which performs salt water gathering and disposal and other midstream services for the Company's oil and natural gas wells operated by OPNA. The Company's projects include Williston Basin, West Williston and East Nesson. It also operates a well services business through Oasis Well Services LLC (OWS) and a midstream services business through Oasis Midstream Services LLC (OMS)."

Inaugural Sohn Australia - Hearts and Minds Investment Leaders Conference (Marks, Zell, Ho & More)

The Sohn Conference Foundation has announced a partnership with the Hearts & Minds Investment Leaders Conference to create the inaugural Sohn Australia - Hearts & Minds Investment Leaders Conference.

This will be the premier investment conference in Australia and will take place on November 11, 2016 at the Sydney Opera House.  Like the other Sohn events around the world, it will feature top fund managers sharing investment ideas to benefit charity and good causes. 

Proceeds from Sohn Australia will be dedicated to medical research and care within the prestigious Victor Chang Cardiac Research Institute as well as the Black Dog Institute, MS Research Australia and JDRF Australia.

For more about the event and to register, head to www.sohnconference.org/australia


Sohn Australia 2016 Speakers List

- Howard Marks, Oaktree Capital
- Leah Zell, Lizard Investors
- Shane Finemore, Manikay Partners
- John Ho, Janchor Partners
- Madeleine Beaumont, BlackRock Asset Management
- Anthony Aboud, Perpetual
- Peter Cooper, Cooper Investors
- Hamish Douglass, Magellan Financial Group
- Patrick Hodgens, Macquarie Investment Management
- Philip King, Regal Funds Management
- Robert Luciano, VGI Partners
- Michael Messara, Caledonia
- Kerr Neilson, Platinum Asset Management
- David Prescott, Lanyon Asset Management
- Geoff Wilson, Wilson Asset Management
- John Pearce, UniSuper Management
- The Hon. Paul Keating, Former Prime Minister of Australia
- The Hon. Mike Baird, MP, Premier of New South Wales, Australia
- Dr. Silviu Itescu, Mesoblast


Event Details

When: November 11, 2016

Where: Sydney Opera House, Sydney Australia

Registration:  You can click here to register for the event

Bill Miller Thinks We're in a Secular Bull Market, Talks Stocks He Likes

Value investor Bill Miller of LMM Investments appeared on CNBC today and thinks we're in a secular bull market that began in March 2009.

"Bonds are unattractive in my view.  I believe we hit a double bottom in bonds in the summertime... 35 year bull market in bonds is over."

"As long as stocks yield more than bonds, stocks are attractive."

Miller is fully invested and says, "Cash earns zero, why do I want something that earns zero?"

He likes One Main Financial (OMF), bought in the spring, still thinks it's 'crazy cheap.'  Thinks smaller financials are attractive, mentioned MGIC (MTG) and Radian (RDN), mortgage insurers. 

Miller also likes big financials as well: Bank of America (BAC), Citigroup (C), JPMorgan (JPM).  Value investor Rich Pzena also likes financials, as he mentioned in his interview last week.

Bill Miller has owned Amazon (AMZN) since the IPO and still owns it today.  He says that was one of the best decisions he's ever made, and one of the worst has been selling any shares of it.  It's his largest position and says people have misunderstood AMZN's valuation from the beginning.  "Amazon's total addressable market is just so much bigger than any other company on earth."

He also talked about Twitter (TWTR), saying he sold half of his call options when it was in the $20s, and thinks it's a unique asset as a 'network of interests.'  He thinks they need a fulltime CEO and suggested they could perhaps switch to a paid monthly platform.  "We own Twitter because of the optionality."  He think it has a floor of $15-16.

Miller also owns various homebuilders such as Lennar (LEN) and TriPointe (TPH).  Feels builders will grow double-digits for the next few years.

On airlines, Miller still owns them and says Delta (DAL) is trading at a 15% free cash flow yield and will generate $5 billion in free cash and return 75% of that to shareholders.  He likes United (UAL) with more upside as the margins are depressed and they've got new management there.

Miller also commented on former hedge fund hotel Valeant Pharmaceuticals (VRX):  "It's probably the most toxic stock in the overall market.  It's blown a hole in Ackman's portfolio, it cost Bob Goldfarb, one of the best investors in our generation his job.  Our cost is from $20-35, we just bought more last week." 

He says they have 2 issues: the legacy issue of transitioning new leadership and then the debt load.  He thinks it doubles in 3 years as the company has a lot of cashflow and will look to sell non-core assets.

He also talked about Netflix (NFLX), noting it's an incredible company and he's owned it twice before, but thinks it's expensive now.  Also thinks Tesla (TSLA) is expensive and most energy plays are as well, especially the integrated players.

For more from prominent investors, check out David Tepper's recent interview, as well as Keith Meister's thesis on YUM China. 

Rich Pzena Likes Banks, Hilton, Seagate

Rich Pzena of Pzena Investment Management appeared on CNBC yesterday and said the market has divided into 2 groups: those that are in sync with the 'lower for longer' philosophy and those aren't cheap stocks, and those that are out of sync like financials/energy/materials that are selling for attractive valuations.

"Any stable, low volatility cash flowing stock" is basically overpriced he feels.

He argued financials were intriguing: "If interest rates go up, you make a fortune, but if they don't you make 10% a year." These companies are paying out their earnings.  He owns Citigroup (C) and Bank of America (BAC), among others.

On the market in general, he says that, "The steady decline in the 10-year is what's caused this whole market situation. And now, maybe it's bottoming."

He thinks interest rates will rise this year and then will go gradually higher.  He thinks his stocks are positioned well to weather downturns in the market or rising rates.

"As this interest rate bubble ends, I think we'll see a re-emergence of active management.  There's lot of interesting opportunities that's not in touch with where the money has flowed."

Pzena also preached what he thinks is instrumental to success:  "Volatility is the opportunity for every real investor.  What we do for a living is exploit other people's fear of volatility to be able to buy stocks at a low price.  Volatility has nothing to do with risk.  Volatility is just stuff going up and down.  And risk is losing money."


Pzena's New Pick: Hilton (HLT)

Pzena has also bought Hilton (HLT) and says that apartment REITs sell for twice as much as lodging REITs.  Hilton is splitting into 3 companies by year-end: a fee based management co, a lodging REIT, and a timeshare business.

"The company's depressed because it's in lodging and people are fearful that we're near the end of the upcycle in lodging."

He feels that it's not a spectacular value like the banks are, but for what it is (a leading franchise) it looks good. He notes HLT has 20% share of all hotel rooms under construction.

He thinks the spin-off in the near-term leads to 20% upside.  Post-spin, he hopes the management company would get a higher multiple than the REIT.  But he thinks that may take time to play out as the cashflow evolves.


On Seagate (STX)

This is one of Pzena's larger positions.  Seagate is in the middle of correcting the overcapacity it had.   They've had strong volumes on the enterprise side and he says that's the whole story:  "It's a replacement of storage in the cloud rather than in the device."


For more from prominent investors, head to David Tepper's recent interview, as well as Keith Meister's thesis on YUM and Barry Rosenstein's thoughts on the market.

Barry Rosenstein on the Market, Active vs Passive, & More

Barry Rosenstein of hedge fund JANA Partners was interviewed on CNBC yesterday and he said stockpicking isn't dead and the push to passive investing is just a 'bubble' of a trend. He noted: "Wall Street has a great ability to overdo a good thing."

On the market: "I think the market's fairly valued; I don't think it's cheap, I don't think it's expensive; there's pockets of value.  It's hard to get excited about corporate earnings growth right now."

On hedge funds: "I think the fact that we're no longer in a one directional market is going to remind people why they want to be in hedge funds again.  I believe this is the kind of market where a fund like ours can find interesting situations and take advantage of the volatility."

On activism, Rosenstein said "as long as human beings are running public companies and as long as the current board dynamic exists, there's always going to be a need for activism.  Sometimes boards lose sight of what needs to happen."  He thinks activism has a long and bright future. 

On ConAgra: He's trimmed his position in ConAgra a bit, but commended management on turning the business around and making a lot of changes (spinoffs, cost savings, etc) and Rosenstein thinks this one has "years to go" with a collection of attractive brands that can grow at double digit earnings growth and the potential for pruning its portfolio and making attractive acquisitions.

He doesn't think they need to increase their dividend as they're already buying back stock.

JANA also reduced its stake in Walgreen's (WBA) and he thinks it's a great company.  He was on the board for a while but stepped off.  He thinks they've accomplished a 'tremendous' amount.


For more from prominent investors, head to David Tepper's recent interview, as well as Keith Meister's thesis on YUM.

Hedge Fund Links ~ 10/21/16

Ray Dalio's remarks at 40th annual central banking seminar [LinkedIn]

Steve Cohen may return to hedge fund industry when ban expires [NYTimes]

Hedge funds struggle to master their miserable new world [Bloomberg]

Hedge fund launches dwindle to 16-year low as returns lag [Bloomberg]

Year-to-date level of hedge fund redemptions highest since 2009 [FINalternatives]

Is Bill Ackman toast? [Vanity Fair]

Paulson's 2016 loss mounts [Bloomberg]

Recruiters give advice for applying for hedge fund jobs [Business Insider]

One venture capitalist is beating hedge fund managers at their own game [CNBC]

So many hedge funds, so little alpha [Bloomberg]

Two big hedge funds unwind bets against Deutsche Bank [Reuters]

Deutsche creats new $50 billion hedge fund and structured products arm [HFM]

What We're Reading ~ 10/20/16

The dying business of picking stocks [WSJ]

Marks, Grantham, Arnott, Gundlach reveal their biggest hits and mistakes [WSJ] 

John Maynard Keynes: courage is the key to investing [WSJ]

Joel Greenblatt's investing secrets revealed [Barrons]

What does Nevada's $35 billion fund manager do all day? Nothing [WSJ]

What I learnt on the sell side [What I Learnt on Wall St]

What's something you strongly believe in that's likely wrong [Collaborative Fund]

How to stay patient for longer [Clear Eyes Investing]

Chipotle (CMG): is the brand intact? [Rational Walk]

A quick look at Liberty Ventures (LVNTA) [Peters Macgregor]

A piece on Atlassian (TEAM) [Fast Company] 

27 charts that will change how you think about the American economy [Vox]

The Jeff Bezos regret minimization framework [A Wealth of Common Sense]

Preparing for the future of artificial intelligence [The White House]

An integrated perspective on the future of mobility [McKinsey]

The best performing CEOs in the world [Harvard Business Review]

Liquid assets: how the business of bottled water went mad [The Guardian]

Sam Zell sees limited investment opportunities in the future [NREI]

Deutsche Bank: a Greek tragedy at a German institution? [Aswath Damodaran]

Imagining a cashless world [New Yorker]

Sohn London 2016 Investment Conference Speakers Revealed

We've got an exclusive preview of the speakers list for the upcoming Sohn London 2016 Investment Conference.  The Sohn Conference Foundation, in partnership with CNBC, has prepared the 5th annual conference, bringing together influential investors to hear their strongest ideas for navigating the unprecedented and complex challenges Europe now faces.

With the backing of the UK investment community, they've raised more than £55 million to date for the fight against pediatric cancer.  This year looks to continue to build on that momentum.  

All proceeds from this year's conference will support The Royal Marsden Cancer Charity, providing crucial funding to support medical research and cancer treatment for children across the UK.

You can learn more and register for the event at www.sohnconference.com/london/


Sohn London 2016 Speakers List

- Christopher Hohn, TCI Fund Management Limited
- Robert Bishop, Impala Asset Management
- Adrian Croxson, Och-Ziff Management Europe Limited
- Ashish Goyal, Citadel Investment Group
- Masroor Siddiqui, Naya Capital Management UK Limited
- Elif Aktug, Agora Fund Manager, Pictet Asset Management
- Iván Martin Aranguez, Magallanes Value Investors
- Bo Börtemark, Carve Capital AB
- Dureka Carrasquillo, Canadian Pension Plan Investment Board
- Marc Chatin, Parus Fund
- Anne-Sophie D'Andlau, CIAM
- David Jones, You & Mr. Jones
- Erik Karlsson, Bodenholm Capital AB
- Mans Larsson, Makuria Investment Management
- Michel Massoud, Melqart Asset Management
- Nicolas Walewski, Alken Asset Management

As you can see, it's quite a list!


Event Details

When: December 8, 2016

Where: Marriott Hotel in Grosvenor Square London W1K6JP United Kingdom


Save the date on your calendar or you can register for the conference by clicking here.

Keith Meister's Thesis on YUM Brands China Spin-Off; Talks Pandora & Williams

Keith Meister of activist firm Corvex Capital was just interviewed by CNBC where he talked about YUM Brands (YUM), Pandora (P), shareholder activism and more.  On the market in general, he said he's bullish on his individual positions but not necessarily the market in general.  He notes, "I'm not a buyer of the market here, per se.  My guess is we're more near a top than a bottom."

Meister on YUM Brands Spin-Off

Corvex is the largest shareholder of YUM and will spin-off its China business to shareholders on November 1st and he believes it's "1 plus 1 equals more than 2."

He notes that the remaining HoldCo will be a 98% franchised, asset light business in the quick service food industry.

Meister says the China co is a different story as 7,500 restaurants (KFC, Pizza Hut) in China gives them a huge advantage as they were first to move and have become the dominant player there in the QSR space and they can now go into tier 2 and tier 3 cities.  He acknowledges that it will be a volatile ride, but says it can be an 'up and to the right' chart over time.

He argues it should trade at 10-12x EBITDA after spin-off, but acknowledged it could start trading around 8x which would basically be trough earnings.  "The market's not gonna make it easy to own YUM China, but that's where I think the best return will be."

He feels the remaining HoldCo will trade more like an annuity, with smoother returns. 

On shareholder activism, Meister says that these types of investors are simply trying to buy good businesses, help make positive changes, and acting like an owner in the public markets.


Meister on Pandora (P)

Meister still owns Pandora (P).  When asked if they're going to sell themselves, he said he didn't know.  He compared the company to competitor Spotify and notes the gap in valuation as one is private and one is public.   He argues that music is so core to many tech players these days (Apple, Amazon, etc) and he says "so it's a hugely valuable piece of property for someone who wants to win."

He concedes the streaming business is a commodity business, but argues that Pandora isn't due to the built up userbase as an asset.


Meister on Williams (WMB)

The Corvex founder also talked about Williams (WMB) and has left the board and commended the company on the work done.  He personally feels that the company has "undermaximized the opportunity set" over the past 5 years.

He thinks it could probably be worth more as part of another entity.  He thinks consolidation is happening and you don't want to be left out.  "It's hard to build new pipeline, so it makes existing pipeline more valuable." 

We'll post up the video of the interview once it's released.  Be sure to also check out CNBC's interview with David Tepper from yesterday, as well as their conversation with Carl Icahn.

Nelson Peltz Not As Cautious As Others, Talks General Electric

Nelson Peltz of Trian Partners appeared on CNBC today and gave his view on the market and his holding General Electric (GE).

Peltz said that "I think Wall Street is talking themselves into a negative environment, and I think they're almost doing it unnecessarily."  He says earnings have been pretty good but revenue's been hard to get, but companies are realizing how much cost they can take out.


"I'm not a macro guy, but I think my portfolio's cheap.  I think you're gonna see a little growth in Europe this year for the first time."  He says Latin America is a problem, Europe is getting better, but 'who knows' on China.

On General Electric (GE), his largest holding, Peltz noted that GE has been a good performer since last year and he thinks "it's the best set of industrial assets on the planet.  85-90% of their revenue today is service revenue and if you look at the business peak to trough through the great recession and if you look at the businesses in there today, earnings were down 5%."

He doesn't know what the quarter's earnings are gonna be but he doesn't seem to care as he's "in this thing for a longtime."

Peltz also touched on Pepsi (PEP), which he's now out of.  They took $1 billion a year in costs out for 3 years in a row. 

On shareholder activism, Peltz floated an idea of 'private equity in public markets' where long-term owners hold stocks for longer periods of time while enacting positive change and helping a business grow.

He thinks Hillary Clinton wins the election and the market could stay where it is, unless she takes both Houses and then it'd go down.

We'll post up the video of the interview once it's released.  Be sure to also check out CNBC's interview with David Tepper from yesterday, as well as their conversation with Carl Icahn.

Jim Chanos Still Short Tesla & Caterpillar

Noted short seller Jim Chanos of hedge fund Kynikos Associates just spoke with CNBC about

Chanos confirmed he's still short Tesla (TSLA) amid rumors that the Model 3 is delayed with production/deliveries.  "Never a dull moment in Tesla land," Chanos said.

"I'm dumbfounded that the board would go ahead with this deal (with SolarCity (SCTY)).  They're growing into a business they don't need to grow into. They're going to pretty much double their cash burn by taking it on, it just makes no sense." Chanos's firm believes SolarCity is an insolvency ex-the deal. 

He also mentioned how Caterpillar's (CAT) CEO was departing.  When asked if he's still short, Chanos said, "Yeah, the fundamentals in our view have not yet changed, we haven't seen any evidence of it."

Chanos also pointed out that the China real estate bubble still hasn't happened yet (popped) so that's still ahead of us, he says. 

We'll post up the video of the interview once it's released.  Be sure to also check out CNBC's interview with David Tepper from yesterday, as well as their conversation with Carl Icahn.

David Tepper Cautious But Not Outright Bearish

David Tepper of hedge fund Appaloosa Management made a rare media appearance on CNBC and gave his thoughts on the market.

Tepper noted that "We're pretty light in the stock market right now and we have a lot of cash.  We're probably more positioned in the bond market right now.  I just don't see the market having the ability to move up that much.  I think the upside/downside is not the most favorable I've seen.  It's not a great environment."

Tepper also touched on the election, noting that it's a "fairly bad choice at the top."  He also said that, "Depending on the outcome of the election, the market can move different ways.  So, generally speaking, pretty cautious on the market, not outright bearish on the market."

He said this environment would probably be 'ok' returns, but not 'great.'

He particularly focused on the outcome of who wins the White House and who wins Congress, basically saying that different market outcomes will be determined by those results.

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

Video 1


Video 2



You can also view Carl Icahn's interview here as well.

Carl Icahn: Companies Overvalued Considering Risk Premium

Activist investor Carl Icahn made an appearance on CNBC yesterday to share his thoughts about the market.

He emphasized his stance that he's more and more concerned about the stock market.  He pointed to the fact that the middle class isn't seeing incomes they need, there's underfunded pensions, and rates are still too low.


Icahn said that, "A lot of S&P companies are way overvalued considering the risk premium"  He's having a hard time finding opportunities in this market but did note that some are "uniquely undervalued."

On Herbalife (HLF), Icahn continues to think that it's undervalued even after a big rally.  He reiterated that Bill Ackman (who is short HLF) is wrong about the stock and Icahn noted that HLF could still be "the mother of all short squeezes."

Icahn also noted: "If you want to be a successful investor, you look for things that are obvious but not apparent.  You have companies that there's some unique quality that aren't apparent that you buy.  Sometimes it takes years and years and years.  The activism is a catalyst for that obviously.  I think our portfolio is made up of those."

Embedded below are videos of Icahn's CNBC interview:

Video 1


Video 2



Video 3



You can view recent portfolio activity from Icahn here. And you can also check out David Tepper's interview here.

Jeff Gundlach: Watch 2,130 Level of S&P 500

DoubleLine Capital's Jeff Gundlach was interviewed on CNBC yesterday and here's his thoughts:


And although he's a fixed income manager, Gundlach often opines on the stock market and this time was no different.  He said that, "I would turn particularly negative if the S&P closed twice below 2,130."

He notes that the Fed wants to raise rates in December once the election ends.  He also mentioned he's turned negative on most assets since July.

Gundlach said he doesn't think the election is all that important because he feels that both candidates would be 'caught up in the trend' of fiscal stimulus.

Embedded below is video of Gundlach's CNBC interview:

What We're Reading ~ 10/12/16

The Signal and the Noise: Why So Many Predictions Fail - But Some Don't [Nate Silver]

Shiller's powerful market indicator is sending a false signal [WSJ]

The consequences of risk taking [A Wealth of Common Sense]

A look at DaVita Healthcare Partners (DVA) [Rational Walk]

The AI revolution: why you need to learn about deep learning [Fortune]

What does Sam Zell know that Wall St doesn't? [Horizon Kinetics]

Profile of UK fund manager Neil Woodford [Bloomberg]

Interview with T-Mobile's CEO John Legere [Business Insider]

Liberty Media: better than Berkshire [Barrons]

The auto industry's real challenge [Strategy Business]

Mars cashes out Warren Buffett to take control of Wrigley [NYTimes]

Decoding Amazon's fashion ambitions [Business of Fashion]

How eBay's CEO plans to take on Amazon [Bloomberg]

Knowing when to break your own rules [A Wealth of Common Sense]

Why the cost of living is poised to plummet over the next 20 years [Singularity Hub]

Fairholme Capital Adds To Lands End Stake

Bruce Berkowitz's investment firm Fairholme Capital has filed an amended 13G with the SEC regarding its position in Lands End (LE).  Per the filing, Fairholme now owns 10.5% of Lands End with over 3.35 million shares.

This is an increase of 353,200 shares since the end of the second quarter when they owned 2.99 million shares.  The filing was made due to activity on September 30th.

Berkowitz originally received his stake in LE as a spin-off from Sears Holdings (SHLD), which he has been a big holder of for some time.

Per Google Finance, Lands End is "a multi-channel retailer of casual clothing, accessories and footwear, as well as home products. The Company operates through two segments: Direct and Retail. The Company offers products through catalogs, online at www.landsend.com. The Direct segment sells products through the Company's e-commerce Websites, international Websites and direct mail catalogs. The Retail segment sells products and services through Lands' End Shops at Sears across the United States, the Company's standalone Lands' End Inlet stores and international shop-in-shops. The Company's product categories include Apparel and Non-apparel. The Non-apparel category offers accessories, footwear and home goods. The Company provides embroidery, monogramming, gift wrapping, shipping and other services. In addition, the Company offers sheets and pillowcases, duvet covers and comforters, blankets and throws, mattress pads, towels, rugs and mats, school uniforms and shower curtains."

Lone Pine Capital Starts Expedia Position

Steve Mandel's hedge fund firm Lone Pine Capital has filed a 13G with the SEC regarding shares of Expedia (EXPE).  Per the filing, Lone Pine now owns 5.21% of EXPE with over 7.14 million shares.

This is a newly disclosed position for the fund as they did not show a stake back at the end of the second quarter.  The filing was made due to activity on September 29th.

Lone Pine has also been a longtime holder of fellow online travel agency, Priceline.com (PCLN). They've owned PCLN shares since 2011.

Per Google Finance, Expedia is "an online travel company. The Company makes travel products and services available, on a standalone and package basis, provided by various lodging properties, airlines, car rental companies, destination service providers, cruise lines and other travel product and service companies. Its Core OTA segment provides a range of travel and advertising services, through a range of brands, including Expedia.com and Hotels.com in the United States and localized Expedia and Hotels.com Websites throughout the world, Orbitz.com, Expedia Affiliate Network, Hotwire.com, Travelocity, Venere, Wotif Group, CarRentals.com, and Classic Vacations. Its trivago segment sends referrals to online travel companies and travel service providers from its hotel metasearch Websites. Its Egencia segment, which also includes Orbitz for Business, provides managed travel services to corporate customers. Its HomeAway segment operates an online marketplace for the vacation rental industry."

Baupost Group Exits SunEdison Semiconductor Shares

Seth Klarman's investment firm Baupost Group has filed a 13G with the SEC regarding shares of SunEdison Semiconductor (SEMI).  Per the filing, Baupost now owns 0% of SEMI with 0 shares.

This is down from the previous 8.37 million SEMI shares Baupost owned at the end of the second quarter.  They no longer hold common stock and the filing was made due to activity on September 30th.

We've also highlighted other recent portfolio activity from Baupost Group here.

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."

Kingstown Capital Trims Aerojet Rocketdyne Stake

Michael Blitzer and Guy Shanon's investment firm Kingstown Capital has filed a 13G with the SEC regarding its position in Aerojet Rocketdyne (AJRD).  Per the filing, Kingstown now owns 4.3% of AJRD with 3 million shares.

This is a decrease compared to the 3.5 million shares they owned at the end of the second quarter.

We've previously highlighted recent portfolio activity from Kingstown here.

Per Yahoo Finance, Aerojet Rocketdyne "designs, develops, manufactures, and sells aerospace and defense products and systems in the United States. The company operates in two segments, Aerospace and Defense, and Real Estate. "

Jeff Saut's Latest Market Commentary: Darvas Discipline

Market strategist Jeff Saut is out with his latest commentary entitled "Darvas Discipline."  He titles it so because he references Nicolas Darvas in a passage from his book, How I Made $2,000,000 in the Stock Market.

Darvas wrote,

"I knew that I had to adopt a cold, unemotional attitude towards stocks; that I must not fall in love with them when they rose and I must not get angry when they fell; that there are no such animals as good or bad stocks.  There are only rising and falling stocks - and I should hold the rising ones and sell those that fall.  I knew that to do this I had to achieve something much more difficult than anything before.  I had to bring my emotions - fear, hope and greed - under complete control ... I started to see that stocks have characters just like people.  This is not so illogical, because they faithfully reflect the character of the people who buy and sell them."

He then touches on the concept of tracking stocks with favorable technical setups but then only buying when they give a fundamental reason for doing so: improving earnings power.


Embedded below is Jeff Saut's latest market commentary: Darvas Discipline



For more, check out Saut's other recent commentary where he noted Steve Eisman thinks the US is destined for slow growth.

Paulson & Co Trims Extended Stay America Stake

John Paulson's hedge fund firm Paulson & Co has filed a couple of SEC filings regarding its paired shares in Extended Stay America (STAY) and ESH Hospitality.

The Form 4 filed indicates that Paulson & Co sold 4,983,333 paired shares in total, at a price of $14.16 per share on October 4th.

After these sales, Paulson still owned 37.67 million shares of STAY, or 19% of the company.

A press release from Extended Stay America indicates that they recently announced a secondary offering of paired shares, each paired share consisting of a share of common stock of STAY and a share of class B stock of ESH Hospitality.  Paulson & Co, Centerbridge Partners, and Blackstone Group were the selling stockholders. 

The company also announced a share repurchase agreement where they repurchased 1.95 million paired shares from the sellers.

We've also posted other recent portfolio activity from Paulson & Co here.

Per Google Finance, Extended Stay America is "an integrated owner/operator of company-branded hotels in North America. The Company operates in hotel operations segment. Its business operates in the extended stay lodging industry. It owns and operates approximately 630 hotels comprising over 69,400 rooms located in approximately 40 states across the United States and in Canada. It owns and operates its hotels under its core brand, Extended Stay America, which serves the mid-price extended stay segment. In addition, it owns and operates over three Extended Stay Canada hotels. It operates its hotels owned by ESH Hospitality, Inc. (ESH REIT). The hotels are operated by the Operating Lessees, subsidiaries of the Company and are managed by ESA Management LLC (ESA Management), a subsidiary of the Company. ESH Strategies, a subsidiary of the Company, owns the brands related to its business. The Company's extended stay hotels are designed to provide lodging or apartment accommodations."