Oaktree Capital Chairman Howard Marks is out with a new memo. It's entitled "There They Go Again... Again." He notes that, "Some of the memos I'm happiest about having written came at times when bullish trends went too far, risk aversion disappeared and bubbles inflated." He feels that it's time again for a cautionary memo.
His latest writings delve into the topics of cycles and what seeds are needed for the foundation of a bull market, boom or bubble. He outlines how investors gradually shift from a benign environment, to one with more money than ideas, to suspension of disbelief, to rejection of valuation norms, to eventually the almighty "fear of missing out."
While Marks says many of the ingredients are in play today, a few usual ingredients are notably missing. He also writes that, "Most people can't think of what might cause trouble anytime soon. But it's precisely when people can't see what it is that could make things turn down that risk is highest, since they tend not to price in risks they can't see."
This is an excellent memo and worth reading in its entirety.
Embedded below is Oaktree Capital and Howard Marks' new memo: There They Go Again... Again:
You can download a .pdf copy here.
For more letters from prominent investors, we've recently posted Third Point's Q2 letter and Greenlight Capital's Q2 letter.
Wednesday, July 26, 2017
Howard Marks' Cautionary New Memo on Cycles: "There They Go Again... Again"
What We're Reading ~ 7/26/17
The most important moat [Base Hit Investing]
Technical Analysis of Financial Markets [John Murphy]
Ferrari (RACE) sells veblen goods, not cars [Intrinsic Investing]
Buy time, they're not making any more of it [Abnormal Returns]
On reinvestment moats and Zooplus [Connor Leonard]
On perceived versus real risk tolerance [Aleph Blog]
On why it's so hard to be a contrarian investor [Medium]
A Hermes Birkin bag generates higher return than stocks? [BagHunter]
Snapchat (SNAP) isn't a social network, it's a toy [Vanity Fair]
Can anyone bury Bloomberg? [Institutional Investor]
Monday, July 24, 2017
Tiger Global Adds To Apollo Stake
Chase Coleman's hedge fund firm Tiger Global has filed a Form 4 with the SEC regarding its stake in Apollo Global Management (APO). Per the filing, Tiger Global acquired 100,916 shares of APO on July 19th at a weighted average price of $27.357.
They also bought 149,052 shares on July 20th at a weighted average price of $27.897. After these buys, Tiger Global now owns over 33.13 million shares. As we've detailed previously, Tiger Global has been accumulating Apollo Global shares throughout the past few months.
Per Google Finance, Apollo Global Management is "an alternative investment manager in private equity, credit and real estate. The Company raises, invests and manages funds on behalf of pension, endowment and sovereign wealth funds, as well as other institutional and individual investors. The Company's segments include private equity, credit and real estate. The private equity segment invests in control equity and related debt instruments, convertible securities and distressed debt investments. The credit segment invests in non-control corporate and structured debt instruments, including performing, stressed and distressed investments across the capital structure. The real estate segment invests in real estate equity for the acquisition and recapitalization of real estate assets, portfolios, platforms and operating companies, and real estate debt, including first mortgage and mezzanine loans, preferred equity and commercial mortgage backed securities."
For more on this hedge fund, you can view additional recent portfolio activity from Tiger Global here.
Fairholme Capital Increases St. Joe Position
Bruce Berkowitz's investment firm Fairholme Capital has filed an amended 13D with the SEC regarding its position in St. Joe (JOE). Per the filing, Fairholme now owns 36.1% of the company with over 25.47 million shares.
This is an increase from the 25.1 million shares they owned at the end of May per a previously filed form 13D.
The filing notes that Berkowitz was buying JOE shares in late May, and early-to-mid June at prices ranging from $17.2483 to $17.8468.
You can view previous portfolio activity from Fairholme here.
Per Google Finance, St. Joe is "a real estate development, asset management and operating company. The Company operates through five segments: residential real estate; commercial real estate; resorts and leisure; leasing operations, and forestry. Its residential real estate segment plans and develops primary residential and resort residential communities of various sizes on its existing land. Its commercial real estate segment plans, develops, manages and sells real estate. Resorts and leisure segment features a portfolio of vacation rentals and hotel operations, as well as golf courses, a beach club, marinas and other related resort amenities. Its leasing operations business includes its retail and commercial leasing. Its forestry segment focuses on the management of its timber holdings in Northwest Florida."
Paulson & Co Trims Trilogy Metals Stake
John Paulson's hedge fund firm Paulson & Co has filed a Form 4 with the SEC regarding its stake in Trilogy Metals (TMQ). Per the filing, Paulson sold 18,247 shares on June 8th at a price of $0.5985. After this sale, they still own over 11.56 million shares of TMQ.
For more from this fund, head to other recent portfolio activity from Paulson & Co.
Per Google Finance, Trilogy Metals is "formerly NovaCopper Inc., is a Canada-based base metals exploration company. The Company focuses on exploring and developing its mineral holdings in the Ambler mining district located in Alaska, the United States. The Company's principal assets, the Upper Kobuk Mineral Projects (UKMP or UKMP Projects), are located in the Ambler mining district in Northwest Alaska. The Company's UKMP Projects include approximately 352,943 acres consisting of the Ambler and Bornite lands. The Ambler lands hosts the Arctic copper-zinc-lead-gold-silver Project and other mineralized targets within a 100-kilometer long volcanogenic massive sulfide belt. The Amber lands are located in Northwestern Alaska and consist of over 112,050 acres of Federal patented mining claims and State of Alaska mining claims. The Bornite deposit is located approximately 25 kilometers southwest of its Arctic deposit. The Bornite lands hosts the Bornite carbonate-hosted copper Project."
Friday, July 21, 2017
Professional Web Design Package For Investment Firms: First 10 Responders Receive Discount
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Thursday, July 20, 2017
JANA Partners Exits Whole Foods Market Stake
Barry Rosenstein's hedge fund firm JANA Partners has filed an amended 13D with the SEC regarding shares of Whole Foods Market (WFM). Per the filing, JANA Partners has sold its entire position as of July 17th.
As an activist investor, JANA Pushed Whole Foods to sell itself and the company recently agreed to a deal with Amazon (AMZN). Instead of sitting around in a merger arbitrage trade, it looks like JANA has decided to move on to its next opportunity.
For more on this firm, we've highlighted a stock JANA Partners recently bought here.
Per Google Finance, Whole Foods is "is engaged in the business of natural and organic foods supermarket. The Company operates approximately 456 stores in the United States, Canada and the United Kingdom. Its stores have an average size of approximately 39,000 square feet, and are supported by its distribution centers, bake house facilities, commissary kitchens, seafood-processing facilities, a produce procurement center, and a specialty coffee and tea procurement and roasting operation, among others. It offers over 30,000 organic stock keeping units (SKUs), covering various areas of its store, including produce, packaged goods, bulk, frozen, dairy, meat, bakery, prepared foods, coffee, tea, beer, wine, cheese, nutritional supplements, vitamins, body care, pet foods and household goods. The Company's brands include 365 Everyday Value, Allegro Coffee, Whole Foods Market, Whole Paws, and Engine 2 Plant-Strong. It also offers approximately 400 temporary exclusives."
Corvex Management Adds To Energen Position
Keith Meister's activist firm Corvex Management has filed an amended 13D regarding shares of Energen (EGN). Per the filing, Corvex now owns 8.8% of the company with over 8.51 million shares.
This is an increase of over 1.1 million shares since late June when Corvex was previously buying EGN. The filing notes they were buying in early July and as recent as July 19th. They bought between $47.11 and $50.57.
Corvex's stake is actually comprised of 8.1 million shares of common stock and various stock options. They have 415,200 shares underlying call options that have an exercise price of $50 and expiration of October 20, 2017. They've also sold the same amount of call options with an exercise price of $60 and the same expiration in October. Also, they've sold the same amount of put options with an exercise price of $40 and expiration of January 19, 2018.
For more on this fund, we've highlighted how Corvex has bought another stock recently.
Per Google Finance, Energen is "an oil and natural gas exploration and production company. The Company is engaged in the exploration, development and production of oil and natural gas properties and natural gas. Its operations are conducted through subsidiary, Energen Resources Corporation and occur within the Midland Basin, the Delaware Basin and the Central Basin Platform areas of the Permian Basin in west Texas and New Mexico. The Company is focused on increasing its oil, natural gas liquids and natural gas production and proved reserves through active development and/or exploratory programs in the Permian Basin. As of December 31, 2016, oil, natural gas liquids and natural gas represented approximately 60%, 20% and 20% of its reserves. As of December 31, 2016, its development activities added approximately 327 million barrels of oil equivalent (MMBOE) of reserves from the drilling of 623 gross development, exploratory and service wells and 73 well recompletions and pay-adds."
ValueAct Capital Cuts Bioverativ Stake
Jeff Ubben's activist investment firm ValueAct Capital has filed an amended 13D with the SEC regarding its position in Bioverativ (BIVV). Per the filing, ValueAct now owns 3.8% of the company with just over 4 million shares.
This is a decrease from the previous 8.4 million shares that they previously owned at the end of the first quarter of 2017. The latest filing shows ValueAct sold over 4.68 million shares from June 19th through July 13th at prices ranging from $59.70 to $62.56.
We've also highlighted another stock ValueAct has been selling here.
Per Google Finance, Bioverativ is "a biotechnology company. The Company is focused on the discovery, research, development and commercialization of therapies for the treatment of hemophilia and other blood disorders. It markets approximately two products, including ELOCTATE [Antihemophilic Factor (Recombinant), Fc Fusion Protein], and ALPROLIX [Coagulation Factor IX (Recombinant), Fc Fusion Protein], extended half-life clotting-factor therapies for the treatment of hemophilia A and hemophilia B, respectively. ELOCTATE and ALPROLIX use a process known as Fc fusion to link recombinant factor VIII and factor IX, respectively, to a protein fragment in the body known as Fc. The fusion of the factor with the Fc protein fragment uses a naturally occurring pathway and is designed to extend the half-life of the factor thereby making the product last longer in a person's blood than various factor therapies. Its pipeline includes BIVV 001(rFVIIIFc-VWF-XTEN) and BIVV 002 (rFIXFc-XTEN)."
Wednesday, July 19, 2017
What We're Reading ~ 7/19/17
How do you value a subscription business? [25iq]
The logic of patience [Value Investor India]
A look at BOFI Federal Savings: Annals of the Bank of Misery [SIRF]
On the struggles of shopping malls part 1 and part 2 [Adventures in Capitalism]
America's venerable food brands are struggling [WSJ]
Inside Formula One's (FWONK) race for world domination [FT]
A look at Liberty Braves Group (BATRA) [Yet Another Value Blog]
A new record high for US consumer debt [WSJ]
This telecom bet big on landlines and lost [WSJ]
Qatar: the global empire of a tiny country [Amrank]
10 years after the last bull began to fail, this market shows fewer signs of trouble [CNBC]
The personality trait that massively improves decision making [Inc]
This guilt-free ice cream is a cult hit, thanks to Instagram [Bloomberg]
Monday, July 17, 2017
Greenlight Capital Q2 Letter: New Toshiba Position
David Einhorn's hedge fund firm Greenlight Capital is out with its second quarter letter. During the quarter, they lost 4% and thus far for the year are down 2.8% net. Their average exposure was 111% long and 79% short.
Their five largest longs in alphabetical order are: AerCap (AER), Bayer (Germany: BAYN), CONSOL Energy (CNX), General Motors (GM), and Mylan (MYL).
They also point out short positions in their 'bubble basket' include Amazon (AMZN), athenahealth (ATHN), Netflix (NFLX), and Tesla (TSLA) that have moved against them.
The letter walks through some of their thoughts on each. While Greenlight is long one auto manufacturer (GM) and short another one via Tesla, they don't do pair trades.
Also, the letter highlights that Greenlight started a new long in Toshiba (Japan: 6502) and outlines their thesis there.
Lastly, they also note they've sold their longs in Altice and Time Warner (TWX), as well as covered their decade-long short position in the credit rating agencies and their short of Mallinckrodt (MNK).
Embedded below is Greenlight Capital's Q2 letter:
For more from this manager, be sure to check out Einhorn's presentation on shorting Core Labs.
Whitney Tilson's Presentation on Alphabet and Facebook
Whitney Tilson of Kase Capital Management gave a presentation at the 14th annual Value Investing Seminar in Italy on two stocks: Alphabet (GOOG) and Facebook (FB).
Tilson starts by doing a bit of a post-mortem on a call he made against Google some time ago. He points out that the company enjoys a flywheel of network effects and economies of scale: large user base > large advertiser base > better monetization > most R&D dollars > best product > high barriers to entry.
That's obviously not anything new, but he points out that valuation isn't crazy at 28x 2017 EPS and 13x EBITDA estimates given that the vast majority of incremental ad spending is ending up on GOOG or Facebook's platforms. And if you back out GOOG's cash ($126 per share) and 'other bets' ($50 per share), you get a valuation much more in line with the S&P for a company that he says is "vastly superior" to the average corporation.
On Facebook (FB), Tilson points out the company has higher margins than GOOG, and revenue growth is higher as well.
Embedded below is Tilson's presentation on GOOG and FB:
You can download a .pdf copy here.
Peter Lynch on How to Pick Stocks
Legendary investor Peter Lynch once gave a talk on how to pick stocks from "The Stock Shop" and goes over basic concepts like time horizon, your advantages for stock picking, types of companies, hidden assets, risk factors, etc.
He previously managed the Magellan Fund and between 1977 and 1990 returned an average of 29% annually. He's also the author of the famous investing book One Up On Wall Street.
Embedded below is the video of Peter Lynch on how to pick stocks:
For more from this investor, we've also previously posted about Peter Lynch on using your edge: timeless advice for investors.
Friday, July 14, 2017
Hedge Fund Links ~ 7/14/17
Bridgewater's Ray Dalio says 'keep dancing' but party ending soon [CNBC]
Ex-Viking CIO Sundheim plans to start equity hedge fund [Bloomberg]
Tourbillon's Jason Karp: this market doesn't make any sense [Business Insider]
Robert Soros stepping down from Soros Fund to start his own [Business Insider]
Insurance dedicated funds: the hot new way to avoid taxes [Bloomberg]
Hedge funds makes the case for humans over AI [Bloomberg]
The book tour approach to launching a hedge fund [All About Alpha]
The last hedge fund pit bull [Institutional Investor]
Investing pioneer Jay Regan on hedge funds, fees and competitive markets [Collaborative Fund]
Thursday, July 13, 2017
2 Non-Consensus Stock Reports From Boyar Research
Boyar Research recently profiled two companies that are currently very much out of favor in the investment community. Western Union (WU) is the second most shorted stock in the S&P 500 and Discovery Communications (DISCK) has 28 analysts covering it with only 3 buy ratings.
To receive Boyar’s complimentary full-length report on both of these companies, please click here.
For over forty years, Boyar Research has been providing profitable non-consensus stock picks to their subscribers. They have demonstrated time and again that they are not afraid of challenging popular opinion or providing their clients with a profitable contrarian perspective, from profiling financial companies in 1987, when they sold at a significant discount to the rest of the market; to advocating purchasing drug company shares in 1993 after the S&P drug group lost nearly 40% of its value due to fears over “Hillarycare”; to being bullish on U.S. housing-related stocks in 2011."
To receive their complimentary full-length reports on both Western Union and Discovery Communications, please click here.
So what attracts Boyar to Western Union, which has 14% of its shares sold short?
- WU’s rapidly growing digital money transfer business, WU.com, could single-handedly lift the Company’s EPS growth to 10%-13% by 2020, from flattish today. WU.com is a hidden asset within WU. Using conservative assumptions, they estimate that WU.com will account for 27% of Western Union’s enterprise value in 2020, up from 11% in 2016.
- Recent precedent transactions—namely, PayPal’s takeover of Xoom, the #2 digital money transfer provider, and the bidding war for MoneyGram, the #2 global retail C2C money transfer provider—highlight WU as substantially undervalued. Moreover, WU is the #1 player in both of these businesses.
- Applying a 3.5x revenue multiple to WU.com, which is a discount to Xoom’s 4.8x revenue takeover multiple, and 15x EV/FCF to WU’s remaining businesses (retail C2C, C2B, and B2B), which is a substantial discount to MoneyGram’s 21x EV/FCF takeover valuation, they derive an intrinsic value estimate of ~$33 per share for WU at the end of 2020, offering ~72% upside, or a 3.5-year IRR of ~20% including the dividend (3.7% current yield).
To receive Boyar’s Western Union report, please click here.
Why does Boyar Research like Discovery Communications despite the consensus view that traditional cable companies are secularly challenged?
- Following a number of key affiliate fee renewals in both U.S. and international markets, DISCK has significant revenue and cash flow visibility. Notably, international affiliate fee revenues are expected to increase at a low-double-digit percentage rate over the next few years.
- A host of potential growth opportunities should favorably impact Discovery’s future results, including increased consumer adoption of Discovery GO (streaming content); further traction with various subscription-based initiatives, including the Eurosport Player; and increased pay-TV penetration in key international markets.
- Since 2010, DISCK has deployed $8 billion toward buybacks (~50% of its current market cap)—reducing diluted shares outstanding by over 30%—including $1.4 billion utilized in 2016 to repurchase ~53 million shares at an average cost of ~$26 a share. They expect share repurchases to be a recurring theme as a result of the Company’s strong revenue and cash flow visibility, coupled with DISCK’s currently depressed share price and attractive valuation.
- Applying discounted multiples (relative to precedent industry transactions) of 10.0x and 9.0x our 2019E EBITDA for the U.S. and International Networks segments, respectively, they derive an estimate of intrinsic value of $47 a share, representing over 80% upside from current levels. They also believe Discovery represents an attractive acquisition target.
To receive Boyar's Discovery Communications report, please click here.
Wednesday, July 12, 2017
Viking Global Trims Rice Energy & EnCana; Adds to Calithera Biosciences
Andreas Halvorsen's hedge fund firm Viking Global has just filed three separate 13G's with the SEC.
Viking Global Trims Rice Energy Stake
First, Viking has disclosed that they now own 5.8% of Rice Energy (RICE) with 12 million shares.
This is a decrease of over 5.45 million shares as they previously owned 17.57 million shares at the end of the first quarter. The filing was made due to activity on July 1st.
Rice recently received a takeover offer from EQT (EQT) and we highlighted how JANA Partners opposes the transaction.
Per Google Finance, Rice Energy is "an independent natural gas and oil company. The Company is engaged in the acquisition, exploration and development of natural gas, oil and natural gas liquids (NGL) properties in the Appalachian Basin. The Company conducts its operations through two segments: Exploration and Production, and Midstream. The Exploration and Production segment is engaged in the acquisition, exploration and development of natural gas, oil and NGLs. The Exploration and Production segment operates in the cores of the Marcellus and Utica Shales. The Company controls approximately 231,000 net acres in the Marcellus and Ohio Utica Shale cores. It operates approximately 1,164 drilling locations. The Midstream segment is engaged in the gathering and compression of natural gas, oil and NGL production of, and in the provision of water services to support the well completion activities of, Rice Energy and third parties."
Halvorsen's Firm Reduces EnCana Position
Second, Viking has also disclosed they now own 7.5% of EnCana (ECA) with 72.77 million shares.
This is a decrease of 6.53 million shares as they previously owned 79.3 million shares at the end of the first quarter. The filing was due to activity on July 1st.
Per Google Finance, EnCana is "an energy producer that is focused on developing its multi-basin portfolio of natural gas, oil and natural gas liquids (NGLs) producing plays. The Company's operations also include the marketing of natural gas, oil and NGLs. All of its reserves and production are located in North America. It operates through three segments: Canadian Operations, USA Operations and Market optimization. Its Canadian Operations segment includes the exploration for, development of, and production of natural gas oil and NGLs and other related activities within Canada. Its Canadian operations include Montney in northeast British Columbia and northwest Alberta and Duvernay in west central Alberta. The USA Operations include the exploration for, development of, and production of natural gas, oil and NGLs, and other related activities within the United States. The Market Optimization activities are primarily responsible for the sale of the Company's production to third party customers."
Viking Adds To Calithera Biosciences
Third, Halvorsen's firm also disclosed they now own 6.9% of Calithera Bioscience (CALA) with 2.42 million shares.
This is an increase of 114,706 shares since the end of the first quarter. The filing was made due to activity on July 1st.
Per Google Finance, Calithera Bioscience is "a clinical-stage pharmaceutical company. The Company focuses on discovering and developing small molecule drugs directed against tumor and immune cell targets that control key metabolic pathways in the tumor microenvironment. It is engaged in developing agents that take advantage of the metabolic requirements of tumor cells and cancer-fighting immune cells, such as cytotoxic T-cells. The Company's lead product candidate, CB-839, is a critical enzyme in tumor cells. Its other product candidate, CB-1158, is being developed for hematology and oncology indications. CB-1158 is a potent and selective orally bioavailable inhibitor of the enzyme arginase. CB-839 is a selective, reversible and orally bioavailable inhibitor of human glutaminase. CB-1158 has single agent anti-tumor activity in syngeneic mouse tumor models that has been demonstrated to act through an immune mechanism. CB-1158 is being tested in a Phase I clinical trial in patients with solid tumors."
Eminence Capital Boosts Cornerstone OnDemand Stake
Ricky Sandler's hedge fund firm Eminence Capital has filed a 13G with the SEC regarding shares of Cornerstone OnDemand (CSOD). Per the filing, Eminence now owns 5.4% of the company with over 3 million shares.
This is an increase of 714,564 shares since the end of the first quarter when they owned 2.34 million shares. The filing was made due to activity on June 29th.
Per Google Finance, Cornerstone OnDemand is "a cloud computing company. The Company provides learning and human capital management software, delivered as Software-as-a-Service (SaaS). Its human capital management platform combines the talent management solutions with analytics and human resources (HR) administration solutions to enable organizations to manage the employee lifecycle. Its enterprise human capital management platform consists of four product suites: its Recruiting suite, which helps organizations to source and attract candidates, assess and select applicants, onboard new hires and manage the entire recruiting process; its Learning suite, which enables clients to manage training and development programs; its Performance suite, which provides tools to manage goal setting, performance reviews, compensation management and succession planning, and HR Administration suite, which supports employee records administration, workforce planning and compliance reporting."
Pershing Square Trims Restaurant Brands Stake: Report
CNBC is reporting that Bill Ackman's activist firm Pershing Square Capital Management has sold $610 million worth of Restaurant Brands (QSR) in a block trade, selling 10 million shares at $61 per share.
After this trade, Pershing would still own 29 million shares of QSR using the latest figures from their first quarter 13F filing. While QSR was previously Ackman's top holding, this sale means there's potential for it to slip down a spot to his second largest holding, behind Air Products (APD).
For more on this hedge fund, check out Pershing Square's Q1 letter here.
Per Google Finance, Restaurant Brands is "a quick service restaurant (QSR) company. The Company had over 20,000 restaurants in more than 100 countries and the United States territories, as of December 31, 2016. It operates through two segments: Tim Hortons (TH) and Burger King (BK). Tim Hortons restaurants are quick service restaurants with a menu that includes blend coffee, tea, espresso-based hot and cold specialty drinks, baked goods, including donuts, Timbits, bagels, muffins, cookies and pastries, grilled paninis, classic sandwiches, wraps and soups, among others. Burger King restaurants are quick service restaurants that feature flame-grilled hamburgers, chicken and other specialty sandwiches, French fries, soft drinks and other food items. The Company operates coffee roasting facilities in Hamilton, Ontario and Rochester, New York. The Company sells its raw materials and supplies, including coffee, sugar, paper goods and other restaurant supplies to Tim Hortons restaurants."
Thursday, July 6, 2017
What We're Reading ~ 7/6/17
A look at Trupanion (TRUP) - a long-term compounder [Variant Views]
Jim Chanos: US economy is worse than you think [INET Economics]
A chat with Peter Bernstein [Jason Zweig]
Bob Rodriguez: We're witnessing development of "perfect storm" [Advisor Perspectives]
A skeptic's view of popular stocks [Barrons]
Bruce Berkowitz seeks return to glory by betting on Sears (SHLD) [WSJ]
Stockpicking is dying because there are no more stocks to pick [WSJ]
Surveying the direct to consumer landscape [Medium]
Tencent rules China; the problem is the rest of the world [Bloomberg]
A pitch on Cars.com (CARS) [Barrons]
Habits of people who know how to bring out the best in others [Fast Company]
Wednesday, July 5, 2017
JANA Partners Starts EQT Stake, Opposes Rice Transaction
Barry Rosenstein's activist hedge fund firm JANA Partners has filed a 13D on shares of EQT (EQT). Per the filing, JANA now owns 5.8% of EQT with over 10.13 million shares (inclusive of options to purchase 1.86 million shares).
This is a newly disclosed equity position for JANA. They purchased shares in April, May and June at prices ranging from $53.xx to $60.xx.
JANA's Letter to EQT Board
Rosenstein's firm also sent a letter to the board of directions and say they invested because "we believe that the Company trades at a substantial discount to its intrinsic value and has a ready opportunity to unleash this value potential by immediately separating its E&P and midstream businesses into two separate companies, which we estimate could create as much as $4.5 billion (or $26 per share) of value for EQT shareholders."
Additionally, they lay out their case as to why they are against the company's acquisition of Rice Energy.
Embedded below is JANA's letter to EQT:
If you overlaid this position on JANA's portfolio as of the end of the first quarter, EQT would be their second largest position, behind only Whole Foods (WFM).
You can view other recent portfolio activity from JANA Partners here.
Warren Buffett Interview With PBS
Berkshire Hathaway's Warren Buffett recently sat down with Judy Woodruff of PBS for an interview on a wide range of topics like the economy, income inequality, taxes and more.
Here's the video of part 1 of the interview:
And here's the video of part 2 of the interview:
For more on Buffett, we've also highlighted some recent buying activity from Berkshire Hathaway.
Tiger Management Shows Ooma Position
Julian Robertson's hedge fund firm Tiger Management has filed a 13G with the SEC regarding shares of Ooma (OOMA). Per the filing, Tiger now owns 6.7% of OOMA with 1.22 million shares.
This is a newly disclosed equity position for the fund and the filing was made due to activity on June 21st.
You can view other recent portfolio activity from Tiger Management here.
Per Google Finance, Ooma is "a communications platform for small businesses and consumers. Ooma serves as a communications hub, which offers cloud-based telephony, Internet security, home monitoring and other connected services. Ooma combines PureVoice high definition (HD) call quality features with mobile applications anytime, anywhere calling. Ooma is a full router capable of prioritizing voice data and directing traffic to ensure reliable phone service. Its enterprise-grade phone service built for small business includes features, such as calling features, including unlimited calling in United States and Canada, 911 service and toll-free numbers available; office features, including virtual receptionist, extension dialing and voicemail; mobility features, including call forwarding, voicemail forwarding and multi-ring, and one-touch Internet protocol (IP) phone features, including three way conference, transfer calls and call on hold."
Wednesday, June 28, 2017
Mohnish Pabrai's Recommended Reading List
Investor Mohnish Pabrai recently recommended a few books at his talk at Google which we just highlighted.
Mohnish Pabrai's Recommended Reading List
And in the past, Pabrai has also frequently recommended books such as:
And while he didn't recommend his own book, it's worth noting Pabrai has authored The Dhando Investor: The Low-Risk Value Method to High Returns.
For more book recommendations from top investors check out the right sidebar of Market Folly as we've posted many lists.
Mohnish Pabrai's Talk at Google on Entrenched Biases
Fund manager Mohnish Pabrai recently gave a talk at Google on how intensive stock research can be injurious to financial health.
The video's description is "how the plethora of deeply entrenched biases and flawed evolutionary brain wiring makes us prone to make plenty of mistakes when picking stocks. Specifically, the more time we spend analyzing a given business, the more likely we are to like it and invest in it.
But if we don't spend time studying a business, how are we expected to understand its prospects and likely future? This strong commitment bias is an important reason why most investment managers have trouble beating the index.
Mohnish will lay out the origins of this bias problem and a few hacks to get around it."
Embedded below is the video of Mohnish Pabrai's latest talk at Google:
For more from this investor, we've posted Pabrai's talk on value investing as well.
For other investor talks at Google, we've posted many of those presentations and you can scroll through that link.
What We're Reading ~ 6/28/17
Taking the pulse of Disney's behemoth ESPN [Sports Business Daily]
The end of car ownership [WSJ]
Pitch on Bank of the Ozarks [Barrons]
Five ways a company can keep its competitive edge [Fortune]
Morningstar's updated top 10 holdings of ultimate stock pickers [Morningstar]
Half of Americans are spending their entire paycheck (or more) [CNN Money]
'How many jobs will be killed by A.I.?' is the wrong question [LinkedIn]
Inside the secret world of the shipping industry [Longreads]
Compound interest applied to learning [Kottke]
How to predict if a borrower will pay you back [NYMag]
Charlie Munger on The Psychology of Human Misjudgement
Investor Charlie Munger is well known for delivering his talk on The Psychology of Human Misjudgement at Harvard in 1995.
A company called Tiny has created an animated and abridged version of the speech that hits the highlights and puts a visual twist on the talk. So if you missed his talk or are looking for a quick refresh, this is a great synopsis.
Embedded below is the video of Charlie Munger on the Psychology of Human Misjudgement:
For more on this investor, check out Charlie Munger's recommended reading list.
Tuesday, June 27, 2017
Steadfast Capital Boosts Trivago Position
Robert Pitts Jr.'s hedge fund firm Steadfast Capital has filed a 13G with the SEC regarding shares of Trivago (TRVG). Per the filing, Steadfast now owns 5.4% of the company with over 1.60 million shares.
This is an increase of over 1.05 million shares since the end of the first quarter when they owned 550,074 shares. The filing was made due to activity on June 14th.
We've previously highlighted how Foxhaven Asset Management has also built a Trivago stake.
Per Google Finance, Trivago "operates an online hotel search platform. The platform allows users to search for, compare and book hotels. It gathers information from various third parties' platforms and provides information about the hotel, pictures, ratings, reviews and filters, such as price, location and extra options. The Company offers access to approximately 1.3 million hotels in over 190 countries via more than 50 localized websites and applications in various languages. The Company also offers marketing tools and services to hotels and hotel chains, as well as to online travel agencies and advertisers, among others. Its principal executive offices are located in Germany."
Paulson & Co Increases Valeant Pharmaceuticals Stake
John Paulson's hedge fund firm Paulson & Co has filed a 13D with the SEC regarding shares of Valeant Pharmaceuticals (VRX). Per the filing, Paulson now owns 6.3% of VRX with over 21.81 million shares.
This marks an increase of 2.42 million shares since the end of the first quarter when they owned 19.38 million VRX shares.
Per the 13D filing, Paulson & Co bought 2.71 million shares at a weighted average price of $13.7080 on May 11th. They then sold 137,000 shares on June 8th at $13.2914.
The filing also notes that on June 14th, John Paulson was appointed to the board of directors.
Per Google Finance, Valeant Pharmaceuticals is "a pharmaceutical and medical device company. The Company is engaged in developing and marketing a range of branded, generic and branded generic pharmaceuticals, over-the-counter (OTC) products, and medical devices (contact lenses, intraocular lenses, ophthalmic surgical equipment, and aesthetics devices). It operates through two segments: Developed markets and Emerging markets. In the Developed Markets segment, it focuses on the areas of dermatology, neurology, gastrointestinal disorders, and eye health therapeutic classes. In the Emerging Markets segment, it focuses on primarily on branded generics, OTC products and medical devices. Its pharmaceutical products include Xifaxan, Solodyn and Glumetza. Its OTC products include PreserVision, Biotrue and Boston. Its other generic products include Latanoprost and Metronidazole. Its ophthalmic surgical products include intraocular lenses, such as Akreos, enVista, Crystalens and Trulign."
Third Point Takes $3.5 Billion Nestle Stake: Letter
Dan Loeb's hedge fund firm Third Point has released a letter that reveals they've taken a $3.5 billion stake (including options) in Nestle in their hedge funds as well as a special purpose vehicle they raised for the opportunity.
They see four areas for improvement:
1) Improving productivity: adopt a formal margin target
2) Capital return: adopt a leverage target and buyback stock
3) Re-shape the portfolio: perhaps sell some businesses
4) Monetize their L'Oreal stake
Third Point feels that Nestle can hit earnings per share 50% higher than today.
Embedded below is Third Point's letter on Nestle:
You can download a .pdf copy here.
We've also posted other recent portfolio activity from Third Point here and you can also read Third Point's Q1 letter.
Berkshire Hathaway Invests in Home Capital Group and Store Capital
News has recently come out that Warren Buffett's Berkshire Hathaway has made two recent investments:
Berkshire Hathaway Invests in Home Capital Group (HCG)
First, Berkshire will indirectly purchased C$400 million of Home Capital shares via a private placement (40 million shares at around C$10 per share). Additionally, Berkshire will give the company a C$2 billion line of credit.
Of the investment, Buffett said, "Home Capital's strong assets, its ability to originate and underwrite well-performing mortgages, and its leading position in a growing market sector make this a very attractive investment."
Berkshire will own just over a 38% equity stake in the company. The company had been undergoing a strategic review as it sought ways to raise capital.
Home Capital had been a popular short among investors betting that Canada could see fallout from a subprime housing crisis of its own. Buffett has clearly zagged the other direction with this bet.
After falling 45% over the past six months, HCG shares are now up 82% over the past few weeks.
For more on Berkshire Hathaway, we highlighted an interview with Warren Buffett last month.
Per Google Finance, Home Capital is "Canada-based holding company that operates through its subsidiary, Home Trust Company (Home Trust), which offers deposits, residential and non-residential commercial mortgage lending and consumer lending. It offers deposits through brokers and financial planners, and through its direct-to-consumer deposit brand, Oaken Financial. Home Trust, through its subsidiary, Home Bank, offers mortgage, deposit and personal banking products. Its mortgage lending includes Traditional Single-family and ACE Plus Lending; insured residential lending; residential commercial lending, and non-residential commercial lending. Its consumer lending includes credit card and line of credit lending, and other consumer retail lending. In addition it manages a treasury portfolio to support liquidity requirements and invest excess capital. Its operations also include Payment Services Interactive Gateway Inc., the Company's subsidiary involved in payment processing."
Berkshire Invests in Store Capital (STOR)
Secondly, Warren Buffett's firm has also made a bet on another industry that's seen some struggles: physical retail. While it's not an actual retailer, it still has exposure to the industry as it's a REIT focused on single tenant commercial operational real estate.
Berkshire has invested $377 million in Store Capital (STOR) according to the company, which turns out to be around a 9.8% stake. The private placement issued 18.6 million shares at $20.25 per share.
Per Google Finance, Store Retail is "an internally managed net-lease real estate investment trust. The Company is engaged in the acquisition, investment and management of single tenant operational real estate (STORE) properties. As of December 31, 2016, the Company owned a portfolio that consisted of investments in 1,660 property locations operated by 360 customers across 48 states. Its customers operate across a range of industries within the service, retail and manufacturing sectors of the United States economy, with restaurants, early childhood education centers, movie theaters, health clubs and furniture stores. The Company's portfolio includes investments in approximately 1,330 property locations operated by over 300 customers across approximately 50 states. The Company provides real estate financing solutions principally to businesses that own STORE properties and operate within the broad-based service, retail and industrial sectors of the United States economy."
For more from Warren Buffett, we've highlighted other Berkshire Hathaway portfolio activity here.
Friday, June 23, 2017
Sohn India Conference Notes 2017: Agarwal, Singh, Prakash & More
We couldn't make it to the Sohn India Conference but luckily Alpha Ideas has allowed us to share their notes from the event as a guest post.
Sohn India Conference Notes 2017
Raamdeo Agarwal (Motilal Oswal): Pick was PNB Housing Finance. He termed it a ‘Lakh Crore Ki Kahani’In India, there are only 27 Companies which have a market cap of more than 1L Crores. For a company to break into this elite club, there must be strong tailwinds and a long runway in place. Some such megatrends that he has seen in his career are IT Services, Private Banks, Pharma etc. He analyzed the Company using his QGLP model. Its a business with secular growth drivers. India’s Mortgage to GDP is very low (9%) and level of urbanization is only 33%. Both these figures can only go up. The Gross NPAs in this business is only 0.8%For all practical purposes, it is Carlyle which owns 38% of the company is running the business. They have put in top class processes and practices. Agarwal quipped –‘I own a housing finance business myself and hence can judge the high quality and scalability of PNB’s processes.’ The management plans to double assets by 2020. Modi’s ‘Housing For All’ can create a 50L Crores Mortgage Market. The Company has grown at 52% CAGR in the last 4 years and increased its market share. He expects the stock to break into the 1 Lakh Crore Club by 2024…a CAGR of 24%.
Sunil Singhania (Reliance Mutual Fund): Being from Mutual Fund Industry, compliance demands he can’t give stock picks but can speak on sectors. His pick was the Cement Sector. Felt while the current demand is low, the sector will benefit from the Govt’s infrastructure and housing boost. The problem is that cement stocks have significantly increased in price. He presented an interesting way to play this sector. Said the most significant wealth creation in Shree Cements happened when capacity when from 15 Million Tonnes to 25 Million Tonnes–stock price went up by 3x/4x. He suggested to buy two companies - one North/Central India and the other South India - which have around 15 Million Tonnes each and are ramping up capacity. Enjoyed the clear thinking and analysis of Sunil Singhania.
Shankar Sharma (First Global): Explained that he liked companies with high leverage because when debt gets paid off, correspondingly market value increases. Recommended MEP Infrastructure Developers Ltd. Basically, a toll operator with 19 Toll Plazas including Mumbai entry points, Bandra sea link etc. For the first time since inception it has made a profit now. Expects debt leveraging to happen.
Saurabh Mukherjea (Ambit): Recommended Garware Wall Ropes. Top manufacturer of nets and ropes in the world. Exports 3000 SKUs to 80 countries. Its expertise in blending high end polymer chemistry with high labor intensity is unmatched. His Primary checks tell him customers are very satisfied with the Company products. Growth will come from Defense, Agri, Infra etc. Management is prudent in their capital allocation, had bought back their own shares in the past.
Navneet Munot (SBI Mutual Fund): Being from Mutual Fund Industry,compliance demands he can’t give stock picks but can speak on sectors. His sector pick was Telcos. There will be a bloodbath in the sector for next 2-3 quarters. The Telcos which survive will make a lot of money as Data addiction now is a bigger addiction than alcohol, tobacco etc. Push by the Govt - show a Modi video clip. Consolidation–>Pricing Power—>ROCE.
Aanand Chouhan (Stockpicking Competition Winner): Aanand had won a stock picking competition organized by Sohn and hence was given opportunity to present his idea. His stock pick was Infoedge. Felt the company’s core business (Naukri), Internet Portfolio (99acres, Jeevansathi, etc) and VC Investments (Zomato, PolicyBazaar etc) were valuable and could grow well. Gave a target price of 1570 Rs/share over the next 3 years.
Jeff Gundlach (DoubleLine Capital): Via video: He said there is no such thing as passive investing as the index constituents are decided by a committee. Said to go long emerging markets and short S&P 500.
Kenneth Andrade (Old Bridge Capital Management): His top pick was ENI. Its the market leader in the Radio space with 30% market share and recognizable brand (Radio Mirchi). It will have second frequency in 11 Metros. National footprint with 60 cities. Radio is an attractive space with 4% of Media spend and growing at a CAGR of 16.9%. ENI has already done significant capex and its time to reap the benefits.
Shashank Singh (Apax Partners): His top pick was DCB Bank. His investment thesis was Retail private banks with clear product/customer strategy will do well. DCB Bank reinvented itself after 2010 under current leadership. Suppressed earnings due to network rollout and hence attractive valuations. Felt the Bank has a conservative credit culture with the CEO himself doing surprise audits. Earnings will improve with time as the branch network gets more ‘seasoned.’
Hiren Ved (Alchemy Capital): His top pick was Varun Beverages. Said the Company is a good proxy for Pepsi in India. Not just a bottler but also a manufacturer, marketer and distributor. Felt one unanticipated impact of 24*7 electricity is more people consuming more beverages. Coming to valuations, he said Varun is cheap compared to other consumer plays like Jubilant Food/Page Industries. Found the comparison very funny.
Ashwini Agarwal (Ashmore): His top pick was Persistent Systems. Said the company was not a typical IT services provider as it is into outsourced product management. Three investment reasons IBM-Watson tie up begins to pay off. Growth in Digital business -40% CAGR is possible. Core IT services revenue shows 6-8% CAGR. Two investment risks: Rupee Strengthening, Curbs/high fees on H1B Visas.
Akash Prakash (Amansa): His top pick was Infoedge.Second time the stock was discussed today. He felt it was the ultimate India Internet play. He also felt due to network effects the value of Naukri, 99 acres, Zomato etc will keep growing. He feels the real estate classifieds space is 5x bigger than the recruitment space and the restaurant space is bigger than the real estate classifieds space. The company's VC fund also lets the investor bet on interesting Internet opportunities which otherwise one could not. He felt the downside risk was minimal while upside could be 3x/4x.
The conference ended by a video clip of Social Capital's Chamath Palihapitiya who discussed Tesla and made a case for buying its convertibles. (MF note: he pitched this idea at a previous conference as well).
Thanks again to Alpha Ideas for the guest post.
For coverage of other Sohn Conferences, head to our notes from Sohn Hong Kong 2017 as well as notes from Sohn New York 2017.
Thursday, June 22, 2017
What We're Reading ~ 6/22/17
Payments industry overview: Analysis of Visa, Mastercard, American Express [Value Seeker]
Brexit in reverse? [George Soros]
If you can't explain something in simple terms, you don't understand it [Kottke]
On the popular 'FANG' stocks [AQR]
How to survive the retail crisis: a master class from T.J. Maxx [WSJ]
Starbucks' Howard Schultz has something left to prove [Fortune]
Blockchain 101 [CFA Institute]
How a 36-year old Wall Street prodigy saved Burger King [Business Insider]
Why grocery retail is the 'holy grail' [Bloomberg]
A look at subprime auto debt [NYTimes]
Profile of Citron's Andrew Left [NYTimes]
Mary Meeker's 2017 internet trends report [KPCB]
Essilor's CEO on an eyewear megamerger with Luxottica [FT]
Why is Trump causing chaos in Washington but not in the stock market? [Five Thirty Eight]
Tuesday, June 20, 2017
Sohn Conference Hong Kong Notes 2017: Block, Krishnan, Shah & More
The 2017 Sohn Conference in Hong Kong recently took place and featured managers sharing investment ideas to benefit the Karen Leung Foundation for gynecological cancer. Here's quick summaries of each speaker's stock idea and pitch from the Asia Society Hong Kong Center.
Sohn Conference Hong Kong Notes 2017
Carson Block (Muddy Waters): Short Man Wah Holdings (1999.HK). Pitch highlighted taxes and concerns over debt and free cashflow. Also questioned sales from export. He thinks they generate 50% of net income from Macau but has a 0% tax rate? "Our opinion is this is tax evasion at best, but we think more likely a major component of financial fraud." Says company has undisclosed debt off books and total debt is around 48% greater than reported. "MWH has inconsistencies in its taxes, a strong indicator of fraud. MWH has an entity in Macau that books over half of consolidated net profits. Fieldwork casts doubt on China sales growth story."
Eashwar Krishnan (Tybourne Capital): Long Rolls Royce (RR.LN). Argued that its position as a UK manufacturer with currency weakness makes the company stronger. "Rolls Royce's 3-year expected return of 85% including dividends, thanks to around a 10% free cashflow yield." Likes the new management team and CEO Warren East, thinks they can improve margins. Highlighted disparity between RR at 5.3% margin and main competition GE/Safran at ~20%. Says capex and research/development will be source of operating leverage and RR can double its market share over the next decade, highlighting company's large order book growing. Aerospace engine makers are an attractive business model as it's a razor/razor blade model with pricing power on the aftermarket service portion of the business. High barriers to entry, sizeable investment costs, strong regulatory hurdles. Duopoly (one of 2 engine makers in widebody and 3 engine makers overall). Points to secular growth in miles flown. Accelerating global travel is the key driver for RR. Prior to founding Tybourne, Krishnan was the Asia head at Lone Pine Capital.
Shashin Shah (Think Investments): Long Indiabulls Real Estate (IBREL). Play on Indian real estate restructuring. Bull market there created by increasing affordability and government regulations that are favorable (Real Estate Regulatory Act: RERA). Thinks it can double over the next 3 years, says co has excellent track record of execution.
James Tu (Nine Masts Capital): Long Sina convertible bonds/Weibo (WB). Play Weibo via Sina convertible bond. SINA 1% 12/1/2018 Convertible Bond. CB Price 106, Matures with accrued 101, conversion price 115.88. Thinks Sina's CEO may do everything to "push up WB valuation through spinning off." Sees 50% margin of safety here, argues it is a much smaller Facebook. Has MAU of 340 million, 154 million DAU, $16b market cap.
Seth Fischer (Oasis Management): Long Sony (SNE / 6758.JP). Valuation is not demanding (just under 17x forward earnings and 5.7x EV/EBITDA), high potential to grow, sees 39% upside as management completes turnaround. Thinks they should start diversifying financial risk better, bring in partners, and utilize tax farming for movie production better. Entertainment is a strength for the company as it grows its TV programming biz. Argues it's one of the best players in virtual reality (VR). PlayStation players spend a lot of time with the device and have attractive demographics. Company has solid corporate governance. Notes company's revenue from third party gaming software is growing 11-30% annually.
Dan David (FG Alpha Management): Short Dali Foods Group. Company's operating costs are too low he argues (a third of peers' costs). His concerns include: advertising expenses, cash advances, capex spending, low operating expenses, SAT and SAIC inconsistencies. "We consulted an industry expert to estimate Dali's capex spend in 2013-2014. Their cumulative estimate for both years is about $1 billion RMB less than Dali reported. Based on our research, the company's operating expenses and salary are unbelievably lower than publicly traded peers." Compared Dali's costs to WantWant. David said he's also still short Fullshare 607.HK
Ethan Devine (Indus Capital): Long Yahoo Japan (4689.JP). Sees shares doubling as it's one of the biggest value creators in Japan and dominant digital advertising play there. Thinks EPS can see CAGR of 26% through 2020 and co can reduce share count by 36%. Also posited that it's possible for Alibaba to sell its stake in Yahoo JP.
Yuet Wei Wan (Wei Capital): Long Great Wall Motor (2333.HK). Chinese automaker, local brands gaining market share. Largest SUV maker has product upgrade this year. Sees 48% upside in base case and 100% upside in best case. Targeting 5-8x 2018 PE with a price range of HKD 7-17. "The Street already thinks it's going to fail." Sell side estimates have EPS growth from (5%) in 2017 up to 6% in 2018 while she thinks it will head from (9%) this year to 45% in 2018 with a 7% jump in ROE year over year. Says they're following the Hyundai playbook of selling affordable premium cars.
Brandon Lin (SPQ Asia Capital): Long Momo. Long the Chinese dating world, livestreaming, social platform. Thinks recent price drop is an attractive entry point. "Momo can continuously grow thanks to its short video business and strong campaign." Highlighted time spent per daily active user per day. Momo beats YY, Weibo, Kuaishou, and Inka. Momo has over 200 million registered users and 85 million MAU.
Rajesh Sachdeva (Flowering Tree Investement Management): Long Shankara Building Products. Notes how home improvement stores have done well around the world (i.e. Home Depot). Thinks can do well in India as GDP and middle class grows in the country. Shankara is the largest organized retailer in India for home improvement. Sees revenue growing 18-20% and margins expanding by 40-50 basis points per year for 3-5 years, so earnings grow around 25% with ROCE of around 27%
Michael Lowy (SC Lowy): Long Peabody Energy (BTU). Been a career debt investor but pitched common stock here as an equity reorg play, sees around 60% upside as company ramps cash flow and is reintroduced to the capital markets. Used a blend of 5.5x !*E EBITDA and a 9% FCF yield to get to $37.5 per share. It's historically traded at a premium (1-2x) of Arch Coal, which would yield $29-36 per share. He expects dividend and buyback program. "Conversion of cash-backed LC's into bank guaranteed LC's will release ~$4/share in cash. Net cash position by the first half of 2018.
Arjun Menon (Highbridge Capital): Long KEPCO (Korean Electric Power ~ 015760.KR). Likes it due to low valuation, stable dividend. Forward ROE goes up while forward P/B stays low.
For more coverage of recent investment conferences, head to our notes from Sohn New York Conference, as well as notes from the London Value Investor Conference.
Corvex Management Ups CenturyLink Stake
Keith Meister's activist firm Corvex Management has filed an amended 13D with the SEC regarding its position in CenturyLink (CTL). Per the filing, Corvex now owns 5.6% of CTL with over 30.99 million shares. This is made up of 18.99 million shares and 12 million shares underlying call options.
This is an increase of around 1 million shares from the beginning of May when Corvex first revealed its stake in CTL. The latest filing was made due to activity on June 16th and it notes they bought CTL at $25.91.
We previously highlighted Meister's presentation on CenturyLink at the Sohn Conference New York. CenturyLink is merging with Level 3, which Meister thinks is a game changer.
Per Google Finance, CenturyLink is "an integrated communications company. The Company is engaged in providing an array of communications services to its residential and business customers. Its segments include business, which provides strategic, legacy and data integration products and services to small, medium and enterprise business, wholesale and governmental customers, including other communication providers, and consumer, which provides strategic and legacy products and services to residential customers. Its communications services include local and long-distance voice, broadband, Multi-Protocol Label Switching (MPLS), private line (including special access), Ethernet, colocation, hosting (including cloud hosting and managed hosting), data integration, video, network, public access, Voice over Internet Protocol (VoIP), information technology and other ancillary services. As of December 31, 2016, it served approximately 5.9 million broadband subscribers and 325,000 Prism TV subscribers."
NYU Stern eValuation Newsletter: Spring 2017
The spring 2017 edition of NYU Stern's Investment Management and Research Society's latest newsletter eValuation has been released. This issue focuses on investing in a changing world.
It features interviews with J. Daniel Plants of Voce Capital, Blu Putnam of CME Group, Roderick Wong of RTW Investments, Professor Paul Wachtel of NYU Stern, and Professor Vasant Dhar of NYU Stern.
The issue also includes investment pitches from students, including: long American Railcar (ARII) and long Lending Club (LC).
Embedded below is the latest issue of NYU Stern's eValuation newsletter:
For other MBA student investment newsletters, we've also posted up the recent newsletter from Columbia Business School as well.
Corvex Management Adds To Energen Stake
Keith Meister's activist firm Corvex Management has filed an amended 13D with the SEC regarding its stake in Energy (EGN). Per the filing, Corvex now owns 6.6% of EGN with over 6.39 million shares.
This is up from the 5.37 million shares Corvex owned at the end of May when they previously filed a 13D.
The latest filing was made due to activity on June 14th and it notes that Covex acquired over the counter American style call options and sold over the counter European style put options. You can view all their transactions here.
You can view other recent portfolio activity from Corvex Management here.
Per Google Finance, Energen is "an oil and natural gas exploration and production company. The Company is engaged in the exploration, development and production of oil and natural gas properties and natural gas. Its operations are conducted through subsidiary, Energen Resources Corporation and occur within the Midland Basin, the Delaware Basin and the Central Basin Platform areas of the Permian Basin in west Texas and New Mexico. The Company is focused on increasing its oil, natural gas liquids and natural gas production and proved reserves through active development and/or exploratory programs in the Permian Basin. As of December 31, 2016, oil, natural gas liquids and natural gas represented approximately 60%, 20% and 20% of its reserves. As of December 31, 2016, its development activities added approximately 327 million barrels of oil equivalent (MMBOE) of reserves from the drilling of 623 gross development, exploratory and service wells and 73 well recompletions and pay-adds."
Wednesday, June 14, 2017
Market Folly's Summer Reading List
If you've got a vacation / holiday coming up and need some reading material, here are some recommended books on investing, hedge funds, business, decision making, and life in general. Some are newer books, others are classics you might have missed and should catch up on.
Have any other suggestions? Hit the comments below. Enjoy!
2017 Summer Reading List
Competition Demystified: A Radically Simplified Approach to Business Strategy by Bruce Greenwald and Judd Kahn. Classic text on important concepts.
Tuesday, June 13, 2017
Senator Investment Group Shows Spirit Realty Capital Stake
Alex Klabin and Doug Silverman's hedge fund firm Senator Investment Group has filed a 13G with the SEC regarding shares of Spirit Realty Capital (SRC).
Per the filing, Senator now owns a 7.23% ownership stake in SRC with 35 million shares. This is a newly disclosed equity position and the filing was made due to activity on June 1st, 2017. In late April, shares traded from $10.44 down to a low of $6.71 in May and now trade around $7.70.
Per the company's website, Spirit Realty Capital is "one of the largest publicly traded triple net-lease real estate investment trusts (REITs) in the United States."
Carl Icahn Enters Forward Purchase Contracts on Herc Holdings, Adds to Freeport McMoRan Stake
Activist investor Carl Icahn has submitted a couple SEC filings recently.
Icahn Enters Forward Purchase Contracts on Herc Holdings
First, Icahn has filed a Form 4 with the SEC regarding shares of Herc Holdings (HRI), a spin-off from Hertz (HTZ).
Per the filing, Icahn has entered into forward purchase contracts on June 8th, 2017. These contracts have a forward purchase price of $35.00 per share, plus a financing charge. The contracts have expiration dates of June 7th, 2019. Multiple contracts were entered via various investment vehicles Icahn controls and in total they represent 23,607 shares.
Per the company's website, Herc Holdings "previously were known as Hertz Equipment Rental Corporation or “HERC.” We now operate in the U.S. under our new brand, Herc Rentals. We generated revenue of $1.6 billion in 2016 and offer customers a diversified fleet of equipment valued at $3.6 billion1. We serve customers through 270 company-owned locations, primarily in North America, and have approximately 4,800 employees. Through the years, we have been widely recognized as a pioneer and leader in the equipment rental industry, setting the standard for service and creating the performance metrics that are now commonplace for rental equipment companies."
Icahn Adds To Freeport McMoRan Stake
Second, Icahn has also filed an amended 13D with the SEC regarding his position in Freeport McMoRan (FCX). Per the filing, Icahn now owns 6.33% of the company with over 91.58 million shares.
The filing notes that on June 6th, Icahn acquired 351,644 shares in total at $11.41 per share.
Per Google Finance, Freeport McMoRan is "a mining company. The Company operates through geographical assets with proven and probable reserves of copper, gold and molybdenum, and traded copper producer. The Company's segments include refined copper products, copper in concentrate, gold, molybdenum, oil and other. The Company's segments include the Morenci, Cerro Verde, Grasberg copper mines, the Rod & Refining operations and the United States (U.S.) Oil and Gas Operations. The Company has organized its operations into five divisions, which include North America copper mines, South America mining, Indonesia mining and Molybdenum mines. The Company's portfolio of assets includes the Grasberg minerals district in Indonesia, copper and gold deposits, and mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America."
Farallon Capital Shows Savara Stake
Andrew Spokes' hedge fund firm Farallon Capital has filed a 13G with the SEC regarding shares of Savara (SVRA). Per the filing, Farallon now owns 9.5% of the company with over 2.22 million shares.
This is a newly disclosed equity stake and the filing was made due to activity on June 2nd. It's worth noting that Savara recently closed on a merger with Mast Therapeutics in April of this year. In conjunction with the merger, Master effected a 1 for 70 reverse stock split.
Also, Savara this month completed an underwritten public offering of over 9 million shares of common stock at $4.75 per share.
Per Google Finance, Savara is "formerly Mast Therapeutics, Inc., is a clinical-stage pharmaceutical company. The Company is focused on the development and commercialization of novel therapies for the treatment of patients with rare respiratory diseases. Its pipeline includes AeroVanc, Molgradex and AIR001. AeroVanc is an inhaled formulation of vancomycin, which the Company is developing for the treatment of persistent methicillin-resistant Staphylococcus aureus, lung infection in cystic fibrosis patients. Molgradex is an inhaled formulation of recombinant human granulocyte-macrophage colony-stimulating factor. It is developing Molgradex for the treatment of autoimmune pulmonary alveolar proteinosis, a rare lung disease. AIR001 is a sodium nitrite solution for inhalation via nebulization. AIR001 is in Phase II clinical development for the treatment of heart failure with preserved ejection fraction, also known as diastolic heart failure or heart failure with preserved systolic function."
Monday, June 12, 2017
Jim Chanos Interview on Bloomberg
Jim Chanos, founder of hedge fund Kynikos Associates recently sat down with Bloomberg to share his thoughts on markets.
He talks about the macro landscape, how the recent political shift has changed things, and other topics.
Chanos is worried about China because it's a debt driven model. He thinks they've added trillions to the system.
Turning to US healthcare, Chanos says it's a system designed to be gamed: "It's a hybrid of socialized and free market healthcare."
He thinks the kidney dialysis business is "headed for difficulties." DaVita (DVA) seems to be one play that Chanos is short.
Telsa (TSLA) is another company Chanos has been short. He would cover the short if the company actually began to make money. They were also short Solar City before it got folded into Tesla. The company burns a lot of cash (he thinks up to as much as $1 billion a quarter). The upcoming Model 3 is the big test.
Embedded below is the video of Jim Chanos' Bloomberg interview:
For more recent interviews with prominent investors, be sure to also check out Paul Singer's chat with David Rubenstein.
Paul Singer Chats With David Rubenstein
Paul Singer of hedge fund Elliott Management sat down with Carlye Group co-founder David Rubenstein to chat at Bloomberg Invest New York.
They talk about how Singer founded Elliott, investing, and more.
Elliott manages $34 billion now and started in 1977 with $1.3 million. Singer was a practicing lawyer at the time but started with friends and family money as he found investing much more enjoyable.
Convertible bond hedging was the first strategy Elliott used for around ten years. (Elliott, by the way, is Singer's middle name). Over 40 years, Elliott has compounded at 13.5% net.
Embedded below is the video of Singer's chat with Rubenstein:
For more profiles of prominent investors, check out Howard Marks' recent interview with Bruce Karsh.
Howard Marks Interviews Bruce Karsh at Wharton School
University of Pennsylvania's Wharton School has started a Howard Marks investor series where the founder of Oaktree Capital interviews outstanding investors and this time around he's interviewed Bruce Karsh, his co-founder at Oaktree.
They talk about the founding of Oaktree, distressed investing, and a myriad of other topics.
Embedded below is the video of Howard Marks' interview with Bruce Karsh:
For more from Marks, check out his most recent memo: Lines in the Sand.
