Eric Sprott's April Commentary: Caveat Depositor

Eric Sprott of Sprott Asset Management is out with his April commentary entitled, "Caveat Depositor."  In it, he delves into the Cyprus situation and the macro effects moving forward.


Caveat Depositor  

by Eric Sprott & Shree Kargutkar, Sprott Asset Management 

“If there is a risk in a bank, our first question should be: ‘Ok, what are you the bank going to do about that? What can you do to recapitalise yourself?’ If the bank can’t do it, then we’ll talk to the shareholders and the bondholders. We’ll ask them to contribute in recapitalising the bank. And if necessary the uninsured deposit holders: ‘What can you do in order to save your own banks?’” – Jeroen Dijsselbloem, March 26, 2013 1 

A deal has just been struck with Cyprus. However, it was not the deal that Cyprus saw other countries receive. This was not the deal received by Greece, Italy and Spain. There were no bailed out banks in the aftermath. There was no transfer of risk from over-levered banks to the taxpayers. The risk was pushed back onto the banks. Their equity was wiped out. Their bondholders were wiped out. Their uninsured depositors saw their accounts raided for additional liquidity. It wasn’t just that the rules of the game had changed, the game itself changed. By raiding the depositors’ accounts, a major central bank has gone where they would not previously have dared. The Rubicon has been crossed. Going forward, this is expected to be the “template” for dealing with risky, over-levered banks and the countries which support them. 

For the first time since the crisis began, we are faced with a new paradigm, or a “template”, for how a major central bank will address weakness in the financial sector. While the old template involved “bailing out” through transfer of risk from the corporate sector to the taxpayer, the new template calls for “bailing in”, whereby the risk is contained within the affected institution at the expense of equity holders, bond holders and finally the depositor. 

How does the new template affect you?  

This “template” is already being applied to the “too big to bail” banks in other developed countries around the world. A statement in the joint paper published by the FDIC and the Bank of England in December 2012 reads: 

“An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company into equity. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailedin creditors would become the owners of the resolved firm…. Such a resolution strategy would ensure market discipline and maintain financial stability without cost to taxpayers”.2 

Note the lack of the phrase “uninsured depositors” in this context, which opens the doors for both insured and uninsured depositors to be affected. In a similar vein, Canada’s recently released budget addresses the same problem. Page 144 of Canada’s Economic Action Plan 2013 reads: 

“The Government proposes to implement a – bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers.”3 

Likewise, New Zealand’s Open Bank Resolution policy allows for a “bail in” of afflicted banks by wiping out the equity holders first, the bond holders second and finally forcing a haircut on the depositors.4 

Over-levered banks are not a recent development. We are faced with a banking crisis, seemingly once every generation. In a majority of cases, the bad banks were allowed to fail and newer, stronger banks took their place. However, the recent modus operandi of the central banks and policy makers allowed over-levered banks to get even bigger, rewarded risk taking with bailouts and let the inherent problem of unsustainability fester.

We carried out the exercise of taking the largest banks, or in other words, the “too big to fail” banks in the G7 countries and added up their assets in relation to the host country GDP. For the layperson, a typical bank’s assets are primarily composed of the loans they have originated while the liabilities are primarily composed of deposits they have accepted. With the exception of the US, all G7 countries have banking systems that have become larger and in some cases dwarfed their respective economies. 

Governments around the world are finally beginning to realize the gravity of the risk that exists in their banking sectors. The EU has decided to build upon the new template of the “bail-in” regime. The US, UK and Canada have all followed suit. This puts the onus squarely upon the depositor. The depositor is a lender to the financial institution that he banks with. However, most depositors naively assume that their deposits are 100% safe in their banks and trust them to safeguard their savings. Under the new “template” all lenders (including depositors) to the bank can be forced to “bail in” their respective banks. Several G7 countries already have provisions that allow troubled banks to be bailed in using depositor accounts. We have been vocal about our concerns over the state of the global financial system for the better part of the decade. The Greek tragedy is now being played out in Cyprus with a new twist as depositors have been unwillingly turned into sacrificial lambs. Given the size of the banking sector in most G7 countries and the burgeoning government debts, the ability of the governments to bail out their banks is severely constrained, especially considering the political headwinds that exist today. For this reason, we strongly believe that real assets trump a fiat currency in a “savings” account. It is not our intention to be alarmist here, merely to say, “caveat depositor”. "

Footnotes:
1     Import Export Stats – US Census Foreign trade: http://blogs.ft.com/brusselsblog/2013/03/the-ftreuters-dijsselbloem- interviewtranscript/
2     http://www.bankofengland.co.uk/publications/Documents/news/2012/nr156.pdf
3     http://www.budget.gc.ca/2013/doc/plan/budget2013-eng.pdf
4     http://www.centralbanking.com/central-banking/official-record/2257939/rbnzarticle- says-open-bank-resolution-helps-keep-banks-in-line

For more from this manager, we've also posted up how Sprott thinks the sell-off in gold is an opportunity to buy.

Whitney Tilson's Kase Capital Q1 Letter: Pitch on Deckers, Sears Hometown & Outlet Stores

The hedge fund duo of Whitney Tilson and Glenn Tongue split up last year and now Tilson is managing his Kase Capital solo.  He just sent out his first quarter letter to investors where he outlines two of his new investments: Deckers (DECK) and Sears Hometown & Outlet Stores (SHOS), which you can read in the letter below.

Kase Capital's Top Holdings

In Kase Capital's letter, Tilson also lists his largest positions:

1. AIG (AIG)
2. Berkshire Hathaway (BRK.A)
3. Howard Hughes (HHC)
4. Deckers (DECK)
5. Citigroup (C)
6. Goldman Sachs (GS)
7. Netflix (NFLX)
8. Canadian Pacific (CP)
9. dELiA*s (DLIA)
10. Iridium (IRDM)
11. Grupo Prisa (B Shares)
12. Sears Hometown & Outlet (SHOS)
13. Spark Networks (LOV)


Tilson's Shorts & Exposure Levels

Tilson also reiterated a few stocks that he's short: InterOil (IOC), K-12 (LRN), and Nokia (NOK).  He's also holding a large cash balance, waiting for better opportunities to deploy capital.  His equity exposure comes in at 66% long and 22% short currently.


Embedded below is Whitney Tilson's Kase Capital first quarter letter to investors for 2013:

Bill Gross on How To Be a Better Investor: PIMCO Investment Outlook

PIMCO's Bill Gross is out with his monthly investment outlook for April.  Entitled "A Man in the Mirror," Gross examines himself as a market participant and provides wisdom by outlaying how others can learn from his mistakes.

One interesting part he raises is how all investors of this generation have benefited from a period of credit expansion.  He writes,

"But let me admit something. There is not a Bond King or a Stock King or an Investor Sovereign alive that can claim title to a throne. All of us, even the old guys like Buffett, Soros, Fuss, yeah – me too, have cut our teeth during perhaps a most advantageous period of time, the most attractive epoch, that an investor could experience."

Later, he goes on to emphasize how investors may be forced to adapt and to make a change, an important thing to keep in mind as we approach the potential of a rising interest rate environment in the future.

Embedded below is Bill Gross' April commentary:




You can download a .pdf copy here.

For more from this bond kingpin, head to Gross' previous investment outlook: rational temperance.

What We're Reading ~ Analytical Links 4/3/13

A sweet spot for equities: opportunity and dangers [Aswath Damodaran]

How much of stock market's growth is caused by its shrinking? [Dealbreaker]

Rally on fumes [Capital Observer]

Greed + confirmation bias = disaster [Kid Dynamite]

A little perspective on the markets [Market Anthropology]

How to find high quality stocks [Greenbackd]

Use Benjamin Graham's investing checklist to invest like him [Old School Value]

Presentation on student debt [NewYorkFed]

Cummins (CMI): should you chase it? [CFA Institute]

Dell (DELL) outlines the death of the PC [Forbes]

The next big catalysts for Blackberry (BBRY) [Yahoo Finance]

Apple (AAPL): is it different this time? [Fusion Investing]

eBay (EBAY): estimates rising on upbeat analyst day [Barrons]

A.H. Belo (AHC): hidden value or value trap? [Seeking Alpha]

Altisource Residential (RESI): spin-off with growth ahead [Seeking Alpha]

Insider buying of gold stocks surges to multi-year highs [Globe and Mail]

How to make a stock pitch [Business Insider]

Dan Loeb's Third Point Discloses Porsche & Volkswagen Stakes: March Exposure Report

Dan Loeb's Third Point Offshore Fund finished March up 2.9% and is now up 9% for 2013.  Managing $11.7 billion, the fund has current net long equity exposure of 45.1%, down around 2% from February.


Top Positions

1. Yahoo! (YHOO)
2. Virgin Media (VMED)
3. Gold
4. American International Group (AIG)
5. Ally Financial (multiple securities held)

Third Point's top holdings remain unchanged from the month prior.  Their position in Virgin Media was a new addition to the portfolio in 2013.


Newly Disclosed Positions

In their March "top winners" and "top losers" columns, Third Point discloses a few positions we haven't seen before.  In their "top losers" column from last month, they show holdings in Volkswagen AG, Porsche Automobil Holding SE, and Bond Street Holdings.  Porsche is notable because as of 2012 year-end, it was the top holding at Children's Investment Fund (see TCI's Porsche thesis from a conference late last year).

Additionally, Third Point shows positions in Cheniere Energy (LNG) and DE Master Blenders in their top winners category.  The latter was spun-off from Sara Lee, a position Third Point previously owned (and most likely where those shares came from).

Embedded below is Third Point's March exposure report:




For more on this hedge fund, head to Third Point's Q4 letter.

Senator Investment Group Adds To International Paper Position

Alex Klabin and Douglas Silverman's hedge fund Senator Investment Group recently filed a 13G with the SEC regarding shares of International Paper (IP).  Per the filing, Senator has disclosed a 5.2% ownership stake in IP with 23,088,500 shares.  The filing was required due to portfolio activity on March 28th.

This marks a 452% increase in the number of shares they own.  At the end of 2012, Senator owned 4,179,065 shares, but they also owned call options representing 3,500,000 shares as well.

Per Google Finance, International Paper is "a global paper and packaging company, with primary markets and manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. The Company operates in four segments: Industrial Packaging; Printing Papers; Consumer Packaging, and Distribution."

About Senator

Alex Klabin and Doug Silverman founded the hedge fund firm in February 2008 with a focus on global long/short investing in distressed assets and equities. They were originally seeded by Blackstone Strategic Alliance Fund with $150 million and at the end of 2012 reported holdings worth $4.5 billion on their 13F filing (which isn't indicative of their entire AUM total).  Prior to founding Senator, both worked at Jamie Dinan's York Capital.

For more on this hedge fund, we've also posted up Senator's pitch on Rayonier (RYN) as well.

Corsair Capital Management Boosts Wausau Paper Holdings

Jay Petschek and Steven Major's hedge fund Corsair Capital Management recently filed a 13G with the SEC regarding shares of Wausau Paper (WPP).  Per the filing, Corsair disclosed a 5.6% ownership stake in WPP with 2,774,724 shares.

This marks an increase of 1,920% in the number of shares they own.  At the end of 2012, they only owned 137,323 shares.  The 13G was required due to portfolio activity as of March 13th.


Starboard Value Involved Too, Pushing For Change

Investment firm Starboard Value has been involved with shares of Wausau for some time.  Starboard had increased its stake in WPP, owning 14.8% of the company as of March and recently gained two seats on the board of directors.

Starboard has been fighting for Wausau to divest all its operations except for the tissue segment.  A few weeks ago, the company announced it planned to sell its specialty paper business for $130 million.  Wausau looks to be repositioning itself by turning focus to the tissue business.

Per Google Finance, Wausua Paper "manufactures, converts, and sells paper and paper products.  The Company operates in two principal segments: Tissue and Paper, with both business segments marketing their products under the Wausau Paper brand name. The Tissue segment produces a complete line of towel and tissue products that are marketed, along with soap and dispensing systems, for the away-from-home market."

For more on this hedge fund, we've also posted up Corsair's thesis on Acacia Research (ACTG).

Marcato Capital Management Discloses CyrusOne (CONE) Stake

Mick McGuire's hedge fund firm Marcato Capital Management recently filed a 13G on shares of CyrusOne (CONE) with the SEC.  Per the filing, Marcato has revealed an 11.8% ownership stake in CONE with 2,592,394 shares.  The filing was originally required due to portfolio activity on February 21st.

Per an additional Form 4 filed with the SEC, we see that McGuire's firm was out buying some of their shares on various dates between February 28th and March 12th, at prices ranging from $21.25 up to $22.02 per share.  Cyrus One shares currently trade just below $23.


Interest Stems From Cincinnati Bell Stake

While Marcato Capital Management has disclosed CONE as a new position, it's important to realize that the hedge fund also owns a stake in Cincinnati Bell (CBB).  CONE is a subsidiary of CBB.  CBB completed an initial public offering of 16,500,000 CONE shares back on January 18th.  After the IPO, CBB expected to effectively own 71.6% of CyrusOne.

A few months ago, McGuire pitched CBB at the Great Investors' Best Ideas symposium and highlighted the compelling angle of the CONE spin-off IPO.  And now that CONE is a separately traded entity, Marcato has revealed a sizable stake in it.

Per Google Finance, CyrusOne is "a owner, operator and developer of enterprise-class, carrier-neutral data center properties. The Company provides mission-critical data center facilities that protect operation of information technology (IT) infrastructure for approximately 500 customers. As of September 30, 2012, the Company’s property portfolio included 23 operating data centers in nine markets: Austin; Chicago; Cincinnati; Dallas; Houston; London; San Antonio; Singapore, and South Bend providing approximately 1,630,000 net rentable square feet (NRSF) and powered by approximately 125 megawatts of utility power."

For more from this hedge fund, head to Marcato's recent portfolio activity.

Jeff Saut's Market Commentary: Still Due For a Pullback

Market strategist Jeff Saut released his investment commentary earlier this week.  In it, he talks about how the rally since the end of December has been rampant and is one of the longest he's seen.  He concludes,

"While we are certainly due for a pause/pullback, any such action should prove to be short-lived and shallow, providing there is not some kind of 'black swan' event that precipitates it.  If investors want to be bullish on the US economy, but are worried about the extended rally in stocks, they might consider 'long' positions in the US dollar."

Embedded below is Jeff Saut's weekly commentary:




You can download a .pdf copy here.

For more from this strategist, see his previous commentary on a permanent investment.

Lee Cooperman Raises Monitise Stake

Lee Cooperman's hedge fund Omega Advisors has revealed an increase in London listed Monitise (LON:MONI).  Due to trading on March 20th, Omega's position has increased from 5.65% to 10.06% of Monitise's voting rights.

Cooperman's firm originally took a stake in Monitise back in January of this year.  We've also detailed how Louis Bacon's hedge fund Moore Capital Management also disclosed a stake back in December.

Per Google Finance – “Monitise plc is a United Kingdom-based holding company. The principal  activity of the Company is as a technology company delivering mobile banking, payments and  commerce networks worldwide. The Company’s segments include Live Operations, Investment in  future operations and Investment in technology platform. Live operations include both territory  deployments and development contracts, which consist of Monitise United Kingdom, Monitise  Americas and Global accounts. Investment in future operations segment represents the Company’s  operations which are not live operations covering both pre-sales and start-up period. Investment in  technology platform segment comprises the ongoing development, enhancement and maintenance  costs of the Monitise technology platform. On June 25, 2012, the Company acquired US mobile  banking and payments specialist, Clairmail Inc.”

The Bull Case on Coach (COH) From Broyhill Asset Management

Broyhill Asset Management recently released its research on shares of Coach (COH).  They're bullish on the company and classify it as a classic compounder.

Broyhill writes,

"Coach currently trades at 8.3x EBIT,  13.0x current and 11.7x forward earnings. In other words, the stock is priced as if Coach’s growth is long in  its past. At its peak in 2001, shares fetched 32 times earnings. If we assume that Coach ultimately trades  back towards its average forward multiple of 15x over the next three years, we estimate the stock is worth  $76.60 in our base case, which represents more than 50% upside potential. In our bull case, upside is significantly greater."

Broyhill's thesis on this handbag retailer is pegged on three growth drivers: the ascent of affordable luxury, continued brand extension, and ongoing international expansion.

They feel a short-term shift in investor sentiment has created an entry point for long-term investors.  Their report, embedded below, highlights industry dynamics, competitive positioning, and executive leadership.


They also highlight the following as areas of potential risk:

- International expansion
- The Chinese consumer
- Margin compression
- Brand dilution
- Competition

Embedded below is Broyhill's full 20-page pitch on shares of Coach (COH):




For more research from this firm, we've also highlighted Broyhill's pitch on Oaktree Capital Group.

What We're Reading ~ Analytical Links 3/27/13

Doug Kass' basic investing tenets [TheStreet]

Cannibals: finding companies doing 'good' buybacks [ValueInvestingLetter]

Four villains of decision making [Farnam Street]

Student loan write-offs hit $3 billion in first 2 months of year [Yahoo News]

America's new railroad age [WSJ]

Examining Cupid PLC [Bronte Capital]

Relative value in credit risk [Bigger Capital]

Technicals: keeping an eye on Dr. Copper [Kimble Charting]

Soda consumption declines to lowest level since 1996 [CNBC]

Value investing in India is dead [Atyant Capital]

Investors face a shrinking stock supply [USAToday]

Market psychology money and investing personality tests [MarketPsych]

Hewlett Packard (HPQ) shares soar, but is it a real turnaround? [Barrons]

Dell (DELL) board continue talks with Icahn and Blackstone [Dealbook]

Google (GOOG): How YouTube is casually beating other social networks [PandoDaily]

Don't blame Barnes & Noble (BKS) [Digital Book World]

10 influential blogs financial advisors should be following [Financial-Planning]

What We're Reading ~ Hedge Fund Links 3/22/13

An earnings report every hedge fund manager should review [All About Alpha]

Nelson Peltz reportedly plotting Mondelez/Pepsi merger [Telegraph]

Hedge funds continue with their dollar love affair [ValueWalk]

Hedge funds dividing into haves and have-nots [II Alpha]

When David Einhorn talks, markets listen, usually [BusinessWeek]

SAC Capital's CR Intrinsic unit agrees to insider trading settlement [SEC]

After disappointing start to 2013, how will hedge funds catch up? [Reuters]

SEC digging into fund fees [WSJ]

Hedge funds are fueling foreclosure inflation [UPI]

Farallon Capital launches real estate vehicle [Reuters]

Behavioral finance helps fund managers spot losers [Wall Street and Tech]

Hedge funds build treasury bets to '07 high [Bloomberg]

Can investors win by following Carl Icahn into battle? [Yahoo Finance]

Hedge fund fees under pressure [Financial Standard]

Eric Sprott: Sell-off In Gold Is Opportunity To Buy "At An Artificially Low Value"

Eric Sprott of Sprott Asset Management has penned his latest commentary entitled "Do Western Central Banks Have Any Gold Left???"  In it, he examines the selling pressure in gold recently, arguing that it's a great time to buy the precious metal.

Sprott notes that the supply of gold has pretty much remained the same, and that demand has steadily increased (thanks to India and China).  He also points out how central banks have been net buyers (instead of net sellers) of the precious metal.

He writes,

"Much ado has been made about the recent sell-off in the yellow metal forcing certain  ETPs to liquidate, adding a supply of gold into the market in the process. Our work  reveals that the previous ETP sell-offs, (which occurred in January 2011, December 2011,  May 2012 and July 2012) have all coincided with gold finding strong price support and  rallying higher."

Sprott concludes that this sell-off in gold is an opportunity to buy it "at an artificially low value."  While he does make some prudent points, it is worth highlighting, however, that Sprott has been a gold bull for quite some time.

Embedded below is the latest commentary from Sprott Asset Management: Do Western Central Banks Have Any Gold Left?





For more from this manager, be sure to check out Sprott's previous commentary: ignoring the obvious.

Bill Ackman's Latest Herbalife Presentation: Comparing HLF to Fortune Hi-Tech Marketing

If you haven't seen it yet, Bill Ackman of hedge fund Pershing Square Capital has released a new slideshow on his short position in Herbalife (HLF).  In it, he further elaborates on his claim that HLF is a pyramid scheme and compares it to Fortune Hi-Tech Marketing.

Ackman made this comparison due to the FTC's recent legal action against Fortune Hi-Tech Marketing.  Obviously, he feels there are numerous similarities and he points them out in the slideshow.

Embedded below is Ackman's latest Herbalife slideshow presentation:




For more analysis on this name, head to Ackman's original short thesis on Herbalife (HLF).  He also followed up with questions for Herbalife.

What We're Reading ~ Analytical Links 3/20/13

What matters more in decisions: analysis or process? [Farnam Street]

The stock market and the economy are two very different animals [Abnormal Returns]

One of the most sentiment-driven rallies ever [Reformed Broker]

A pitch on retailer Coach (COH) [Old School Value]

Walt Disney (DIS): Can ESPN sustain its fee subscriber growth? [Trefis]

A small investors' guide to activist investing [Fool]

When will interest rates rise? [LearnBonds]

Technical tools for helping to identify possible market tops and bottoms [Chris Perruna]

Confirmation bias and the importance of asking "why might I be wrong?" [Incblot]

Why Redfin, Zillow (Z) and Trulia (TRLA) haven't killed off real estate brokers [BW]

This is the future of TV [Quartz]

Is it time to short Canada? [Bonddad]

How to beat Amazon (AMZN), Best Buy (BBY) edition [WSJ]

The scariest statistic about the newspaper business today [The Atlantic]

Short sellers flee the scene [WSJ]

10 signs stocks are about to tumble [Marketwatch]

Should investors be on Twitter? [Felix Salmon]

March madness analytics: blind bracket tool [WSJ]

Discount to the London Value Investor Conference 2013

We're excited to announce a special discount for Market Folly readers to the upcoming London Value Investor Conference 2013 that benefits children's charity Place2be.

London Value Investor Conference 2013

£100 Discount Code: MARKETFOLLY123 
Click here to register

Market Folly has managed to secure a very limited number of discounted tickets to the forthcoming London Value Investor Conference 2013.  This year's conference takes place on the 9th of May 2013 at Central Hall Westminster with the following excellent speaker line-up:

- Howard Marks, Oaktree Capital - The Most Important Thing
- Michael Price, MFP Investors - The Peter Cundill Foundation Address
- David Harding, Winton Capital - Searching for Value in Data
- Anthony Bolton, FIdelity China Special Situations Fund - Q&A Session
- Nick Purves and Ian Lance, RWC - New Challenges for Value Investors
- Richard Oldfield, Oldfield Partners - Still Simple, Still not Easy
- Plus speakers from smaller, less well known funds (see the full list of speakers here)

As part of their presentation, each of the speakers will give at least one current investment idea.  Winton Capital has also kindly agreed to sponsor a drinks reception after the event, which will be a great opportunity for networking amongst the value investing community.

With 8 weeks to go, the number of delegates attending is already well ahead of the total who came last year.  It is expected that the 2013 conference will be the largest gathering of value investors ever outside of the USA.

---

In order to claim your special £100 discount to this conference,
please use the code MARKETFOLLY123 when signing up here.

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The last London Value Investor Conference donated its profits to the children's charity, the SMA Trust.  This year's conference will be supporting the children's charity Place2be.

Ruane Cunniff Goldfarb: Sequoia Fund Annual Letter 2012

Catching up on a few more notable 2012 annual letters, we turn next to the Sequoia Fund run by Ruane Cunniff & Goldfarb.  An investment of $10,000 at inception in 1970 has grown to over $2.89 million as of the end of 2012.  They returned 15.68% in 2012.


Key Takeaways

- They currently don't see many compelling investment opportunities.  Began 2012 with 21% cash position, ended the year with 16%

- "In the fourth quarter of 2012, we were modest net sellers of equities for the first time since 2008, in response to specific situations at several of our portfolio holdings."  They exited Target (TGT) and Becton Dickinson (BDX).

- "Valuations for stocks are heavily influenced by interest rates, and particularly by the risk-free rate of return on 10-year and 30-year United States Treasury bonds. Relative to the current return on Treasury Bonds, stocks continue to be quite attractive.However, the current risk-free rate of return is not a product of market forces.  Rather, it is an instrument of Federal Reserve policy."


Top Holdings At 2012 Year-End

1. Valeant Pharmaceuticals (VRX): 11.6% of assets
2. Berkshire Hathaway (BRK.A): 10.9%
3. TJX (TJX): 7.5%
4. Fastenal (FAST): 5.6%
5. Mohawk Industries (MHK): 4.0%
6. Idexx Laboratories (IDXX): 3.2%
7. Advance Auto Parts (AAP): 3.1%
8. Precision Castparts (PCP): 3.1%
9. Rolls-Royce (LON:RR): 3.0%


Embedded below is Ruane Cunniff's annual letter from the Sequoia Fund where they go into detail about some of their positions and overall market views:




For more on this fund, late last year we posted up why Ruane Cunniff likes Valeant Pharmaceuticals.

PointState Capital Reveals Stake in iStar Financial (SFI)

On Friday, Zach Schreiber's hedge fund PointState Capital filed a 13G with the SEC regarding shares of iStar Financial (SFI).  Per the filing, PointState has revealed a brand new equity position in the company.

The hedge fund firm now owns a 6.5% stake in SFI with 5,492,500 shares and the filing was required due to portfolio activity on March 5th.

PointState was founded by former Duquesne Capital employees with seed capital from Stanley Druckenmiller after he wound down Duquesne as well as capital from other former investors in Duquesne.  We recently highlighted lessons from Druckenmiller, which has been a popular post.  Druckenmiller also gave a rare interview recently.

Per Google Finance, iStar Financial is "a fully integrated finance and investment company focused on the commercial real estate industry. The Company provides investment capital to high-end private and corporate owners of real estate and invests directly across a range of real estate sectors. The Company is a real estate investment trust (REIT). The Company operates in three segments: lending, net leasing and real estate investment."

A few months ago, we also highlighted other portfolio activity from PointState.

Market Folly's 4th Annual Free March Madness Bracket Contest

It's that time of year again: march madness.  This year marks Market Folly's 4th annual bracket contest for college basketball fans.

To join the free contest, please click this link:  http://marketfolly.mayhem.cbssports.com/e
The password to join is: mf


Prizes

1st place:  The winner of the contest will receive a free one year subscription to our Hedge Fund Wisdom premium newsletter (a $300 value).

2nd place:  A free copy of Bethany McLean and Joe Nocera's book: All the Devils Are Here: The Hidden Story of the Financial Crisis.


Only one entry per person.  You must fill out your bracket before games start this Thursday!  Good luck!