What We're Reading ~ Hedge Fund Links 4/26/13

David Tepper builds stake in Energy Holdings debt [ValueWalk]

Mark Anson's formula for choosing a good hedge fund for your portfolio [CFA]

How hedge funds need to adapt [All About Alpha]

The mind of DoubleLine's Jeffrey Gundlach [Crossing Wall Street]

George Soros' European solution to the Eurozone's problem [George Soros]

JANA Partners says Rockwood worth $80 in possible takeover [Bloomberg]

ValueAct takes $2 billion Microsoft (MSFT) stake [Yahoo News]

John Paulson says he's staying the course on gold [Hedgeworld]

Rob Arnott: most hedge funds disappoint [Term Sheet]

Hedge fund managers mixed on 2013 outlook [HedgeCo]

Billionaire Carl Icahn's tale of aggression [Forbes India]

Hedge fund gold wagers defy worst slump in 33 years [Bloomberg]

Hedge funds plowed into gold as market looked vulnerable [Hedgeworld]

Devitt sees consolidation in outlook for fund of funds [Investment Europe]

Hedge funds find new Swiss rules good for business [Reuters]

Singapore will replace Switzerland as wealth capital [CNBC]

Nelson Peltz's Trian Fund Decreases Family Dollar Stake

Nelson Peltz's investment firm Trian Fund Management today filed an amended 13D with the SEC regarding shares of Family Dollar (FDO).  Per the filing, Trian has disclosed a 7.35% ownership stake in FDO with 8,444,597 shares.

This means that Trian has reduced the number of FDO shares they own by around 6%.  In total, they sold 524,260 shares at a price of $63.5090.  The 13G filing was reported portfolio activity on April 25th.

Per Google Finance, Family Dollar "operates a chain of more than 7,000 general merchandise retail discount stores in 44 states, providing primarily consumers with a selection of merchandise in neighborhood stores. The Company merchandise assortment includes Consumables, Home Products, Apparel and Accessories, and Seasonal and Electronics. A Family Dollar store is between 7,500 and 9,500 square feet, with an average of approximately 7,100 square feet of selling space."

In other recent activity from this firm, we recently highlighted Trian's new stakes in Mondelez and PepsiCo.

Senator Investment Group Discloses Taminco Position

Alexander Klabin and Doug Silverman's hedge fund Senator Investment Group filed a 13G with the SEC regarding shares of Taminco (TAM).  Per the filing, Senator has revealed an 8.82% ownership stake in Taminco with 5,750,000 shares.

The filing was required due to portfolio activity on April 18th as the company went public.  According to IPO materials, Taminco is the "world’s largest pure play producer of alkylamines and alkylamine derivatives."

In other recent portfolio activity from the hedge fund, we posted about how Senator added to its International Paper stake.

Soros Fund Starts J.C. Penney Stake

George Soros' family office Soros Fund Management filed a 13G with the SEC late yesterday afternoon regarding shares of J.C. Penney (JCP).  Per the filing, Soros Fund has revealed a 7.9% stake in JCP with almost 17.4 million shares.

This is a brand new position for the family office as they did not disclose a stake at the end of 2012 in their most recent 13F filing.  The 13G just filed was required due to portfolio activity on April 15th.

CEO Ron Johnson was recently fired from JCP and shares have risen since then.  He was originally recommended by Pershing Square's Bill Ackman and the company will now turn to new management.

We've highlighted how Bill Ackman has a large stake in J.C. Penney and have posted up Ackman's presentation on JCP before.  There's also one coincidence here: both Pershing Square and Soros Fund share the same New York office building address.  Perhaps Ackman recently gave an elevator pitch?

Shares of JCP have fallen from $35 down to around $16 over the past year as they have struggled amidst a turnaround plan involving the company's stores.

Per Google Finance, J.C. Penney is "a retailer, operating 1,102 department stores in 49 states and Puerto Rico as of January 28, 2012. Its business consists of selling merchandise and services to consumers through its department stores and through its Internet Website at jcp.com. It sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products through Sephora inside jcpenney and home furnishings."

Jim Chanos on His Tech Longs/Shorts, China & the Art of Short Selling: CNBC Interview

Kynikos Associates founder Jim Chanos was on CNBC today talking his short positions, China, and even some of his longs.  Here's the key takeaways from his talk:


Chanos' Technology Longs & Shorts

One of the main takeaways here is that he's long leading players in the mobile smartphone/tablet arena: Apple (AAPL) and Samsung (KRX:005930).  At the same time, he's short the slowly dying PC makers like Dell (DELL) and Hewlett Packard (HPQ).  While the trade hasn't been working well as of late, he still thinks the fundamentals will win out over time.  He thinks printers, ink and PCS all face secular declines.


On China

A few days ago, we posted up Jim Chanos' presentation on China from the Wine Country Conference.  On CNBC today, he talked about why he feels China's economic situation has actually gotten worse.  He points to the rapid credit expansion over there and sees a potential bubble. He likes to be short companies related to real estate and construction in China and also pointed out steelmakers and iron ore players.  Greenlight Capital's David Einhorn has also said to short iron ore.


On What He Looks For in Shorts

The Kynikos manager says that "timing is not my forte" and the ever-rising markets of today can be difficult for a short-seller.  He says, "It's problematic because it's more frustrating, but on the other hand you're given more opportunities."  He feels that ultimately, the fundamentals will win out because these rallies have also propped up the 'leaky boats'.  He also somewhat joked that they like to look at companies that put their names on sports team arenas.

Chanos looks for an edge in something that everyone's not focused on.  Two simple indicators he likes: wholesale executive departures and large amounts of insider selling from multiple individuals.  He says, "Those two indicators together are about as big of red flag as you can get."


Embedded below are the videos of Chanos' interview on CNBC:

Video 1 on China

Video 2 on tech stocks

Video 3 on natural gas and coal

Video 4 on what he looks for in short selling


For more from this hedge fund manager, head to Chanos' recent China presentation.

What We're Reading ~ Analytical Links 4/24/13

12 rules of goldbuggery [The Big Picture]

On Africa's economic prospects [The Economist]

Nate Silver: confidence kills predictions [IndexUniverse]

Leverage: financial versus operating [MicroFundy]

The endgame is forced liquidation [Hussman Funds]

P/C insurance industry overview and outlook [Insurance Information Institute]

Twitter is becoming the first and quickest source of investment news [Guardian]

Shameless plug: if you don't already, follow @MarketFolly on Twitter

An economic analysis of cable TV pricing [Colorado.edu]

Paying for sports programming [The Sports Economist]

Here comes Amazon's (AMZN) Kindle TV set-top box [BusinessWeek]

eBay (EBAY) fighting online sales tax [Dealbook]

Public speaking: how to shine on the soapbox [Anthony Scaramucci]

A quant finance reading list [Quantstart]

For aspiring investment managers: Kaplan's Series65 exam prep .pdf [Kaplan]

Bitcoin investors hang on for the ride [WSJ]

Lone Pine Capital Ramps Up Workday Stake

Steve Mandel's hedge fund firm Lone Pine Capital on Monday filed a 13G with the SEC regarding shares of Workday (WDAY).  Per the filing, Lone Pine has disclosed a 9.35% ownership stake in WDAY with 3,522,285 shares.

This marks a 259% increase in the hedge fund's position size since the end of the fourth quarter when they owned just over 980,000 shares.  The 13G was required due to portfolio activity on April 10th.

In other activity from the hedge fund, last week we pointed out that Lone Pine boosted its Lululemon stake.

About Workday

Per Google Finance, Workday is "a provider of enterprise cloud-based applications for human capital management (HCM), payroll, financial management, time tracking, procurement and employee expense management. It is focused on the consumer Internet experience and cloud delivery model. Its applications are designed for global enterprises to manage complex and dynamic operating environments. The Company provides its customers the applications to manage critical business functions for their financial and human capital resources."

Other Hedge Funds Involved

Workday went public in October of 2012 and numerous hedge funds participated in its initial public offering.  At the end of 2012, some of the largest holders of WDAY shares included the likes of Blue Ridge Capital, Lone Pine Capital, Tiger Global, and Dorsal Capital.  The largest disclosed owner seems to be venture capital firm Greylock Partners.


Steve Mandel was recently named one of the top 10 highest paid hedge fund managers of 2012.  You can see additional portfolio activity from Lone Pine here.

Scout Capital Discloses New Position in Post Holdings

Adam Weiss and James Crichton's hedge fund firm Scout Capital this week filed a 13G with the SEC regarding shares of Post Holdings (POST).  Per the filing, Scout has revealed a 6.94% ownership stake in the company with 2,266,972 shares.

This is a brand new position for the fund as they did not disclose owning any shares in their last 13F filed with the SEC which detailed positions at the end of the fourth quarter.   Their new disclosure was required due to portfolio activity on April 11th.

Post Holdings was created as a result of a spin-off from Ralcorp Holdings (RAH), which took place at the beginning of 2012 and shares have rallied furiously since then, almost doubling from $24 to current prices just shy of $44.


Other Funds Involved in POST

Parsing through 13F filings from Q4, we see that while a large portion of POST's top holders are 'vanilla' institutional plays, a few hedge funds held Post Holdings at the end of 2012: Paulson & Co and Highfields Capital.  New 13F filings are due out in the middle of May and we'll be able to see who else might have scooped up shares of POST in Q1. 


About Scout Capital

Scout was founded and is co-managed by James Crichton and Adam Weiss. Before founding Scout, Crichton worked at Zweig-DiMenna and received his MBA from Harvard. Weiss, on the other hand, worked at Dan Loeb's Third Point and received his MBA from Columbia. 


About Post Holdings

Per Google Finance, Post Holdings is "a manufacturer, marketer and distributor of branded ready-to-eat cereals in the United States and Canada. The Company’s portfolio of brands includes Honey Bunches of Oats, Pebbles, Great Grains, Grape-Nuts, Shredded Wheat, Raisin Bran, Golden Crisp, Alpha-Bits and Honeycomb. It markets and sells ready-to-eat cereal products in three different categories: sweetened, balanced and unsweetened. Its sweetened products include Pebbles, Honeycomb, Golden Crisp, Alpha-Bits and Waffle Crisp. Its balanced products include Honey Bunches of Oats, Post Selects, Great Grains and Shreddies. The Company’s unsweetened products include Post Shredded Wheat, Post Raisin Bran and Grape-Nuts."

For more on this hedge fund, we've highlighted some of their thoughts on their other positions.

Connect with Family Offices at Events in New York & Los Angeles

The Family Offices Group would like to invite you to attend one of their two family office workshops in Los Angeles (Friday May 10th) and New York at the Harvard Club (Friday June 7th).  These events allow you to meet face-to-face with a few dozen single and multi-family offices while also being trained by multiple single family office executives and some of the top multi-family offices in the world: http://FamilyOfficesGroup.com/Workshops






Here is the speaker line up for the Family Office Workshop Series:

- John Johnson, Capricorn Investment Group, LLC ($5B Multi-Family Office) [LA Workshop]
- Paul Tramontano, Constelaltion Wealth Advisors (Top 30 Multi-Family Office) [NYC Workshop]
- Jonathan Bergman, TAG Associates, LLC (Top 30 Multi-Family Office) [NYC Workshop]
- Richard C. Wilson, Family Offices Group (#1 Family Office Association) [LA&NYC Workshops]
- George Isaac, GAI Capital LTD (Single Family Office) [LA Workshop]
- Michael Connor, Consolidated Investment Group ($1B+ Single Family Office) [NYC Workshop]
- John Bishop, Bishop Office, LLC (Single Family Office) [LA & NYC Workshops]
- Lee Hauser, PhD., First Foundation (Multi-Family Office) [LA Workshop]
- Todd Ganos, Integrated Wealth Counsel, LLC (Multi-Family OFfice) [LA Workshop]
- Bill Malloy, Malloy & Company (3rd Generation Single Family Office) [LA & NYC Workshops]


Benefits of Attending One or Both of These Family Office Training Workshops:

1) Get trained directly from $1B+ single family offices and top 50 multi-family office executives on how to operate, grow, and invest capital as a family office.  Learn about and take advantage of the rapidly growing family office industry.

2) Connect face-to-face with peers, ultra-wealthy families, and family offices that you can share resources or partner with in the future. (From our last family office workshop, negotiations are under way for three joint venture deals worth 7 and 8 figure potential.)

3) Come away with the top 20 fund management selection criteria that most family offices apply to their fund manager research process.  Plus, listen to a presentation on quick character analysis tools you can use to evaluate potential business partners, investors, or fund manager executives.

Reserve your seat today: http://FamilyOfficesGroup.com/Workshops

If you have any questions please call them at (212) 729-5067 or email them at Events@FamilyOffices.com

P.S. If you missed their invite to download their free family office report last week, you may still do so here today: http://familyofficesgroup.com/family-office-book

Jim Chanos' Presentation on China From The Wine Country Conference

Jim Chanos' of hedge fund Kynikos Associates recently gave a presentation entitled "China: The Edifice Complex" at the Wine Country Conference which benefits the Les Turner ALS Foundation.

Chanos has held a negative view on China for a while now, largely focused on the property market.  His presentation this time of course focuses on that as well but also highlights rising wages and a wealth gap.

Embedded below is Jim Chanos' China presentation from the Wine Country Conference:




We've previously summarized the hedge fund bear thesis on China as well.  And for more from the well-known short-seller, check out Jim Chanos' recent interview.

Mark Yusko's Presentation on Japan From The Grant's Conference

Today we wanted to highlight a presentation that Mark Yusko of Morgan Creek Capital Management gave at the Spring 2013 Grant's Interest Rate Observer Conference.  Entitled "This Time For the Money", his presentation focused on Japan.

In it, he argued that the current rally in Japanese equities is just getting started and that there's a lot of room to run.  This, he points out, is largely affected by "Abenomics" where the government has unveiled a massive attempt to combat Japanese deflation via aggressive monetary easing.

Yusko points out that there will be winners and losers in Japan and offers some ideas.  As potential winners, he listed Toyota, Marubeni, Mitsui, Mitsubishi UFJ, Sumitomo Mitsui Financial, Mizuho, and Japan Securities Finance.

As far as potential losers go, he questioned whether or not the short squeeze is over in names such as Sharp, Panasonic, Sony, and Fujitsu.  Yusko also singled out airlines and food companies as they struggled during the last reflation.  Will it be different this time around?

Embedded below is Mark Yusko's presentation from the Grant's Conference:


 

For other investor thoughts on the country, head to Kyle Bass' thoughts on Japan.

Baupost Group Reduces Vivendi Stake

Seth Klarman’s Baupost Group has reduced its holding in Paris listed media conglomerate, Vivendi  (PAR: VIV). According to Vivendi’s 2012 Annual Report, Baupost trimmed their position from a year  earlier from 2.04% to 1.38% of voting rights or from 25.5 million shares down to 18.22 million shares. 

Per Google Finance – “Vivendi SA is a France-based company engaged in telecommunications  services and media entertainment. The Company operates six core subsidiaries: Activision Blizzard,  a publisher of online and console games; Universal Music Group, a recorded music company;  SFR, a French telecommunications operator; Maroc Telecom Group, a mobile and fixed-line and  Internet operator in Morocco, active also in Burkina Faso, Gabon, Mauritania and Mali; GVT, a  telecommunications operator in Brazil; and Groupe Canal+, a subsidiary which offers premium  and theme channel distribution and programming in France. In addition, it holds stakes in See  Tickets (the United Kingdom), Vivendi Mobile Entertainment (France), Wengo (France) and  Elektrim Telekomunikacja (Poland). In February 7, 2013, it announced a definitive agreement to sell  Parlophone Label Group, a unit of EMI Recorded Music, to Warner Music Group.”

For more on this hedge fund, we've detailed some of Baupost Group's recent portfolio activity here.

Nelson Peltz's Trian Fund Management Discloses Mondelez & PepsiCo Stakes

Nelson Peltz's investment firm Trian Fund Management today filed an amended 13F filing with the SEC for the fourth quarter of 2012.  This filing, detailing positions as of December 31st, 2012 now shows that Trian had positions in Mondelez International (MDLZ) and PepsiCo (PEP) at the end of the year.

According to the filing, Trian's position in MDLZ totaled 19,415,193 shares at the time.  Their stake in PEP consisted of 3,932,663 shares.


Mondelez (MDLZ) Stake

It is extremely likely that this is not a new position for Trian and here's why:  Mondelez is a product of the Kraft split up into Kraft Foods (KRFT) and MDLZ in Q4.  Peltz's firm had been an owner of the old Kraft entity (old ticker KFT) back in the third quarter of 2012 per their 13F from that quarter.  KFT split up into KRFT and MDLZ on October 1st, 2012.

Trian's original 13F filing from the end of December did not show a stake in either entity, so many assumed that Trian had sold completely out of anything Kraft related in the fourth quarter.  However, their 13F also indicated that "confidential information has been omitted" from the filing and was filed separately with the SEC.

Fast forward to today when they file an amended 13F and all of a sudden a stake in Mondelez shows up again.  It then becomes clear that MDLZ (as well as PEP) were the confidential positions.  

As such, Trian most likely never sold MDLZ after they received shares from the Kraft spin-off and we assume they just didn't disclose the stake in their public 13F, but filed the position separately with the SEC.  While there's a chance they could have just bought shares in the open market post-spin, that seems less likely given their past ownership of the old Kraft entity pre-spin.

This week, we also highlighted that Bill Ackman's Pershing Square also filed an amended 13F from Q4 and also revealed a Mondelez position.  Also, hedge fund Scout Capital reported a large MDLZ stake at that time as well.


New PepsiCo (PEP) Stake: Seeking to Merge Companies?

Trian's position in Pepsi, on the other hand, is a brand new stake as they previously did not own any shares.  The Daily Telegraph has speculated that Peltz might potentially have plans to attempt to merge the two companies together.

At the same time, the piece mentions that Peltz could pursue activism with PepsiCo alone, potentially pushing them to split-up just like the old Kraft entity did. 

At the time the Telegraph piece was originally published, it was rumored that Trian had taken stakes in the companies.  And today, we get confirmation of those rumors via SEC filing.  We'll have to wait and see if Peltz has any activist tricks up his sleeve.

Kyle Bass on MBS, Housing & Gold: Bloomberg Interview

We wanted to quickly highlight Kyle Bass' appearance on Bloomberg TV from last week for some of his comments on housing, the mortgage-backed securities market, gold and other topics.  The Hayman Capital founder also talked about Japan, his longstanding topic of interest.


On residential mortgage-backed securities: “That investment is working…The various concentric circles surrounding housing not getting worse, which is how we think about it. We are not expecting it to get materially better, just not to get worse. The services sectors, the new mortgage insurance companies, the things that are actually asymmetric investments you can make around the housing market not worsening are where the majority of our long side of our portfolio is.”

Just yesterday, we highlighted a piece from hedge fund Prologue Capital on MBS and the housing market which featured bullish comments on the industry as they see a recovery happening.

Bass mentioned playing mortgage servicers and these related bets have been popular amongst hedgies.  Our Hedge Fund Wisdom newsletter in the past has flagged that many funds have been active in shares of Ocwen Financial (OCN) and the like.

Turning to other positions Bass might potentially be involved with, Hayman disclosed an ownership stake in Realogy (RLGY) at the end of the fourth quarter.  The residential brokerage house completed its IPO during Q4.


On the future of Fannie and Freddie: “I have no clue…We decided to just exit, thinking about them when you meet with both sides of the aisle, they both want a bullet in their head. Typically when that happens you get a bullet in your head. The second thing we were thinking about, if you remember there was a proposal to start raising the g-fees. There is a way for the U.S. Treasury to get paid back all of the money they've pumped into Fannie and Freddie if they start raising g-fees."


On gold: “We have always had a position in gold. When you think about the largest central banks in the world, they have all moved to unlimited printing ideology. Monetary policy happens to be the only game in town. I am perplexed as to why gold is as low as it is. I don't have a great answer for you other then you should maintain a position.”


Embedded below is Bass' latest Bloomberg TV interview where he talks about many other topics:



For more on this hedge fund manager, we've also posted up Bass' short of Japanese Government Bonds.

What We're Reading ~ Hedge Fund Links 4/19/13

Summary of Viking Global's Q1 letter [Institutional Investor's Alpha]

Breaking into the hedge fund world is harder than before [The Economist]

SEC hedge fund ad rule no closer to finalization [Marketwatch]

Japan as hedge fund opportunity [AllAboutAlpha]

Dan Loeb simultaneously solicits, betrays pension funds [Rolling Stone]

Paulson's Advantage fund stung by plunge in gold [Reuters]

Scalable strategies should follow long only equities example and cut fees [COO Connect]

Global hedge fund assets top $2.2 trillion as big firms dominate [BCA Research]

Ranking the best sell-side stockpickers [WSJ]

Och-Ziff nets $2 billion trade [WSJ]

JANA Partners statement at Agrium annual meeting [Yahoo Finance]

Tiger Management partners with Delaware firm [Evestment]

Energy hedge funds caught out in the cold on natural gas bet [WSJ]

Onetime hedge fund giant Stark Investments winding down [JS Online]

Bloomberg integrates live Twitter feeds with its financial platform [Bloomberg]

Meet Britain's wealthiest hedge fund chiefs [The Guardian]

Global private equity report 2013 [Bain & Company]

Prologue Capital on the US Housing & MBS Markets

Today we present some interesting commentary on the mortgage backed security (MBS) and US housing markets from hedge fund Prologue Capital.  Prologue is a $2.1 billion global macro fixed income manager that focuses on inflation-linked investments. 

Their latest commentary features thoughts from portfolio manager Noah Estrin and Chief Economist Tomas Jelf and they believe that the housing market will shift from a headwind to a tailwind.


Prologue writes that,

"A modest increase in home prices from current levels will translate into a large swath of credit impaired borrowers being able to refinance, significantly increasing mortgage supply. However, the doves at the Fed will be reluctant to step away from the assistance they are providing the economy until they are 100% certain that the recovery can stand on its own."

Prologue sees housing starts "increasing by around 60% to 1.5 million in the next 2-3 years, which brings it in line with natural rate of household formation."  They also highlight a shift in housing-related employment which is growing at an accelerated pace.

You can read the entirety of their thoughts below, but suffice it to say that they feel the "positives outweigh the negatives" in the US housing market and that Spring has sprung.

Embedded below is Prologue Capital's commentary on the MBS market and US housing market:

East Coast's Q1 Letter: How an Idea Goes Through Their Investment Process

Christopher Begg's East Coast Asset Management is out with their first quarter letter for 2012.  Entitled "The Art of Fugue," the letter details how an opportunity goes through their investment process and they also provide an update on their portfolio.

Investment process is always a work in progress, so it's interesting to hear how other investors refine this and what they incorporate into their approach.  On East Coast's process, Begg writes,

"Once an investment idea is sourced, the idea is put through an initial checklist and if it has merit it will ultimately be categorized as a compounder, a transformation, or a workout. Next, the investment idea will go through two stages of due diligence – two individual fugues, both in six parts. In each six-part stage we always begin and resolve with our subject, or royal theme, which is a perspective on compounding."

We've highlighted East Coast's investment process before, but their latest letter breaks down the six things they look at (in search of quality of the business):

- Competitive advantage
- Pricing power
- Market opportunity
- Capital itensity
- Economics
- Management

Then eventually they look to answer 4 questions:

1. Does the investment have an attractive expected rate of return? (IRR)
2. Does the investment have a sufficient margin of safety?
3. Do we understand the critical data points that will drive the success and intrinsic value of the business?
4. Do we understand first cause, or why the investment may be mispriced?

Begg then applies the above to a new holding they initiated in the quarter so you can follow along with their investment process to see how they think about everything.  It's certainly a useful exercise and some of you may be able to guess the position.  Embedded below is East Coast's Q1 letter:




For more on investment process, be sure to head to East Coast's letter on transformation investments.

Blum Capital Partners Reduce Position in Career Education

Richard Blum's hedge fund firm Blum Capital Partners has filed an amended 13D and various Form 4's with the SEC over the past few days regarding their stake in Career Education Corp (CECO).  According to the filings, Blum has disclosed a 16.1% ownership stake in CECO with 10,803,834 shares.

This marks a decrease of around 19% in their position size since the end of 2012 when they owned over 13.3 million shares.  The latest 13D amendment was made due to portfolio activity on April 12th.

Looking at Blum's Form 4's, we see that they've been selling from April 4th through the 13th at prices ranging from $2.1 to $2.18.

It's also worth mentioning that Blum owns another large stake in the for-profit education space: ITT Educational (ESI).  As of the end of 2012, this was an even larger position for them, though they were out selling some shares in the fourth quarter according to their last 13F filed with the SEC.

The for-profit education sector has been under scrutiny from some time by regulators and has been shorted by numerous hedge funds as student loan debt has grown rapidly over the past few years.  Back in 2010, Steve Eisman laid out a bearish view on the sector in his presentation: subprime goes to college.

Per Google Finance, "Career Education Corporation ((CEC) through colleges, schools and universities that are part of the CEC family, offers education to a diverse student population of approximately 100,000 students in a variety of career-oriented disciplines through online, on-ground and hybrid learning program offerings. The Company has approximately 90 campuses that serve these students are located throughout the United States and in France, the United Kingdom and Monaco. It offers doctoral, master’s, bachelor’s and associate degrees, diploma and certificate programs. It institutions include, among others, American InterContinental University (AIU); Brooks Institute; Colorado Technical University (CTU); Harrington College of Design; INSEEC Group (INSEEC) Schools; International University of Monaco (IUM); International Academy of Design & Technology (IADT); Le Cordon Bleu North America (LCB), and Sanford-Brown Institutes and Colleges."

What We're Reading ~ Analytical Links 4/17/13

A new site aggregating conference call transcripts [ConferenceCallTranscripts.org]

Intel (INTC): Anatomy of a tech value trap [Reformed Broker]

Why equity long/short investing is not dead [HFIntelligence]

Sticking to a plan in the face of emotional volatility [Abnormal Returns]

Rare interview with Liberty Media's (LMCA) John Malone [CNBC]

Jeremy Grantham on how to play resource scarcity [Advisor.ca]

Aereo has TV networks circling the wagons [NYTimes]

The death of value investing [Business Insider]

Thermo Fisher (TMO) nears deal for Life Technologies (LIFE) [Reuters]

On Dish Network's (DISH) bid for Sprint Nextel (S) [Bloomberg]

Interview with Markel's (MKL) Tom Gayner [GuruFocus]

Diabetes in Mexico: eating themselves to death [The Economist]

Top 5 websites capturing larger share of real estate traffic [Inman]

As big investors emerge, Bitcoin gets ready for close-up [Dealbook]

Ken Heebner's Interview on Consuelo Mack's WealthTrack

Ken Heebner is the founder of Capital Growth Management and he manages the CGM Focus Fund, among other actively managed mutual funds.  He has put up big numbers some years, but he also was hit big during the financial crisis.  However, his long-term numbers beat the market (10 year and 15 year performance) and put him in the top 1% of his peers.

He sat down with Consuelo Mack on WealthTrack and talked about the themes he's seeing these days and how he's playing them:


Resurgence In Housing = Big Theme

Heebner's big theme in the US is housing.  He says, "I think it's the single most important factor causing economic activity and the stock market to surprise on the upside."

He notes that after a large drawdown in prices during the financial crisis, housing starts declined as homebuilders cut back.  As such, demand has grown while supply was largely stagnant.  As such, supply needs to catch up with demand and home prices can head higher until supply catches up.

As a result of this, Heebner also sees consumer confidence rising due to improved personal balance sheets which can obviously translate into increased consumer spending.

However, he doesn't necessarily think homebuilder stocks offer the best value as they're well off their lows and the general perception is more favorable for the industry nowadays.  The time to really load up on shares was when the majority of people were pessimistic.


His Outlook For Banks

Other themes he's tracking include industry consolidation and corporate profit margins.

He points out that 5 major banks have almost 50% of deposits and this consolidation hasn't been seen in quite some time.  Additionally, Heebner highlights the low P/E ratios many banks trade it.  He also feels that business opportunities for banks are presenting themselves and they should have some solid pricing power.

In particular, he highlights Morgan Stanley (MS) and Goldman Sachs (GS), noting that they can see P/E multiple expansion and that half of the earnings from MS come from wealth management.  He also points out the negative sentiment surrounding MS in particular.  We've highlighted Dan Loeb and Third Point's pitch on Morgan Stanley as well.

Of the industry, Heebner says, ""I look for situations where I think the fundamentals are a lot better than everyone else thinks they are.  I wish there were more of them.  I'd say the big investment banks are in that category today."


On Running a Concentrated Portfolio & Cutting Losses Quickly

Heebner likes to focus on companies where the risk/reward is very skewed in his favor.  While there's a lot of companies he looks at possibly owning, he says he wants to place the most capital on the companies he feels best about.  He asks, "Why hold the ones that aren't as good?  The side effect is volatility that exceeds everyone else's portfolio."

A lot has been made of Heebner's high turnover.  This, he says, is partly due to the fact that he likes to cut losses quickly.  Many great investors over time have highlighted the importance of managing losses.


Embedded below is the video of Ken Heebner's interview with Consuelo Mack on WealthTrack: