What We're Reading ~ Hedge Fund Links 7/26/13

The big hedge fund backlash [Reformed Broker]

David Einhorn covers JC Penney short, excerpts from Q2 letter [ValueWalk]

SAC Capital is indicted [NYTimes]

White Elm Capital's white hot streak [Institutional Investor]

Microsoft in talks with ValueAct over board seat [Reuters]

How to get a job at a hedge fund [Forbes]

Why John Paulson is talking [Felix Salmon]

A gripping account of the scandal that ruined hedge fund Galleon [LA Times]

Investors sow seeds for hedge funds [WSJ]

Hedge fund advertising is a problem waiting to happen [Boston Globe]

Falsifying Bill Ackman's Herbalife thesis [Bronte Capital]

Dan Loeb's Herbalife message [BusinessInsider]

Viking Global's Thesis on Valero (VLO): Q2 Letter

Andreas Halvorsen's hedge fund firm Viking Global is out with their Q2 letter and in it they talk about their thesis on refiner Valero (VLO):


Viking's Thesis on Valero

"Valero is the largest independent oil refiner in the U.S. with over 50% of its capacity located around the Gulf of Mexico.  Over the past several years, Gulf-based refiners have been at a cost disadvantage because they had to buy expensive crude imports while their mid-continent competitors could source cheaper inputs domestically from shale oil developments.  We believe this cost advantage is shifting towards the Gulf as new pipelines carrying cheap domestic crude are completed, giving Valero the greatest benefit due to its strong presence there.  In a further boost to the company over the next couple of years, we think its access to discounted Canadian heavy crude also will improve.  These positive developments have been amplified by sound capital allocation by the management team, such as investing in crude transport logistics to gain access to cheaper inputs, acquiring two new hydrocrackers to improve production yields, spinning off a non-core retail operation, and allocating available cash to stock buybacks.  We find the current valuation attractive given the significant earnings potential once these factors start contributing to the bottom line."


Other Notable Q2 Moves

Viking also added or re-entered positions in Capital One (COF), Valeant Pharmaceuticals (VRX), and Thermo Fisher (TMO) during Q2.  All are were sizable top-10 positions at the end of the quarter, with COF being the largest as their #2 holding.

Lastly, it's worth highlighting that Viking is exploring the impacts of a potential slowdown in the Chinese economy.  While such effects have led to lower metals prices, a weak Australian dollar and luxury goods companies weakening, Viking is looking for consequences beyond those listed above.  In particular, they're focused on exploring potential unwinding of the leverage in the banking system.

For more on this fund, we've detailed some of Viking Global's recent portfolio activity here.  Additionally, we posted up a rare interview with Andreas Halvorsen.

What We're Reading ~ Analytical Links 7/24/13

A dozen things I've learned about investing from Daniel Kahneman [25iq]

Sorry, commodities are a poor diversification tool [FT Alphaville]

Don't personalize the stock market [Abnormal Returns]

Keep investing as simple as possible [Motley Fool]

On Goldman's big shuffle of aluminum [NYTimes]

The greatest investment book ever written [Brooklyn Investor]

Looking at the shift in and future of the camera market [LensRentals]

Hitting China's wall [NYTimes]

7 secrets of investing the Warren Buffett way [NDTV]

How to make poison pills palatable [NYTimes]

China's great uprooting - moving 250 million into cities [NYTimes]

Channel retailers see trouble clearing PC inventories [Digitimes]

What George Costanza can teach us about investing [CBS]

Odey Starts Enterprise Inns Position

Crispin Odey’s hedge fund Odey Asset Management has disclosed a new position in London listed Enterprise Inns (LON: ETI).  Due to trading on July 22nd, Odey hold the equivalent of 5.1% of Enterprise Inns' voting rights, all via contracts for difference (CFDs).  We say ‘equivalent’ because CFDs do not confer voting rights.     

In the past, at least one of Odey’s funds has held a short position in Enterprise Inns.  Back in 2009 the Odey UK Absolute Return Fund, managed by James Hanbury, was short ETI as part of a bet that the UK consumer would suffer from a lack of spending power.   

Larry Robbins’ Glenview Capital had also held a large position in Enterprise Inns held via total return swaps.  The last filing by Glenview on Enterprise Inns that we have seen was made in March 2010 when they held the equivalent of 12.27% voting rights.   

Per Google Finance – “Enterprise Inns plc is engaged in the operation of public houses under the leased and tenanted pub model. This involves the granting of leases to Publicans who operate the pubs as their own businesses and who must pay rent to the Company, purchase beer and other drinks from the Company and enter into income sharing arrangements with the Company in relation to income generated from leisure machines. All of the Company’s public houses are situated in England and Wales. The Company’s subsidiaries include Unique Pub Properties Limited, which is engaged in the ownership of licensed properties, and The Unique Pub Finance Company plc, which include financing acquisitions of licensed property. On December 23, 2011, it completed the sale and leaseback of a portfolio of 17 pubs. In March 2012, Fuller, Smith & Turner P.L.C. completed the purchase of 15 freeholds, tied and tenanted pubs from the Company.”

For more on this fund, head to some of Odey's other recent portfolio activity.

Third Point Sells YHOO Shares to Yahoo

Dan Loeb's hedge fund firm Third Point filed a Form 4 with the SEC regarding trading activity in shares of Yahoo (YHOO). 

Per the filing, Third Point sold 1.4 million shares on July 19th at a weighted average price of $29.30.  Additionally, they entered into an agreement with Yahoo where the company would buy 40 million shares from Third Point at $29.11.  Additionally, Loeb would step down from the board.

After all is said and done, Third Point is left with a 20.6 million share position in Yahoo.  YHOO had previously been Third Point's top holding, but obviously it has now slid down their position sheet and they now have some new cash to put to work.

For more on this hedge fund, head to Third Point's June exposure report.

Hedge Fund Slogans & Ad Ideas: A Parody

With news that the SEC will lift the advertising ban on hedge funds in the near future, we thought it'd be fun to explore some mock slogans and ads.   Note: This is a parody.  If it isn't obvious below, this post is all in good fun.  


Hedge Fund Slogans & Ad Parodies For Major Firms


Viking Global:  TV Ad: A viking horn plays loudly as you see a viking ship sailing the ocean.  Slowly zooming in on the ship, it shows Andreas Halvorsen at the helm dressed in viking gear.  The camera pans to the other side of the ship revealing Johnny Drama from Entourage dressed as his Viking Quest character yelling "VICTORY!!!!"  Fade to black. "Viking Global"


Third Point:  TV Ad: A picture of a stoic Dan Loeb's face stares at you for 30 seconds straight. No text. No sound.  Fade to black.


Bridgewater Associates:  Video of Ray Dalio saying: "Give me your money or I will take it from you."  A black screen with the word: "Zen."  And then inspired by an old Dealbreaker post: The slogan "Be the hyena, attack the wildebeest" plays over audio repeatedly while a video of a hyena attack is played.


Appaloosa Management: Slogan: "We've got brass balls."  TV Ad: They hire Will Ferrell to play his Ricky Bobby NASCAR character from the movie Talladega Nights.  Ferrell appears on screen and says "Hi, I'm Ricky Bobby.  If you don't invest with Appaloosa, then f*ck you." 


Soros Fund: TV Ad: George Soros appears on screen and says "Why should you invest with Soros? Let me show you."  The audience then gets RickRoll'd as a music video from Rick Astley pops up out of nowhere.  The camera then pans back to Soros who is laughing like a maniac.  "Hahahah you can't even invest with us!!"


SAC Capital:  They anonymously buy ads that simply say: "Hey SEC: Suck it."


Oaktree Capital:  Howard Marks buys out all the ad inventory of a primetime broadcast to display a spot "Mr. Marks' Neighborhood" mirrored after the old children's show "Mr. Rogers Neighborhood."  Marks takes off his cardigan and shoes then proceeds to read his latest memo in its entirety, split up into 41 different 30-second spots.  


Pershing Square:  TV Ad: The words: "1 Fund. 1 Stock. Ride or Die" appear on screen.  Rapper DMX comes out of nowhere and starts yelling "RIDE. OR. DIE!  WHAT?!? C'MON!!!" repeatedly.  

2nd TV Ad: Bill Ackman grows a beard to look like the Dos Equis 'most interesting man in the world' and says, "I don't always invest in hedge funds, but when I do, I invest in Pershing Square." (via @largecaptrader1)


Icahn Partners: TV Ad: Carl Icahn appears and simply says, "I hate Bill Ackman." 


Tudor Investment Corp: Print Ad: The classic "losers average losers" PTJ picture from the 1980's with the caption, "Winners invest with Tudor.  Don't be a loser, chump."


Elliott Management:  Print Ad: A picture of the Argentinian ship they took over with the caption, "Somali pirates ain't got sh*t on us."


Maverick Capital:  TV Ad: They hire Tom Cruise to reprise his role of 'Maverick' and Val Kilmer to play 'Iceman' from the movie Top Gun.  Kilmer looks at the viewers and quotes his movie line, "You can be my wingman any time."  Cruise busts on screen and yells, "Bullsh*t!  You can be mine."  He then quotes another line, "This is what I call a target rich environment."  Iceman chomps his teeth while Cruise says, "Invest with Maverick."


Citadel: Print Ad: Picture of a big fort with the caption, "COME AT US, BRO!!!"


ESL Investments: *insert a Sears Ad*


Cerberus Capital: Image of a three-headed dog breathing fire with the caption, "Deal with it."  They sign licensing deals with Affliction and Ed Hardy for a new range of deep v-neck t-shirts with said logo.


Kase Capital: TV ad: Whitney Tilson buys an entire night's worth of infomercial slots and hires the ShamWow guy to enthusiastically promote his fund:  "Do YOU need a hedge fund?! Well do I have the fund for you. Wow!!!"   


Greenlight Capital:  Inspired by old Dealbreaker posts, Einhorn uses clips from the Green Lantern movie with his face superimposed over Ryan Reynolds' body.


Kynikos Associates: TV Ad: Jim Chanos runs a cryptic ad where the word "short seller" flashes on the screen.  Other phrases flash in and out rapidly like "Kynikos: greek for cynic" and "TRUST NO ONE."  Pictures of company logos like Enron appear and disappear like subliminal messages.


Hayman Capital: "Betting against adult diapers since 2010."


Baupost Group: "We don't even need your money."


Paulson & Co:  TV Ad for Paulson's gold fund: They hire Mike Myers to play his 'Goldmember' character from the Austin Powers movie.  He appears on the screen and just yells "I love goooooooold" nonstop.


Renaissance Technologies:  "You have no clue what we're doing."



Lastly, here's a slogan that's up for grabs.  All you gotta do is bring Jay-Z into the mix and you're set: "99 problems but beta ain't one."


Submit Your Hedge Fund Ad Slogans Below

Let us know your favorites and feel free to submit your hedge fund slogans in the comments below.  The cheesier and funnier, the better.  We'll post up the best submissions.

John Paulson Discloses New Stake in Green REIT

John Paulson’s hedge fund, Pauson & Co, has disclosed a new position in Green REIT (LON: GRN).  Green REIT recently raised 320m euros via a public offering in Dublin and London.  According to a disclosure made on July 22nd,  Paulson & Co hold 12.92% of the voting rights.    

The company’s name perhaps suggests that it is involved in environmentally friendly investing but in this case the “green”  refers to Ireland and Green REIT is Ireland’s first real estate investment trust.  Green REIT will focus on buying commercial property in the Dublin area.  

If you missed it, be sure to also check out John Paulson's rare recent interview.

Per Google Finance – “Green REIT plc is a property investment company. The principal activity of the Company will be to acquire and hold investments in Irish real estate (primarily commercial real estate) with a view to maximizing shareholder returns. The Company will focus on investing in commercial real estate, including office, industrial and retail assets. The Company will not invest     20% or more in a single underlying issuer or investment company. The Company will not invest 40% or more in another collective investment undertaking. Green Property REIT Ventures Limited is an investment Manager to the Company.”

Interview With Julian Robertson & Nehal Chopra of Tiger Ratan

Tiger Management founder Julian Robertson made his rare yearly media appearance today on Bloomberg Surveillance.  Here are the highlights of the interview with the hedge fund titan:


Julian Robertson's Interview

On the hedge fund industry's overall performance:   "Hedge funds do better than the markets in bad markets because they are hedge funds. And the, the ideal for hedge fund is a vigorous active market that doesn't move a whole lot. There they can make it in both the long and short basis….In '07, hedge funds, I know ours, just blew it out….It was just unbelievable. And then in '08, we lost, you know much of that."

This isn't the first time he's touched on this as we've highlighted Robertson's thoughts on why hedge funds were underperforming.


On whether he sees the hedge fund industry as a group of top performers and everyone else or whether he bundles performance together:   "I don't think you can bundle everyone together. But I do think one of the things that's affected hedge fund performance over the last, well, really since it started really getting big around the '80s, is the increase in size of hedge funds. It was so much easier to compete with Bank Trust departments, with individual investors, with mutual funds than it is with other hedge funds. And I think the success of hedge funds in general has probably hurt the performance of individual hedge funds…Because the competition is tougher."

Robertson also noted that he's not constructive on Apple (AAPL) anymore and he likes Google (GOOG) more.  For more from the Tiger man, we've posted up notes from Robertson's talk at the Virginia Investment Symposium.


Nehal Chopra of Tiger Ratan Capital

One of the managers Robertson has seeded also joined the interview, Nehal Chopra of Tiger Ratan Capital.  While everyone will be focused on Robertson's soundbites, Chopra actually offered more points on investment process.

She focuses on change-driven opportunities.  She looks at corporate change, CEO change, transformational measures, bankruptcy emergences, and spin-offs.

Chopra's 3 things she looks at when looking for investments: a great management team (really in-depth look at the person's ability to drive results), a good business that is very cheap, and all of it is focused on change.

She says "it's a very targeted process that's repeatable ... change creates confusion.  Confusion creates dislocation of value."

Robertson again touched on how he focuses on competitiveness when looking for new managers to seed and noted Chopra has that.


Embedded below is the video of Julian Robertson's interview with Bloomberg Surveillance:

David Winters' Wintegreen Fund Focused on the Emerging Market Consumer: Wealthtrack Interview

Consuelo Mack's show Wealthtrack had David Winters of the Wintergreen Fund on this past weekend.  Their interview touched on what stocks he's seeing value in these days.  Winters is a value-oriented investor and he runs a somewhat concentrated book with his top 5 holdings representing 30% of the portfolio.  


Winters' Focus on the Emerging Market Consumer  

One of the main themes in Winters' portfolio is the emerging market consumer.  This is by no means a new theme, but Winters argues you can buy stakes in some great companies with exposure to a rising consumer at good prices still.  

In particular, he's focused on luxury brands as he's seen these aspirational consumers crave these brands in his many trips to Asia (he's been 20 times).   Richemont (VTX:CFR) is the owner of Cartier and is one name he likes.  He says it's the most aspirational jewelry brand and he notes that the Wynn Macau has two stores there since they were selling so much.   

Winters also likes Wynn Macau (HK:1128) as a beneficiary in the Asian gambling hub since there's only 6 operators there.  He notes there's no social stigma in Asia associated with gambling.  He also likes Steve Wynn as an operator  They're the high-end provider of gaming in Macau.  He likes that you get paid 5% (dividend) to wait while the company builds out its property in Cotai.  Winters likes the conservative balance sheet and the fact that there's so much demand.  

Jardine Matheson (SGX:J36) is another name he likes and has been involved with for a long time.  It has 3 principal businesses: small convenience stores, a dairy farm, and it controls Astra, the biggest company in Indonesia, and they also own Hong Kong land, some of the most valuable assets in the world. 

One of the companies Winters has been newly buying is Cielo (CIOXY), Like his thesis on Mastercard (MA), his play on Cielo is the secular shift from cash to plastic.  Cielo is a payment processor that has 50% market share and trades at 13x earnings.  While short-term Brazil might face headwinds, he likes the opportunity long-term as 190 million people can start paying via credit/debit cards. 

Given Winters' emerging market consumer focus, Consuelo Mack prudently highlighted a term from a Bain & Co report: HENRYS: High Earnings, Not Rich Yet consumers.    This is a sweet spot Winters is targeting.  


Winters Loves Companies With Pricing Power  

The Wintergreen Fund manager says, "In my life and in everybody's life I know, everything costs more."  For this reason, he loves businesses with pricing power. 

For instance, he loves the watch and jewelry business.  For men, he notes, the only jewelry they wear (aside from a wedding ring), is a watch.  Swatch (VTX:UHR) has low, medium, and high-end watches and it's one of his major holdings.  He likes the management team and says the company is shareholder friendly. 

He also likes Nestle (NSRGY), especially for their pet food business as humans will spend a lot of money on their pets.  

Pricing power is a valuable asset for any business and we've outlined Warren Buffett's focus on pricing power in the past.


Interest Rates Rising = Inevitable

He thinks interest rates will go a lot higher over the years, saying "it's inevitable." 

In a rising rate environment, he likes companies with the trifecta: good management, a cheap price, and improving economics.  As long as the company can grow earnings and cashflows, they can outpace.  Winters says this is a stockpicker's market and notes the economy in the US is rebounding and some companies trade at the wrong prices. 

He also made sure to point out the asset allocation of many investors these days: safety.  "Most of the public is in cash and bonds, and they'll get annihilated."  

Winters ended with this bit of investing wisdom: "Headlines are often an opportunity, because people today focus on the negative, and we're very focused on where can we make money out of this?"


Embedded below is the video of Consuelo Mack's Wealthtrack interview with David Winters of the Wintergreen Fund:



For more Wealthtrack interviews, we've also posted up Consuelo Mack's talk with Bruce Berkowitz.

Discount to Alpha Hedge West Conference: Burbank, Bass, Huemer, Rabinowitz & More

The 19th annual Alpha Hedge West Conference is coming up and we just wanted to let readers know (especially those on the West Coast) that you receive a 10% discount by using code: Folly10 

The event typically has focused on emerging markets and macro themes, but this year they're expanding to cover hedge fund seeding, private equity, and growth of the family office.  As you'll see below, the speakers list is quite comprehensive covering a wide range of finance.

You can register for Alpha Hedge West here.


Alpha Hedge West Conference Details

When: September 15-17, 2013

Where: Ritz-Carlton,  San Francisco, California


Speakers List

-  Macro debate between John Burbank (Passport Capital) and Kyle Bass (Hayman Advisors)

- Best investment ideas session led by Craig Dandurand, Portfolio Manager (Absolute Return), CalPERS

- Structured credit discussion: Andrew Rabinowitz (Marathon Asset Management), Richard d'Albert (Seer Capital Management), Christopher Hentemann (400 Capital Management), Amin Majidi (Premium Point Investments).

- Alternative investing strategies panel: Jason Huemer (Visium Asset Management), Michael Gaviser (Kohlberg Kravis Roberts), Bob Kern (US Bancorp), Mazin Jadallah (Alphaclone), and Clay Smudsky (Forward)

- And plenty of other speakers: Mark Okada (Highland Capital), Edward Oppedisano (Tricadia Capital), Paul Twitchell (Whitebox Advisors), Eric Alt (Hall Capital Partners), David Andre (Cerebellum Capital), Mark J.P. Anson (Acadia Investment Management), Kurt Billick (Bocage Capital), Christopher Cole (Artemis Capital), Francis X Frecentese (Lyxor Asset Management), Pat Grady (Sequoia Capital), Spencer Hempleman (Ardsley Partners), Thomas Hewett (Perella Weinberg Partners), Ronnie Jaber (Carlyle Group), Steve Kahn (Talpion Fund Management), Jonathan Little (Northill Capital).

Here's the full list of speaker bios.


10% Discount For Market Folly Readers

Don't forget to get 10% off by entering code: Folly10  Click here to register for the event.

What We're Reading ~ Hedge Fund Links 7/19/13

Where is the sweet spot for hedge fund AUM? [aiCIO]

The #1 thing worrying hedge fund managers right now [SFGate]

Hedge fund alpha drops 1700 basis points in 11 years [ValueWalk]

First half hedge fund performance round up [Hedge Fund Intelligence]

Dan Loeb's Third Point Re files for IPO [Reuters]

Activist investors fuel event-driven returns [FT]

Blackstone's Byron Wien: his take on Asia [Barrons]

Hedge funds spot opportunities in Poland sell-off [Reuters]

Hedge fund long positions beat the S&P [Business Insider]

Does past performance matter? [CBS]

Desperate hedge funds 'as seen on TV' [FT]

How to advertise your hedge fund [Marketwatch]

Hedge fund fees: exotic expenses [Forbes]

Redbull fueled all-nighters put Fortress fund on top [Bloomberg]

Tiger Global Starts BBA Aviation Stake

Chase Coleman's hedge fund firm Tiger Global Management has disclosed a new position in London listed BBA Aviation (LON:BBA).  Due to trading on July 9th and 11th, Tiger Global now holds 4.22% of BBA's voting rights.

BBA Aviation's stock price is up about 50% in 2013 and it looks as though Tiger Global acquired some of their stake at approximately 286p / share.

Per Google Finance, BBA Aviation plc "is a provider of aviation services and aftermarket support to operators of business and general aviation, military and commercial aircraft. The Company delivers its services at over 220 locations on five continents. The Company operates through two segments: Flight Support segment and Aftermarket Services segment. The Company’s Flight Support segment provides refueling, ground handling and other services to the business, general and commercial aviation markets. Its Aftermarket Services segment maintain, manufacture and support engines and aerospace components, sub-systems and systems. The Flight Support segment consists of Signature Flight Support and ASIG, and Aftermarket Services and Systems segment consists of Engine     Repair and Overhaul, Legacy Support and APPH. Its Flight Support has approximately 200 locations worldwide, and its Aftermarket Services has approximately 23 locations worldwide.”

For more on this hedge fund, we've detailed more of Tiger Global recent portfolio activity here.

Intangible Attributes That Lead to Intelligent Investment Decisions: East Coast's Q2 Letter

Christopher Begg is out with East Coast Asset Management's Q2 letter and in it he tackles the intangible attributes that they feel lead to intelligent investment decisions.

Here's a few of the intangibles they've identified:

- Ability to be receptive
- A curious nature
- Desire to seek continuous improvement

Expanding on investment process, Begg writes,

"Freedom from answers is not indecisiveness, it is an awareness of the biases that lead to false convictions where one roots oneself into a position that is immovable.  We are not always right, and humility has taught us to treat every capital allocation decision we make with the assumption that we are unaware of some unknowable piece of information.  Even after we decide to make an investment, we set a course to discover what we missed."

The full letter is below.  For those less interested in process and investment approach, East Coast also lays out their investment thesis for an agricultural equipment manufacturer at the end of the letter:

East Coast's Q2 letter:




For more from this firm, head to East Coast on transformation investments.

Corsair Capital's Thesis on American Realty Capital Properties (ARCP): Q2 Letter

Jay Petschek and Steven Major's hedge fund Corsair Capital recently sent out their Q2 letter and in it they detailed their thesis on a new core investment, American Realty Capital Properties (ARCP).

The main story here is that this is an underfollowed company with minimal sell-side coverage that's gone through a "major transition" over the past 6 months.  The company is a net lease real estate investment trust that owns single tenant commercial properties.

Overall, Corsair sees numerous catalysts for the company, including closing 2 deals, internalizing the management company, increasing the dividend slowly, and acquiring more properties.

Embedded below is Corsair's Q2 letter with the full ARCP thesis:




In the other part of Corsair's letter, the hedge fund firm also reveals they have a new core position in ING US Inc (VOYA).  This is a spin-off of the company's US operations that came to market at ~50% of book value as the company was a 'forced seller.'  Corsair thinks the company will trade at book value ($38) or slightly higher as the company drives initiatives and they could start a dividend.

For more on this hedge fund, we've also posted up Corsair's thesis on Ryman Hospitality here.

Trian Partners' PepsiCo White Paper: Nelson Peltz's PEP Thesis

Nelson Peltz's hedge fund firm Trian Partners today released a white paper on PepsiCo (PEP).  The activist investor owns $1.3 billion worth of shares and presented their thesis on PEP in a slideshow.

Trian argues that PepsiCo (PEP) is at a strategic crossroads and they've outlined 2 strategic alternatives to enhance shareholder value at the company.


Option A:  Merge PepsiCo With Mondelez

Merge PEP with Mondelex (MDLZ), creating a global snacks company.  This tie-up could lead to $175 of implied value per PEP share and approximately $72 of implied value per MDLZ share by the end of 2015.  It's also worth pointing out that Trian Partners owns a stake in MDLZ as well.


Option B: Split-Up PepsiCo 

If PEP doesn't pursue MDLZ, they argue the company should separate the snacks and beverages segments.  Under this scenario, they see $136 to $144 of implied value per PEP share by the end of 2015.


Embedded below is the full .pdf of Trian Partners' white paper and Nelson Peltz's analysis of PepsiCo:




You can download a .pdf copy here.

For more on these companies, don't miss Nelson Peltz's thoughts on PEP/MDLZ from the Delivering Alpha Conference today.

Carl Icahn on Activism, Herbalife & More: Delivering Alpha Conference

At the Delivering Alpha Conference, activist investor Carl Icahn sat down to talk about activist investing and some of his holdings like Herbalife (HLF), Dell (DELL), Netflix (NFLX) and more.

Icahn had the audience in the palm of his hand, talking stocks and making people laugh almost as if he was a stand up comedian.


On Dell (DELL)

On activism: Icahn said good targets are companies that are badly managed. 

Icahn said he wouldn't comment on Dell (DELL) because of the SEC.  Jim Chanos has been short.  Icahn says he's never seen a board as dysfunctional as Dell's.  He argues that Jim Chanos misses the fact that you can put a good board and CEO in and institute change with accountability.  He even went on to say that he has a better record than Chanos.


On Netflix (NFLX)

He thought about selling some, but his son threatened to leave if he did, so that talked him out of it.  He likes Reed Hastings and says it's hard not to like someone who helps make you $100 million in a month or so.


On Herbalife (HLF)

Icahn is still in Herbalife (HLF) and hasn't sold a share.  He said, "I never would have looked at Herbalife if Ackman hadn't come out with that report." 

He thinks HLF's CEO is a good CEO and believes very strongly in the product.

While Icahn vs. Ackman has been well documented, Icahn says he no longer dislikes Ackman because he's made him money on HLF.  And of Ackman's large HLF short position, Icahn says: "It's stupid to take that big of a position anyways."

He also pimped his Twitter account, saying he was going to tweet insights about stocks he was allowed to talk about and he seems to want to boost his follower count so give him a follow: @Carl_C_Icahn


For more from the Delivering Alpha Conference, head to:

- John Paulson on gold, real estate & merger arbitrage

- Nelson Peltz on PepsiCo & Mondelez 

- Best Ideas Panel with Mark Kingdon, Chris Hohn, Jim Chanos & Lee Cooperman

- Larry Robbins on healthcare

Larry Robbins & Jacob Gottlieb on Healthcare Plays: Delivering Alpha Conference

At the Delivering Alpha Conference, Larry Robbins of Glenview Capital, Jacob Gottlieb of Visium, and Kris Jenner of Rock Springs Capital sat down to talk the Affordable Care Act and Obamacare.


Larry Robbins, Glenview Capital

Robbins notes that Thermo Fisher Scientific (TMO) is their largest position.  He says it's independent of the Affordable Care Act as it's 75% consumables.  The growth there is driven by capital allocation.  The space will benefit from sequestration ending in 2014.

He also likes Walgreen's (WAG).

Robbins expects an increase in pharmaceutical consumerization after Obamacare starts.  Robbins also noted he still likes McKesson (MCK) ~ we've highlighted in the past how it's been one of his largest holdings for some time.

Glenview's founder notes that healthcare used to trade at a 10% premium to the market, but their portfolio trades at a 25% discount so he loves if companies buy back stock or make acquisitions.  He sees hospitals likely to continue consolidation, which means the for-profit players gain share.

With the Affordable Care Act and more people getting insured, you'll see growth on growth (especially in hospitals) but on the other hand, there will be losers down the chain as they're over-earning now and will get squeezed.

In the space, big pharma have a lot of cash but not a lot of innovation.  Small companies are exactly the opposite, so consolidation will continue there.

If you missed it, Robbins recently made a very rare media appearance and talked about HMA, THC and what he thinks about this market.


Jacob Gottlieb, Visium Asset Management

Jacob Gottlieb of Visium voiced his concern over taxes on healthcare as it could be counterproductive to making more affordable and better quality care.  As far as what his picks go, he likes healthcare IT providers and well-run hospitals.


Kris Jenner, Rock Springs Capital

Kris said there will be winners and losers in all of this.  The opportunities in healthcare are robust and based in innovation.  That innovation will be more-so in business models than new drugs.  He said he likes Vertex Pharmaceuticals (VRTX) and Gilead Sciences (GILD).

Thanks to @EquityNYC for live tweets on this panel.


For more from the Delivering Alpha Conference, head to:

- John Paulson on gold, real estate & merger arbitrage

- Nelson Peltz on PepsiCo & Mondelez 

- Best Ideas Panel with Mark Kingdon, Chris Hohn, Jim Chanos & Lee Cooperman

- Carl Icahn on activism

Delivering Alpha Best Ideas Panel: Mark Kingdon, Chris Hohn, Jim Chanos, Lee Cooperman

The Delivering Alpha Conference today featured a 'best ideas' panel that featured some hedge fund titans including Jim Chanos (Kynikos Associates), Chris Hohn (Children's Investment Fund), Mark Kingdon (Kingdon Capital), and Lee Cooperman (Omega Advisors).  Here's a brief summary of their picks:

Mark Kingdon, Kingdon Capital

Long Japanese automakers: Long Toyota (TM), Long Fuji Heavy (7270.TO) Long Mazda (7261.JP)

He says these companies obviously benefit from Abenomics in Japan.  Toyota he likes as an innovative leader with focus on hybrid technology.  Fuji Heavy (Subaru) is moving from low margin to high margin products.   He says Mazda might have the most upside of the names. 

Chris Cooper-Hohn, Children's Investment Fund

Long Porsche (PAH3.DE) - It's basically a holding company owning 150 million shares of Volkswagen.  If the two merge eventually, the stock doubles.  We've highlighted Hohn's thesis on Porsche before.

Long EADS (EAD.FR) - A liquid large cap with a new focus on making money.  Could double over 2 years. 

Long Aurizon Holdings (AZJ.AU)- Australian railroad, a total turnaround story as the company has transitioned from government-owned to a company more aimed at profit.  He thinks it could double over next 3 years


Lee Cooperman, Omega Advisors

Long Qualcomm (QCOM) - points to a large amount of cash on the balance sheet and a lot of pessimism on the name.

Long Sandridge (SD) - could be a double.

Long Express Scripts (ESRX) - company is growing and buying back stock.  We've also posted up another Cooperman interview recently where he talked about other stocks he likes.


Jim Chanos, Kynikos Associates

Short Caterpillar (CAT) - a bet on China's property development slowdown and he says the company is just exposed to the wrong products at the wrong part of the cycle.  Here's Chanos' pitch on CAT here.

Short Hewlett Packard (HPQ) - he also reiterated his call against the PC, saying it's dying a slow death.  This has been a longstanding short and we've posted up Chanos' thesis on HPQ as he called it a value trap last year.



For more from the Delivering Alpha Conference, head to:

- John Paulson on gold, real estate & merger arbitrage

- Nelson Peltz on PepsiCo & Mondelez

- Larry Robbins & Jacob Gottlieb on healthcare plays

- Carl Icahn on activism 

Nelson Peltz on PepsiCo, Mondelez & DuPont: Delivering Alpha Conference

Trian Partners' Nelson Peltz sat down at the Delivering Alpha Conference today and talked about PepsiCo (PEP), Mondelez (MDLZ) and Andrew Ross Sorkin revealed that Peltz has been building a position in DuPont (DD).

Back in April, we highlighted how Peltz took stakes in both PEP & MDLZ.  At the event today, he laid out two scenarios for PEP which he thinks the company should pursue:


On PepsiCo and Mondelez

1. PEP should buy Mondelez (MDLZ) for $35-38 per share.  MDLZ is part of the split from the old Kraft that broke up into Mondelez and Kraft Foods (KRFT).  MDLZ is seen as the fast growing snacks business (Cadbury etc).

The problem with MDLZ he says is operational.  He loves that the CEO made important strategic moves (splitting up the old Kraft entity), but notes that management really needs to boost margins to catch up with direct competitors.


2. Separate Pepsi's beverage side from its snacks business (FritoLay).  Peltz says that these businesses have dis-synergies and they would benefit from a split.  He says Pepsi's beverage side can go to a cashflow generating company run with appropriate leverage.

Then, Peltz noted that the FritoLay snacks business can flourish on its own and even possibly pursue an acquisition of MDLZ after a potential PEP break up since they're both in the snacks business.

Peltz did acknowledge the secular trend of consumers focusing more on healthy items.  He thinks this is more-so focused on sugary drinks, but does note that sweet/salty snacks could be vulnerable as well.


Peltz's New Stake in DuPont?

Andrew Ross Sorkin also said that sources are pointing to Peltz acquiring a stake in DuPont (DD).  Peltz wouldn't really add any color when asked about it (pun intended).

Embedded below is video of Peltz's interview:



For more on this investor, we've highlighted some of Peltz's trading activity here.


And for more summary of the Delivering Alpha Conference, head to:

- John Paulson on gold, real estate & merger arbitrage

- Best Ideas Panel with Mark Kingdon, Chris Hohn, Jim Chanos & Lee Cooperman

- Larry Robbins on healthcare

- Carl Icahn on activism

John Paulson on Gold, Housing/Real Estate & Risk Arbitrage: Delivering Alpha Conference

John Paulson, founder of hedge fund firm Paulson & Co, sat down with CNBC's Carl Quintanilla at the Delivering Alpha Conference today and touched on numerous topics, mainly focusing on gold and the housing recovery/real estate.  He noted that his returns this year at his main funds range from 5% and 32%.


Paulson on Gold

He's been getting a lot of negative publicity for his Gold Fund.  However, he points out that this fund is only around 2% of his assets under management.  He was looking for a currency alternative to the US dollar in the event we get inflation, and he notes that gold has been an excellent candidate for this in the past.

Paulson said, "Although the Fed has printed a lot of money to date, there is little inflation.  Some (investors) who bought gold have lost patience.  The rationale for owning gold has not gone away.  The consequences for printing money over time will be inflation... it's just difficult to predict when."

He thinks gold is in a 'pause period' right now and sees demand for gold increasing again and points out that it's always been volatile.  He thinks it's an important part of anyone's portfolio.


Paulson on Housing / Real Estate / Land

They took a long-term view on housing, as it's a cyclical area (7 years up, 7 years down).  They saw a peak around 2006 (and shorted subprime) and they think it's bottomed so they've gone long.  He sees it as the beginning of the recovery and said it could last another 4-7 years, inviting others to jump in, saying "it's not too late."

Paulson went on to say, "Buying a home is the best investment an individual can make.  Affordability is at an all time high.  You can lock in rates of a fixed rate mortgage and get the benefits."

He then continued, noting, "I'm not sure (home prices) will increase 10% every 5 years, but probably around 5-7%."

Paulson has exposure in real estate via land as he says land is actually affected the worst in real estate cycles.  He noticed this pattern in the crisis of 1990, so he set up special real estate funds to exclusively buy entitled lots across the country.

Prices fell almost 80% from their peak value in 2006.  They like to buy in distressed situations (from banks, builders, etc) in growth areas of the country.  They've focused on Arizona, California, Colorado, Nevada, and Florida.

They've also played securities:  Before/during the crisis, they shorted BBB tranches, then started buying AAA tranches that fell in price by 40%.

He also highlights his stake in Realogy (RLGY), the largest residential broker in the country (we flagged Paulson's stake in RLGY late last year and also pointed out how Lone Pine Capital bet on RLGY recently as well).

On his bet on the housing recovery, John Paulson said he's as sure of this bet as he was about his subprime short.


Paulson on His Legacy Risk Arbitrage Strategy

Paulson's legacy fund strategy is merger arbitrage.  He talked about how companies he likes to buy are often ones from the announced deals that could get a competitive bid.  He's also looking to see which industries will see consolidation and take a stake in companies that could be takeover targets.

He also talked about his stakes in Sprint and Leap Wireless that have panned out well.

Paulson also noted how there's a lot of talk/chatter in the cable business.  He pointed to John Malone's stake in Charter Communications (CHTR), which he thinks will acquire more cable assets.  While there's been talk of Time Warner Cable (TWC), he says that's a large entity.  He also named Cablevision (CVC) as a potential target, but notes that's up to the Dolan family.

In risk arbitrage, he says "There's always a regulatory risk, and that's an important part of the analysis."

Paulson said he never considered retiring after his successful big subprime bet: "The goal in money management is not to do one great year, it's to compound returns over many years."  He says he'd like to manage money another 20 years, as he admires Warren Buffett and George Soros.

Video from Paulson's interview is embedded below:




For more from the Delivering Alpha Conference, head to:

- Nelson Peltz on PepsiCo & Mondelez

- Best ideas panel with Mark Kingdon, Chris Hohn, Jim Chanos & Lee Cooperman

- Larry Robbins & Jacob Gottlieb on healthcare plays

- Carl Icahn on activism