Kyle Bass Long General Motors, Exits J.C. Penney Equity: Interview

In an interview with Bloomberg Television, Hayman Capital's Kyle Bass reveals that he's long General Motors (GM) and has exited his equity stake in J.C. Penney (JCP) but retains his debt position. 

The hedge fund manager also talked about Herbalife (HLF), noting that it generates significant cashflows and no debt.

He originally thought JCP could move higher with a turnaround from new management, but what he got wrong, he said, was the vendors and perception changing so quickly.  He's still long credit but doesn't own equity in the company.

Bass thinks GM can trade 40% higher in the next 18 months.  He says it's a catalytic time to be investing as the Treasury finally exits its stake and the company can initiate shareholder friendly actions.

The Hayman founder also said he didn't see anything interesting in US banks, but he would be betting against European banks, especially as a hedge against other European bets.  Bass mentioned he likes Vodafone (VOD).

Embedded below is Bass' interview with Bloomberg:



For more from this hedgie, head to Kyle Bass' macro debate with John Burbank.

What We're Reading ~ Hedge Fund Links 12/6/13

Hedge fund ideas from the InvestPitch competition [Institutional Investor]

Baupost Group to return $4 billion to investors [II Alpha]

Biggest trends that hedge funds encountered this year? [ValueWalk]

Jim Chanos betting against CGI Group [Newsweek]

Chanos also shorting US coal sector [Reuters]

Passport Capital gains with Asian internet stocks [HedgeWorld]

Study shows women beat men as hedge fund managers [FINalternatives]

Investors pull back from Lampert's fund [Dealbook]

Tepper's Appaloosa to return some investor money [II Alpha]

Hugh Hendry capitulates, turns bullish [Zerohedge]

Short sellers see once in a lifetime opportunity [CNBC]

Short sellers have had a miserable year [WSJ]

Tiger Global invests in Glassdoor [HedgeWorld]

White House rejects Fairholme's Fannie/Freddie plan [FINalternatives]

Hedge funds get 'too cosy' with prime brokers [FT]

Taconic's co-founder to retire [CNBC]

From hedge fund to family office [Forbes]

A second act for a top Wall Street strategist [Dealbook]

Peter Lynch's Interview With Charlie Rose

Legendary investor Peter Lynch (formerly of Fidelity's Magellan Fund) sat down for a rare interview with Charlie Rose.  In it, he talks about philanthropy, what makes good management, and more.

Lynch notes that he's now working with some young analysts but the only investing he's doing now is for himself and for charity. 

He joked that he was a "bottom down" investor.  He likes to invest in the second or third inning of a story, noting that you could have bought Walmart (WMT) ten years after it went public and still done extremely well on that investment.

He identified the three C's in investing: complacency, concern, and capitulation.  He said complacency is the worst one.

On knowing what you're investing in: "If you don't understand it, you're probably gonna do the wrong thing."

On what's different in investing between then and now:  He said there's a lot of computer driven trading, which he says is a waste of time.  But the other main difference is the freedom of information.  He says, "Investing now is much clearer, they (retail investors) know the same things I do."

On advice he'd give to young investors: Invest in a retirement fund and watch the money compound tax free.  For individual stock investing: run a paper portfolio, check back with it and see how it performed and why.

On today's market: "I think the market's fairly priced in what's happening right now ... The stock market's the best place to be for the next 10, 20 years ... the next two years, who knows."


Embedded below is the video of Charlie Rose's interview with Peter Lynch:



For more wisdom from this great investor, be sure to read Peter Lynch's book: One Up On Wall Street as well as our past post on Lynch's principles and golden rules of investing.

What We're Reading ~ Analytical Links 12/4/13

On investment idea velocity [Dasan]

Mapping investor behavior [All About Alpha]

Should AT&T (T) buy Vodafone (VOD)? [FT]

Bullish thesis on Sears (SHLD) starting to show cracks? [Peridot Capitalist]

A write-up on Colfax Corp (CFX) [Brooklyn Investor]

Once cable's king, Malone aims to regain his crown [Dealbook]

Deflation fears stalk eurozone [The Guardian]

Stock funds lure most cash in 13 years as investors chase rally [Investment News]

Short seller: best opportunity in two decades [CNBC]

Treasury seeks an exit from General Motors (GM) by year-end [Dealbook]

Paper on the valuable asset of spectrum [SSRN]

Advice on careers, finance and life from Harvard Business School class of 1963 [HBS1963]

Clear Channel's Bob Pittman on the value of dissent [NYTimes]

Howard Marks' Latest Memo: The Race Is On

Oaktree Capital's Chairman Howard Marks has released his latest memo entitled "The Race Is On."

Marks' latest conclusion is that:

"Over the last 2-3 years, my motto for Oaktree has been consistent: “move forward, but with caution.” If feel the outlook is not so bad, and asset prices are not so high, that it’s time to apply maximum caution (or, as they said in The Godfather, “go to the mattresses”). But by the same token, the outlook is not so good, and asset prices are not so low, that we should be aggressive. That’s the reason for my middling stance.  

Having said that, however, there’s no doubt in my mind that the trend is in the direction of increased risk, and I see no reason to think that trend will be arrested anytime soon. Risk is likely to reach extreme levels someday – it always does – and great caution will be called for. Just not yet.

Here's my conclusion from The Race to the Bottom [Feb. 2007].  I'll let it stand - another case of "ditto."

... there's a race to the bottom going on, reflecting widespread reduction in the level of prudence on the part of investors and capital providers.  No one can prove at this point that those who participate will be punished, or that their long-run performance won't exceed that of the naysayers.  But that is the usual pattern."


Embedded below is Howard Marks' latest memo: "The Race Is On":




You can download a .pdf copy here.

For more from this hedge fund, we've highlighted some of Oaktree's recent portfolio activity.

Odey Disclose Arrow Global Stake

Crispin Odey’s Odey Asset Management has disclosed a new position in London listed Arrow Global (LON: ARW). Arrow made its stock market debut in October, raising £139m.

It looks as if Odey picked up most of their shares in the secondary market due to trading on and before November 26th. Odey hold the equivalent of 4.94% of Arrow’s voting rights. About 35% of the position in nominal terms (not delta) is held via derivatives. The Odey Absolute Return fund managed by James Hanbury is the main holder. 

Per Google Finance – “Arrow Global Limited is a provider of debt purchases and receivables   management solutions. The Company’s portfolio consists of a range of consumer and commercial   credit, including credit card, personal loans, utilities, retail, second liens and telecommunications.   The Company includes the development of its Collections Bureau, which is available for use industry- wide.”

We've covered other recent Odey portfolio activity here.

Family Office Training

The Family Offices Group is the largest family office association, and they are offering a few family office training programs that may be of interest.  These programs can help single and multi-family offices professionalize their business, and they can be instructive to those looking to raise capital from family offices, or work with them on a co-investment or club deal investing basis.

Two Family Office Training Programs:


Self-Paced Family Office Training: The Qualified Family Office Professional (QFOP) is an industry-leading family office training and certification program that the Family Offices Group offers, to date over 500 professionals have joined.  To learn more about this program please see http://FamilyOfficesGroup.com/Training

Family Office Workshops: The Family Offices Group offers live training workshops where you can network with single and multi-family offices, build your relationships in the industry, and learn about family office trends, and investment mistakes to avoid.  If you would like to learn more about family office risk management, co-investments, and meet face-to-face with family offices you can register for our next workshop here: http://FamilyOfficesGroup.com/Workshops

If you want to do more research on the Family Offices Group, and haven't downloaded their free report yet you can join over 30,000 others by downloading this now here: http://FamilyOfficeReport.com

Glenview's Larry Robbins on Healthcare, For-Profit Hospital Stocks

At the Robin Hood Investors Conference late last week, Glenview Capital's Larry Robbins also made a rare media appearance on CNBC and talked about the Affordable Care Act, his healthcare investments, and other topics.

He articulated that the key focus on more Americans gaining healthcare is who is getting insurance versus how many.  He feels that people who actively use health services are the ones signing up first, which benefits hospitals (and he thinks managed care will have some issues).

On for-profit hospitals versus not-for-profit: "Regardless of what the competitive environment is, they (for-profit)  have fared better in the past and they will in the future."

On why he wanted Health Management Associates (HMA) to merge with Community Health (CYH):  "Consolidation is important, scale is important."

Touching on general market valuation, he noted that his portfolio is trading at lower multiples since that's what they've focused on.  But if you turn to the overall market, historically with low interest rates, the market trades at a higher multiple until real inflation goes above 4% he says.

Video 1 on the Affordable Care Act & healthcare in general:


Video 2 on for-profit hospitals (HMA, CYH, THC, HCA etc):


Video 3 on market valuation:

David Tepper Says Market Isn't a Bubble: His Thoughts on Valuation, Tapering, Airlines & More

After the Robin Hood Investors Conference last week, Appaloosa Management founder David Tepper sat down with Bloomberg TV to talk about the markets.


On market valuation: He does not think we're in a bubble now as he compared P/E multiples over the last 5 years to the 5-year period running up to the 2000 bubble.  Stocks now have seen little change in multiples, while stocks back then saw huge multiple expansion.

On airlines:  "Our big play versus the market is the airlines.  We're the biggest holder of many of these airlines." We flagged this big bet for readers of our Hedge Fund Wisdom newsletter over a year ago.  See what else Tepper is betting on by subscribing (a brand new issue was just released last week).

On his 2014 investing approach: "We'll probably stay long.  We recently put on a treasury short, to hedge ourselves against the equity markets.  Little bit scared of tapering... higher rates... though rates won't go that high."

On to be worried about: "I would be worried if I was a long/short guy and not long enough, that's what I'd be worried about.  But I'm not worried, because I am long.  But if I'm a L/S guy who can only go 60% long ... the biggest risk for the market is you'll have multiple expansion, higher growth, 10% earnings growth next year, and you'll have another year of 20-30% (performance)."

On J.C. Penney (JCP): "It was a tiny position... a trade and we're done."

On Twitter (TWTR):  They would have held Twitter longer, but they had a price target in the $40's and so when the stock hit that in the first days of trading, he exited.  "It's a discipline."

On Citigroup (C):  "Citi still has some pretty good upside, we think it can make 7 bucks a share."

On his performance this year:  "I think gross we're in the 40's (%)."

On tapering:  He does think it's time to start tapering. He also said: "There can be a short-term negative reaction.  But if you're tapering, it's because there's stronger underlying US growth.  And if there's growth, there's going to be higher P/E multiples and the market should be higher.  If the market goes down, that's great, it'll be one more opportunity that people will be come and buy."

On what a lower Japanese Yen means: "It means higher P/E multiples in Japanese companies, straight out.  That's the way it works, because they're such exporters. So when you have a weaker yen, you have higher earnings."


Embedded below is the video of Tepper's Bloomberg TV appearance:



For more on the Appaloosa manager, head to Tepper's other recent interview where he said he thinks the market could see an 18-20x multiple.

Bill Ackman's New Herbalife Presentation From Robin Hood Conference

Pershing Square's founder Bill Ackman again attacked Herbalife (HLF) in his talk at the recent Robin Hood Investors Conference late last week in a presentation entitled "Robin Hood in Reverse."

In it, he highlights an SEC warning investors to beware of pyramid schemes posing as multi-level marketing programs, among other points.

Ackman's new HLF presentation from the Robin Hood event is embedded below in its entirety:




For more on Ackman, head to recent portfolio activity from Pershing Square here.

Corvex Management Sells ADT Shares Back to Company

ADT (ADT) recently announced that it has repurchased shares held by Keith Meister's activist hedge fund Corvex Management.  At the end of the third quarter, ADT was previously Corvex's 2nd largest position, worth over $454 million at the time.

We highlighted how Meister went activist on ADT over a year ago, as he was pushing for balance sheet optionality.  The company has headed in that direction by spending around $1.6 billion to shrink its share count by ~15%. 

It's a bit curious to see Corvex sell its stake so soon after the company has largely followed their lead.  Perhaps the hedge fund saw more compelling opportunities to allocate capital to, or maybe the company no longer wanted to deal with an activist, who knows.  Regardless, Corvex has exited its ADT stake.  ADT shares initially traded down around 8% on this news, before rebounding a bit that day.  However, they're down for a second consecutive day.

Per Google Finance, ADT is "a provider of electronic security, interactive home and business automation, and monitoring services for residences and small businesses in the United States and Canada. The Company’s products and services include ADT Pulse interactive home and business solutions, and home health services. ADT provides business security intrusion detection, which protect the business from burglary, robbery and intruders. Its electronic access control limits unauthorized entry and employee access to the business, as well as complete access. Its video surveillance views events in multiple areas of facility, which has control over loss and oversees business. Effective August 2, 2013, The ADT Corp acquired Devcon Security Services Corp, a provider of security protection services, from Devcon International Corp. In November 2013, Kastle Systems International announced that it had acquired Mutual Central Alarm Services and Stat-Land Security Systems from ADT Corporation."

You can view other recent portfolio activity from Corvex Management here.

Blue Ridge Capital Adds to Avis Budget Group Stake

John Griffin's hedge fund firm Blue Ridge Capital has filed a 13G with the SEC regarding shares of Avis Budget Group (CAR).  Per the filing, Blue Ridge now owns 6.17% of the company with 6,613,700 shares.

This marks a 56% increase in their position size since the end of the third quarter.  The filing was required due to activity on November 13th.

Last week, our premium Hedge Fund Wisdom newsletter drew attention to the fact that Blue Ridge had been increasing its stake in CAR in Q3, and now they've acquired even more shares in Q4.  Additionally, CAR was analyzed in the Q2 issue of our newsletter and new subscribers can access that as well.

Per Google Finance, Avis Budget Group "operates two brands in the global vehicle rental industry through Avis and Budget. Avis is a rental car supplier positioned to serve the commercial and leisure segments of the travel industry and Budget is a rental car supplier focused primarily on more value-conscious segments of the industry. It operates in three segments: North America, consisting of its Avis and Budget car rental operations in the United States and its Avis and Budget vehicle rental operations in Canada; International, consisting of its Avis and Budget vehicle rental operations in Europe, the Middle East, Asia, Africa, South America, central America, the Caribbean, Australia and New Zealand, and Truck Rental, consisting of its Budget truck rental operations in the United States."

12 West Capital Increases Aegean Marine Petroleum Network Holdings

Joel Ramin's hedge fund firm 12 West Capital has filed a 13G with the SEC regarding its position in Aegean Marine Petroleum Network (ANW).  Per the filing, they now own 5.1% of the company with 2,388,713 shares.

This marks an 8% increase in their position size and the filing was required due to activity on November 12th.

Prior to founding 12 West, Ramin worked at Roberto Mignone's Bridger Capital.

Per Google Finance, Aegean Marine Petroleum Network is "an independent physical supplier and marketer of refined marine fuel from refineries, major oil producers and other sources and resell and deliver these fuels using its bunkering vessels to a broad base of end users, including oil tankers, container ships, drybulk carriers, cruise ships, reefers, LNG/LPG carriers, car carriers, ferries, marine fuel traders, brokers and other users. The Company serves Greece, Gibraltar, the United Arab Emirates, or UAE, Jamaica, Singapore, Northern Europe, Antwerp-Rotterdam-Amsterdam (ARA), Portland, United Kingdom, West Africa, Vancouver, Montreal, Mexico, Trinidad and Tobago, Las Palmas, Tenerife, Morocco, Cape Verde and Panama"

We've highlighted some other portfolio activity from 12 West Capital here.

Joho Capital Boosts Veeco Instruments Position

Robert Karr's hedge fund firm Joho Capital has filed a 13G with the SEC regarding its position in Veeco Instruments (VECO).  Per the filing, they now own 6.5% of the company with 2,535,933 shares.

This marks a 170% increase in their position size and the filing was required due to activity on November 11th.

Per Google Finance, Veeco Instruments "designs, manufactures and markets equipment to make light emitting diodes (LEDs), hard-disk drives, as well as for emerging applications such as concentrator photovoltaics, power semiconductors, wireless components, microelectromechanical systems (MEMS), and other next-generation devices. The Company operates in two segments: Light Emitting Diode (LED) and Solar and Data Storage. In the LED & Solar segment, it designs and manufactures metal organic chemical vapor deposition (MOCVD) systems, molecular beam epitaxy (MBE) systems and components sold to manufacturers of LEDs, wireless devices, power semiconductors, and concentrator photovoltaics, as well as to research and development (R&D) applications. In the Data Storage segment, it designs and manufactures the critical technologies used to create thin film magnetic heads (TFMHs) that read and write data on hard disk drives. In October 2013, the Company acquired Synos Technology, Inc."

Family Office Association

If you want to learn more about family offices the Family Offices Group is the #1 largest family office association where you can do so.  Supported by over 70,000 global members the Family Offices Group association provides the following resources to the industry:

1) Family Office Report: They have created a detailed report on the state of the family office industry, their investments, and how the industry is changing quickly.  This same report also includes a few free chapters from their bestselling book, The Family Office Book: Investing Capital for the Ultra-Affluent (ISBN#: 978-1118185360 ).  Get your free copy of this report here: http://FamilyOfficeReport.com

2) Free Family Office Association Membership: Unlike many other expensive family office association memberships which can range from $5,000-$20,000 a year or more, they have decided to give away their basic membership for free.  By doing so they have become the largest network of family offices, and that strengthens everything else they do.  Take advantage of this by visiting http://FamilyOfficesGroup.com and clicking on "membership" at the top of the website.

3) Family Office Training Workshops: At these live events you can meet with family offices face-to-face from all over the world and hear them talk about what they invest in, and why.  To see their upcoming workshops please visit http://FamilyOfficesGroup.com/Workshops

4) Self-Directed Family Office Training: The Qualified Family Office Professional (QFOP) program is a self-paced training and certificate program which can be completed in one month, or over several years or longer if you would like.  This program includes over 30 hours of audio interviews with family office CIOs and CEOs as well as over 250 video modules.  It is the #1 most popular training and certificate program on family offices globally.  Learn more at http://FamilyOfficesGroup.com/Training

5) Family Office Database: To get access to their detailed database of single and multi-family offices please visit: http://FamilyOffices.com

6) Single Family Offices: If you are a single family office and you are looking for resources please see http://SingleFamilyOffices.com & http://BillionaireFamilyOffice.com

If you have questions about any of these offerings you may reach the Family Offices Group at (212) 729-5067 or by emailing their team at Clients@FamilyOffices.com
 

New Q3 Issue of Hedge Fund Wisdom Now Available

The brand new Q3 issue of our premium Hedge Fund Wisdom newsletter is now available.  Subscribers, please login at www.hedgefundwisdom.com to download it.


Inside This Issue

- Consensus buy/sell lists of the most popular trades among hedge funds

- The latest portfolios of 25 top hedge fund managers revealed

- Expert commentary on each fund's moves with historical context

- Equity analysis section focusing on 2 stocks hedgies were buying


The last issue of HFW analyzed Rite Aid (RAD) and Avis Budget Group (CAR).  Since publication on August 21st, shares are up 52.7% and 24.7% respectively, outperforming the S&P's gain of only 8.6% over the same timeframe.

Want to check out a free sample? View a free past issue here.


See What Stocks Are Analyzed This Quarter: Subscribe Below

The brand new issue focuses on two stocks that have recently been targeted by activist investors. The newsletter walks you through company background, the business model, the current situation, hedge fund activity in the stock, the activist thesis, as well as the bull case versus the bear case.


1 Year Subscription (4 issues, save 20% with this option): $299.99 per year

Quarterly Subscription: $89.99 per quarter

Want to pay by check?  Email us: info@hedgefundwisdom.com

Warren Buffett's Berkshire Hathaway Acquires More DaVita Shares

In a Form 4 filed with the SEC, Warren Buffett's Berkshire Hathaway has revealed new purchases in shares of DaVita (DVA). 

On November 6th, 7th, and 8th, Berkshire acquired 3,700,294 shares in total at prices ranging from $52.78 to $56.41.

After all was said and done, Berkshire now owns 35,147,124 shares of DaVita.  Keep in mind that the company had a 2-for-1 stock split on September 6th of this year.

This has been a position Berkshire has been heavily adding to ever since new portfolio managers Todd Combs and Ted Weschler came onboard.  We've highlighted Berkshire's purchases of DVA shares earlier this year in the summer, as well as in 2012.

Per Google Finance, DaVita is "a provider of dialysis services in the United States for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD)."

For more on Berkshire, head to a recent interview with Warren Buffett where he said stocks are fairly priced.

Passport Capital Discloses 58.com Stake

John Burbank's hedge fund firm Passport Capital has filed a 13G with the SEC regarding shares of 58.com Inc (WUBA).  Per the filing, Passport now owns 11.8% of the company with 2,821,526 shares (via 1,410,763 ADR shares).  The filing was made due to activity on November 1st.

Per Yahoo Finance, the company "Beijing 58 Information and Technology Co., Ltd. owns and operates an on-line classified advertisement services Web Site under the name 58.com. The Web Site helps individuals and SMEs to broadcast and search information relating to job opportunities, housing, dating, community events, services, and trading of second hand products. Beijing 58 Information and Technology Co., Ltd. was founded in 2005 and is based in Beijing, China."

For more from this hedge fund, head to John Burbank's thoughts at the Excellence in Investing Conference, as well as Burbank's comments at the Alpha Hedge West Conference.

Scout Capital Increases COTY Holdings

Adam Weiss and James Crichton's hedge fund firm Scout Capital Management filed a 13G with the SEC regarding shares of COTY (COTY).  Per the filing, Scout has revealed a 4.3% ownership stake in COTY with 3,530,000 shares.

This marks an increase of 30,000 shares since the the end of the second quarter.  The new filing was required due to activity on October 28th.

Per Google Finance, COTY is "engaged in the manufacturing, marketing and distribution of women’s and men’s fragrances, color cosmetics and skin and body care related products globally. The Company operates in three segments: Fragrances, Color Cosmetics and Skin & Body Care. The Company’s power brands consists of adidas, Calvin Klein, Chloe, Davidoff, Marc Jacobs, OPI, philosophy, Playboy, Rimmel and Sally Hansen. The Company sells products in each of its segments through retailers, including hypermarkets, supermarkets, independent and chain drug stores and pharmacies, upscale perfumeries, upscale and mid-tier department stores, nail salons, specialty retailers, duty-free shops and traditional food, drug and mass retailers."

For more portfolio activity from Scout Capital head here.

Dan Loeb Discloses New FedEx Stake

Third Point's founder Daniel Loeb today disclosed a new position in FedEx (FDX) at the Dealbook conference which was shown on CNBC and said he met with the CEO.

Loeb said that, "We had a very constructive discussion about the company."  He also commented that he is not looking to oust the CEO.

Third Point isn't the only prominent hedge fund interested in the company, either.  Our Hedge Fund Wisdom newsletter highlighted that John Burbank's Passport Capital and Richard Perry's Perry Capital both initiated stakes in FDX in the second quarter.  Perry's position was quite notable at the time, as they owned over $384 million worth and it was one of their largest disclosed US longs.

The thesis on this name focuses on improvement in profitability, bringing margins more in-line with competitors, as well as favorable tailwinds like gas prices.

Loeb also talked about shareholder activism and specifically about Sony (SNE).  Loeb argues they're more like private equity investors.  When asked whether or not Sony was a bet on Japan, Loeb replied, "We remain very bullish on Japan."

Embedded below are the videos of Loeb's comments:

Video 1 on FedEx:

Video 2 on Sony:

Video 3 on activism:

Video 4 on Herbalife:

For more on this hedge fund, we've posted up Third Point's Q3 letter as well.