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

Hedge fund managers optimistic about markets but concerned about tapering [P&I]

John Burbank's investment alchemy [Institutional Investor]

Pennant Capital returns some money to investors [II Alpha]

LibreMax launching student loan fund [FINalternatives]

Hedge fund managers seek to set themselves apart through branding [P&I]

Odey short Manchester United [Dealbook]

Coatue invests $50 million in Snapchat [FINalternatives]

3 big hedge fund predictions for 2014 [CNBC]

Hedgies trail stocks by the widest margin since 2005 [Bloomberg]

The hedge fund problem - and the solution [Bloomberg]

Corvex Management Exercises Calls on Fidelity National Financial, Applauds Management's Moves

Keith Meister's hedge fund firm Corvex Management filed an amended 13D with the SEC regarding its activist position in Fidelity National Financial (FNF).  Per the filing, Corvex now owns 7.3% of the company with over 18.2 million shares.

They exercised calls on December 10th and acquired 15,451,900 shares in aggregate. 

The filing also indicates that Corvex continues to engage with management:

"The Reporting Persons applaud the Issuer’s decision to explore strategic alternatives with regards to its non-core assets in order to unlock value not reflected in the current share price.  In addition, the Reporting Persons are pleased with the Issuer’s decision to focus capital allocation going forward towards the new core business and away from non-core businesses.  The Reporting Persons look forward to a continued, constructive dialogue with the Board and Management of the Issuer."

You can view the details of Corvex's initial position here.

Trian Discloses Allegion Stake, Spin Off From Ingersoll-Rand

Nelson Peltz's activist investment firm Trian Fund has disclosed a new stake in Allegion (ALLE) via a 13G filed with the SEC.  Per the filing, Trian now owns 5.9% of the company with over 5.7 million shares.

Allegion is a spinoff of securities businesses from Ingersoll-Rand (IR) and shares started trading at the beginning of December.  Shareholders of IR stock received 1 ALLE share per every 3 IR shares owned.

As of November, Trian owned also over 18.7 million shares of IR.

For more on this investor, head to Nelson Peltz's presentation at Invest For Kids Chicago.

Pennant Capital Discloses BFC Financial Position

Alan Fournier's hedge fund firm Pennant Capital has filed a 13G with the SEC regarding shares of BFC Financial Corp (BFCF).  Per the filing, Pennant now owns 3.94% of the company with 2,985,600 shares. 

This is the first time they've disclosed a position in this security.  The filing was required due to portfolio activity on December 4th.

Pennant also recently has decided to return some investor capital.  They join the likes of Baupost Group and Appaloosa Management (where Fournier previously worked) in the ranks of hedge funds that have sent capital back to investors.

Per Google Finance, BFC Financial is "a holding company whose principal holdings include controlling interests in Bluegreen Corporation and BBX Capital Corporation. The Company’s objective is to create long-term value for its shareholders through profitable growth of its portfolio companies and appreciation in the value of its investments. The Company has invested in or acquired businesses in a variety of industries. BBX Capital Corporation is a diversified investment and asset management company. In April 2013, Bluegreen Corporation completes merger with subsidiary of the Company, Woodbridge Holdings, LLC (Woodbridge)."

You can see some of Pennant's other recent trades here.

Blue Ridge Capital Discloses Zulily Stake

John Griffin's hedge fund Blue Ridge Capital recently filed a 13G with the SEC and disclosed a new stake in Zulily (ZU).  Per the filing, Blue Ridge now owns 6.05% of the company with 799,811 shares.

The company recently completed its initial public offering (IPO) on November 14th.  It priced at $22 per share, above the expected range, and now trades around $38.

Per Google Finance, Zulily is "an e-commerce company. The Company, through its desktop and mobile Websites and mobile applications, which it refers to as its sites, helps its customers discover new and unique products. The Company provides moms with a selection of over 4,500 product styles offered on a typical day through various flash sales events, which are limited-time curated online sales of selected products launched each day on its sites. The Company offers merchandise primarily targeted at moms purchasing for their children, themselves and their homes. Its merchandise includes children’s apparel, women’s apparel, and other product categories, such as toys, infant gear, kitchen accessories and home decor The Company sources its merchandise from thousands of vendors, including emerging brands and smaller boutique vendors, as well as larger national brands.The Company offers merchandise primarily targeted at moms purchasing for their children, themselves and their homes."

We've posted additional recent portfolio activity from Blue Ridge here.

Lee Cooperman Shows Increased Atlas Resource Partners Stake

Lee Cooperman's investment firm Omega Advisors recently filed an amended 13G with the SEC regarding their position in Atlas Resource Partners (ARP).  Per the filing, Cooperman now owns 11.1% of the company with 6,753,919 shares.

This marks an increase of over 1.9 million shares since the end of the third quarter.  The filing was made due to portfolio activity on November 12th.

Per Google Finance, Atlas Resource Partners is "an independent developer and producer of natural gas, crude oil and natural gas liquids (NGL), with operations in basins across the United States. The Company is a sponsor and manager of investment partnerships, in which it co-invests, to finance a portion of its natural gas and oil production activities."

You can view other activity from Cooperman here.

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."