What We're Reading ~ Hedge Fund Links 6/6/14

Hedge fund AUM hits $2.9 trillion [FINalternatives]

The hedge fund fee conundrum [All About Alpha]

Carl Icahn acquired Fannie/Freddie shares from Fairholme [Reuters]

Marcato Capital sends letter to American Realty Capital [Yahoo Finance]

Profile of David Abrams (ex-Baupost) [WSJ]

Want to work at a hedge fund? Go to these schools [CNBC]

Hedge fund cover without the hedge fund fees [Bloomberg]

The mysterious power pulling strings on Wall Street [Guardian]

In defense of hedge funds [Guardian]

Hedge fund replication: is it right for you? [P&I]

50 stocks most loved by hedge funds [WSJ]

The $13 billion mystery angels [BusinessWeek]

Icahn's son Brett setting up a hedge fund [WSJ]

What We're Reading ~ Analytical Links 6/4/14

Q&A with Alice Schroeder, author of The Snowball, book on Warren Buffett [Reddit]

For great returns, follow the cash [Millennial Invest]

Does value investing work in the tech sector? [Alpha Architect]

A lifelong pursuit of investment knowledge [Abnormal Returns]

On the importance of ROIC [Base Hit Investing]

Mauboussin on dividends and buybacks [Credit Suisse]

The demise of set-top box makers [BuysideNotes]

E-commerce is a bear - what one entrepreneur learned building [Medium]

Beware of emotions when investing [Investors]

Confessions of a former analyst [LinkedIn]

It's activists, not Buffett who can change corporate America [Dealbook]

Deciphering the economics of venture capital [TechCrunch]

What We're Reading ~ Hedge Fund Links 5/30/14

Baupost Group looks to real estate, Greek bank warrants [ValueWalk]

David Einhorn's comments at Greenlight Re investor day [Santangels Review]

Lee Cooperman's presentation why equities are the place to be [ValueWalk]

Top 500 hedge funds control 99% of industry assets [Reuters]

Interview with JANA's Barry Rosenstein [Barrons]

The rise of David Tepper [Marketwatch]

Hedge funds haunted by deflation spectre [FT]

Marcato Capital urges Intercontinental Hotels to pursue merger [Dealbook]

How do hedge funds get away with it? [New Yorker]

3 reasons the New Yorker is wrong about hedge funds [Forbes]

What to expect from a hedge fund [WSJ]

Hedge funds won't make you rich [Bloomberg]

Hedge funds' investing prowess doesn't live up to billing [WSJ]

How Athenahealth's CEO met his short-seller (Einhorn) [Fortune]

Ackman said to plan public hedge fund in London [Dealbook]

Woodbine Capital said to return client money [Bloomberg]

CQS' Hintze warns on market volatility [WSJ]

The trade of the century: when George Soros broke the British Pound [Priceonomics]

Tiger Global Exits Carter's Stake

Chase Coleman and Feroz Dewan's hedge fund Tiger Global has filed an amended 13G with the SEC regarding shares of Carter's (CRI).  Per the filing, Tiger Global has completely exited its stake and no longer owns any shares.

The filing was made due to activity on May 23rd.  The hedge fund had previously owned over 6.4 million shares and it had been a longstanding position.  Some hedge funds had been concerned with product cost inflation and the potential impact on gross margins this year.

Hedge funds that owned sizable CRI stakes as of the end of Q1 include Hound Partners, Pennant Capital, Glenview Capital, and White Elm Capital.

You can view other recent portfolio activity from Tiger Global here.

Per Google Finance, Carter's is "a branded marketer of apparel for babies and young children in the United States. The Company owns two brand names in the children’s apparel industry, Carter’s and OshKosh. Its Carter’s brand provides apparel for children sizes ranging from newborn to seven. OshKosh brand provides its line of apparel for children sizes newborn to 12. Its Carter’s, OshKosh, and related brands are sold to national department stores, chain and specialty stores and discount retailers."

Baupost Group Added to Vivendi Position

Seth Klarman's investment firm Baupost Group has added to its holding in Paris listed media company Vivendi (PAR:VIV).  Vivendi recently published the final version of its 2013 annual report which shows that during 2013 Baupost increased its holding from 1.38% to 2.0% (or 18.2 million to 26.8 million shares).

This newly updated shareholder information was correct as of December 31st, 2013 but unfortunately there's no clarity as to what they might have done with their stake since then (if anything).

Baupost have held a stake in Vivendi since 2011/2012 with a 2.04% stake.  By the end of 2012 they had trimmed the position down to 1.38% and now they've built it up again.

London Value Investor Conference Notes 2014: Morfit, Hawkins, Yacktman & More

Today we're pleased to present notes from the London Value Investor Conference 2014 that just took place benefiting School Aid to improve the quality of education in Africa.  Enjoy! 


Mason Morfit – ValueAct

Mason Morfit is a partner with activist manager ValueAct Capital.  ValueAct has held 75 core investments since inception in 2000.  Roughly half of these core investments (37) have resulted in a board seat. Unusually in the activist world, 36 of the 37 board positions have come via invitation rather than a proxy contest.  Mason Morfit has recently resigned his seat on the board at Valeant Pharmaceuticals.  Valeant was the highest returning investment in ValueAct’s history. 

Morfit is now focusing his energy on Microsoft where he took up a board seat earlier this year. The networks that ValueAct has built up over the years by sitting on boards has been a major contributor to their success.  Morfit said that gaining the Microsoft board seat while owning a relatively small amount of the company’s equity was the culmination of this work.  He mentioned that their contacts with people at Seagate and AT&T were particularly important in landing the seat. Interestingly, Morfit talked about ValueAct’s investment in Adobe which they started in 2011. Morfit seemed to suggest that there were similarities between the Adobe and Microsoft cases.  ValueAct has had success at Adobe partly due to the introduction of annual subscription charges for its leading software, Photoshop.  Is it possible that the subscription model could be pursued at Microsoft with, for example, Microsoft Office?

Executive compensation is a very important lever for ValueAct. Morfit said that their research shows that executive pay is not well connected to company performance. One of the key strategies they pursue is to put pressure on companies to directly tie CEO pay to shareholder returns. ValueAct are happy for CEO’s to receive high levels of compensation for high shareholder returns but they should only receive small sums for average and poor shareholder returns. ValueAct prefer CEO’s to own a significant amount of the company’s stock and in the Valeant case they succeeded in getting CEO, Michael Pearson, to borrow money to buy Valeant shares.

Another interesting fact that came out of Morfit’s presentation was that whilst he thinks the activist space is getting very crowed at present they have only bumped into another activist once and that was recently with Carl Icahn at Ebay.  ValueAct subsequently sold their stock quickly and moved on.

Morfit said that the UK offers a very good environment for activists to operate in as there are no regulations against large investors talking to one another. In the past, ValueAct has been involved with Misys and Invensys in the UK.  He admitted that they find mainland Europe a harder nut to crack but that he expects them to do more work there during the next ten years.

For more from ValueAct, we've previously posted Morfit's lectures on activist investing.


Mason Hawkins – Southeastern Asset Management 

Mason Hawkins said that if you want to outperform you must invest in companies with good leadership.  Finding high quality partners is even more important now that there is less value in the market.  He finds it relatively easy to identify investments at a good price but picking great business leaders is harder. Getting the people right is the hardest part.  He recommended William Thorndike’s book the “The Outsiders” as an excellent guide to how to identify successful CEOs. 

He pointed out that Southeastern has sometimes misjudged managements and in those cases they are prepared to get involved to put things right.  Southeastern has taken an activist stance many times over the years, filing twenty four 13Ds.  In the last year alone it has been involved in activist campaigns with four companies in the US: Level 3, ACS Group, Texas Instruments and Chesapeake Energy. In the previous year they were involved in gruelling battles with Dell and Olympus in Japan. 


Donald Yacktman – Yacktman Asset Management 

Perhaps the biggest piece of news from Don Yacktman was that during the Q&A he said they had recently been out buying Samsung Electronics.  He said the stock is currently very cheap. Yacktman talked about valuing stocks as bonds, a subject he has covered before. He sees value as a function of future cash flows. His funds like to invest in predictable businesses as this allow them to more accurately project cash flows into the future.  They like high returns on tangible assets at a reasonable price. Another interesting snippet from Yacktman was that they always vote against stock options as remuneration for management. 


David Samra – Artisan Partners 

Samra said that it is hard to find good ideas at the moment and that his best idea and largest holding was cash. Long Compass Group (LON:CPG). The company has a dominant position in the contract food and support services market. Great management, good growth, potential margin upside. They bought in 2009 at 11x earnings. Compass now trades at 19x earnings.

Long Samsung Electronics.  Samra said that he thought that Samsung was cheap compared to US companies like Apple.  Samsung is trading on a PE of 6.6 with a strong balance sheet and lots of cash. He likes the management team and is not worried that the company is family controlled.

Long Aker Solutions (OSL:AKVER). An oil services company which is going through restructuring. Sells for 0.6 of 2013 revenues and 11.6x 2013 operating income. The company is protected by entry barriers.

Long Chubb Corporation (NYQ:CB). A property and casualty insurer with low leverage, disciplined underwriting and a good track record over time.  It trades at 1.5 book value and 2013 10.7x PE.  It should trade at x2 book value. 


Aled Smith – M&G Investments 

Long: Ingredion (NYSE:INGR) Ex-quant, Aled Smith argued that the secret sauce for stock picking is not to be found in numbers and spreadsheets but in the qualitative aspects of today’s complex businesses.   He pitched Ingredion, formerly Corn Products International, a global manufacturer and supplier of starch and sweetener ingredients to food and beverage producers. Smith particularly rates the CEO, Ilene Gordon who he argues has increased innovation, cut waste, reduced injuries and introduced a continuous improvement culture. Ingredion is moving away from sugar to higher value added products.  Smith also likes the oligopolistic qualities of the business.  M&G own 1m shares which they purchased in March this year. 


Tim Hartch – Brown Brothers Harriman 

Tim Hartch focuses on high quality and resilient businesses with a durable competitive advantage. He requires a margin of safety in the region of 75% of intrinsic value.

Long: Zoetis (NYSE:ZTS) Zoetis was spun out of Pfizer in early 2013. Hartch purchased shares in Q1 2014 between $28-30. He values the company in the low $40s.  Zoetis is the world’s leading animal health company. They sell products to poultry farmers, ranchers, vets and cat and dog owners.  Sales relating to livestock account for 65% of the business whilst the animal companion market accounts for 35%. The pet and livestock market is growing driven by global population growth and growing global wealth. Unlike human health care, governments are not exerting downward pressure on costs. The customer base is loyal. Zoetis has the largest R&D budget in animal health. The company is diversified with over 300 different medicines, vaccines and services and is not dependent on a few big drugs. 

Long: Svenska Handlesbanken (Sweden).  This is a Swedish based bank that provides services for private and corporate customers.  The bank has been run conservatively and had a good financial crisis. Hartch likes the simplicity of the way they do business.  They make money from traditional banking. Local managers operate what they refer to as the 2church tower model “ where  local managers get to know their local clients.  Most Swedish towns have a church with a tower and the idea is the bank only serves the local community that can be seen by climbing to the top of the tower. Despite the traditional approach, Svenska Handlesbanken has the highest return on capital amongst banks in Sweden. Unusually, the bank does not pay bonuses but instead staff are rewarded via promotion. Capital ratios are good. The bank has entered the UK market over the last 12 years, opening 25-30 branches per year and now has 170 branches in total. Many customers in the UK are dissatisfied with the performance of British banks and Hartch thinks that the UK could become Svenska Handlesbanken’s most profitable market.


Andrew Cormie – Eastspring Investments 

Andrew Cormie argued that Asia Pacific region (excluding Japan) is currently cheap at 1.6x price/book.  He noted that historically when Asian markets have been priced this way returns have been positive over a one, three and five year time horizon.  Long: Bank of China (BoC) and Noble Group (Singapore) 


Philip Best & Marc Saint John Webb – Argos Investment Managers 

Best and Webb are deep value, Graham and Dodd style managers that specialise in buying things that most fund managers would not touch. Since inception in Dec 2007 they have returned 331% compared to the Euromoney European Smaller Companies index return of 192%  They like small, illiquid stocks, family owed stocks, orphan stocks, failed IPOs, fallen angels (once high flying growth companies that have fallen to earth and become hated).  They are not necessarily afraid of value traps and actively look for situations that make other investors fearful. Long: Donegal  Investment Group (Ireland); Camellia (LON:CAM); Les Nouveaux Constructeurs (France); Biesse (Italy); Hochdorf (Switzerland). 


Jonathan Mills – Metropolis Capital 

Jonathan Mills said that he agrees with Warren Buffett that it is better to buy a great business at a reasonable price but in the current market he is finding it a challenge to identify wide moat businesses with a margin of safety. Mills' answer to the problem is to consider a narrow moat business if it is what he calls “owner occupied”.

An owner occupied company is one where the founder has a significant ownership stake. Mills said that public markets do not distinguish between companies that are owner occupied and those that are not.  Yet a study by Bain & Co has shown that between 2002 and 2012 companies with founder traits outperformed the S&P 500 by three times. Mills says that founders tend to have long time horizons, be good capital allocators, are customer focused, restless innovators and keep costs down.

Long: Admiral Group (LON:ADM).  Admiral floated in 2004 and the founders Henry Engelhardt and David Stevens are still there. Since the IPO it has paid out dividends of over £1.4bn (current dividend yield 7%).  Admiral uses a capital light model and therefore should not be valued on book.  It is trading at 2013 13x PE – at the lower end of range for Admiral historically. 


Andrew Hollingworth – HollAnd Advisors 

Long: Buckle( NAS:BKE). Buckle is a retailer of casual apparel, footwear, and accessories. Return on Net Tangible Assets, last ten years avg 47%. Sales per share growth last 10 years 10.2% compounded. Management shareholding approx. 40%. Around 90% of net income has been returned to shareholders in the last 4 years. All growth has been organic (no acquisitions). 2013 13.4x PE. EV/EBIT 7.8x.  Eleven analysts cover the stock but there are no buy ratings at the moment. 


Charles Heenan – Kennox Strategic Value 

Long: Fujikon Industrial Holdings (Hong Kong).  Founded in 1983.  Heenan likes to see a long-term track record. Fujikon is primarily a manufacturer of headphones and headsets. Historic yield of 10%.  Strong balance sheet, 50% cash holding and no debt. In terms of historic PE values Fujikon has a 5 year average PE 11x and 10 yr average of 9x.  2014 10.13x PE. 


This concludes the notes from the London Value Investor Conference 2014.  If you missed it, we've also posted up notes from the Sohn Conference, that took place recently as well as the Next Wave Sohn Conference.

See What Top Hedge Funds Have Been Buying: New Q1 Issue Released Today

The brand new Q1 2014 issue of our premium publication, Hedge Fund Wisdom, was just released today.  Subscribers please login at www.hedgefundwisdom.com to download it.


Inside The New Issue

- The latest portfolios of 25 top hedge funds:  See the latest positions from David Tepper, Steve Mandel, Seth Klarman, John Paulson, and many more.

- In-depth equity analysis of 2 stocks:  Hedge funds bet big on these 2 stocks recently. Play catch-up quickly with detailed bull and bear case analysis.

- New consensus buy/sell section: Top 5 new buys, top 5 sells, top 5 additions, top 5 reductions.  Each list shows the most popular stocks among top managers.

- Expert commentary on each fund's moves:  We've been tracking these funds for over 6 years and explain the quick thesis behind some more of their trades.

- 1 convenient document (93 pages):  All the latest hedge fund data aggregated in one place to save you time. Search the PDF for your favorite manager or stocks with ease.



To Read The New Issue, Sign Up Below

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 or soft dollar account?  Email us: info@hedgefundwisdom.com

Capitalize For Kids Investors Conference in Toronto: Ainslie, Lasry, Robbins, Dinan & More

Today we're proud to introduce the Capitalize for Kids Investors Conference that will take place October 23-24 at Arcadian Court in Toronto, Canada.  This is the first major conference of its kind in Canada so it's a great opportunity for those of you based there.

Their goal is to annually raise over $1 million for the Hospital for Sick Children.  This year they'll be raising capital for the Centre for Brain and Mental Health.  To learn more about the conference, head to the Capitalize for Kids website.


Speakers List

- Lee Ainslie, Maverick Capital
- Marc Lasry, Avenue Capital
- Larry Robbins, Glenview Capital
- Jamie Dinan, York Capital
- Jeff Smith, Starboard Value
- Steve Shapiro, GoldenTree Asset Management
- Jody LaNasa, Serengeti Asset Management
- Jacob Doft, Highline Capital
- Michael Thompson, BHR Capital
- Brian Zied, Charter Bridge Capital
- Frank Brosens, Taconic Capital
- Evan Vanderveer, Vanshap Capital
- Jeff Hales, Alignvest Capital
- Scott Ferguson, Sachem Head Capital
- Chuck Akre, Akre Capital
- Guy Gottfried, Rational Capital
- Sahm Adrangi, Kerrisdale Capital
- John Thiessen, Vertex One

As you can see, this event is absolutely loaded with quality speakers in order to benefit the Hospital.  In addition to the conference, if you join the cause you will also receive actionable investment ideas from several research partners throughout the year.  They include Horizon Kinetics, Veritas Investment Research, Voyant Advisors and many more.

Embedded below is the flyer for the event:



To hear investment ideas from these hedge fund managers, register for the event by clicking here. It should be a great conference benefiting a great cause.

NYU Stern Evaluation Investment Newsletter: Marc Lasry Interview

NYU Stern's student-run investment newsletter Evaluation is out with its second issue.  This time around, they focus on distressed investing with interviews with Avenue Capital's Marc Lasry, as well as bankruptcy expert Dr. Ed Altman, among others.

Also featured are investment pitches from the Stern Investment Idea contest.  Ideas include long Urban Outfitters (URBN), short Ulta Salon (ULTA), long Apple (AAPL), long Bonanza Creek Energy (BCEI), long Wisdom Tree (WETF), long Amerco (UHAL), and long FTI Consulting (FCN).

Embedded below is the second edition of NYU Stern's Evaluation investment newsletter:



If you missed it, we posted NYU Stern's inaugural issue here as well.

Marcato Capital Files 13D on Life Time Fitness

Mick McGuire's hedge fund firm Marcato Capital Management has filed a 13D with the SEC on Life Time Fitness (LTM).  This is a brand new position for the hedge fund and they now own 7.2% of the company with over 2.9 million shares.

The filing was made due to activity on May 12th.  The activist investor included the typical boilerplate in the 13D and didn't outline any specific plans at this time.

Marcato's position is comprised of various stock options as they have calls referencing an aggregate of over 1.7 million shares with an exercise price of $30 and expire in July 2014.  They also sold put options for the same underlying amount of shares with the same strike and expiration date.  They've also entered into swaps.

Their trading activity log shows they were buying stock at the end of March around $47.80, the end of April around $47.74 and in the middle of may around $48.45.

Per Google Finance, Life Time Fitness is "operates multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment."

For more on this hedge fund, check out Marcato's presentation on Sotheby's & Dillards.

50% Discount to the Value Investing Congress: Only 275 Seats Available

The 10th annual Value Investing Congress will take place on September 8 & 9 in New York City.  This year, they're limiting attendance to only 275 people, so if you want to attend you'll have to sign up fast. 

*** We're pleased to offer readers a special discount: over 50% off.  Click here to register and use discount code: MARKETFOLLY

This discount expires on June 24th, but don't wait until then to sign up because there's so few seats this year and it will sell out quickly.

Speakers List

- Leon Cooperman, Omega Advisors
- Jeffrey Smith, Starboard Value
- Alex Roepers, Atlantic Investment Management
- Carson Block, Muddy Waters Research
- Guy Gottfried, Rational Investment Group
- Sahm Adrangi, Kerrisdale Capital
- Whitney Tilson, Kase Capital
- David Hurwitz, SC Fundamental
- Michael Kao, Akanthos Capital
- John Lewis, Osmium Partners
- Tim Eriksen, Eriksen Capital
- Cliff Remily, Northwest Priority Capital
- And More Speakers Will Be Announced Soon
 
Also, the press is not being invited to the event, so if you don't want to miss out on the latest investment ideas from the above hedge fund managers, be sure to attend.

Discount Code

To take advantage of the discount for our readers, enter the discount code: MARKETFOLLY
Sign up with this link to secure one of the few seats available

What We're Reading ~ Analytical Links 5/14/14

Dream Big: on the Brazilian Trio behind 3G Capital [Amazon]

On investment process [Dasan]

Predicting the present with Google Trends [Berkeley]

A look at Yahoo: a puzzle, a mystery and an enigma [Aswath Damodaran]

The unlikely ascent of Jack Ma, Alibaba's founder [NYTimes]

Recession-baby millennials shun stocks after US slump [Bloomberg]

Families are dining out a lot less [RestFinance]

The future of monetising television [TheGuardian]

What happens when the cable TV money dries up? [Sports on Earth]

Africa growth outlook [WEForum]

Macau jackpot turns to bust for stock investors amid rout [Bloomberg]

Murdoch's $14 billion TV plan sets up showdown with Malone [Bloomberg]

AT&T's deal strategy raises questions [Dealbook]

How dumb are fund investors? [WSJ]

Post Office says it lost $1.9 billion in quarter [NYTimes]

Tiger Global Discloses Tuniu Position

Chase Coleman and Feroz Dewan's hedge fund Tiger Global has filed a 13G with the SEC regarding shares of Tuniu (TOUR).  Per the filing, Tiger Global has revealed a new position in TOUR with 3.6 million shares. 

This represents a 10.1% ownership stake in the company.  The filing was required due to activity on May 9th when the company completed its initial public offering (IPO).

In other recent activity, Tiger Global also started a Zillow stake.

Per Google Finance, Tuniu is "an online leisure travel company. The Company offers a selection of packaged tours, including organized tours and self-guided tours, as well as travel-related services for leisure travelers. It offers packaged tours sourced from over 3,000 travel suppliers, covering over 70 countries, as well as all popular tourist attractions in China. The Company’s product portfolio consists of over 100,000 stock-keeping units (SKUs) of organized tours, over 100,000 SKUs of self-guided tours, and tickets for over 1,000 domestic and overseas tourist attractions. Its online platform, which consists of its tuniu.com Website and mobile platform, provides comprehensive product and travel information through user-friendly interfaces to enable leisure travelers to plan their travels and search for itineraries. Its online platform contains photos, information and recommendations for all destinations it covers."

Farallon Capital Discloses Gleacher Stake

Andrew Spokes' hedge fund firm Farallon Capital has filed a 13G with the SEC regarding Gleacher (GLCH).  Per the filing, the hedge fund has disclosed a 7.3% ownership stake in Gleacher with 451,000 shares.

The filing was made due to portfolio activity on May 2nd.  The company's board of directors has approved a liquidation of assets.

Per Google Finance, Gleacher is "an investment bank that provides corporate and institutional clients with financial advisory services, including merger and acquisition, restructuring, recapitalization, and strategic alternative analysis. Gleacher offers a range of products through its Investment Banking, Mortgage Backed/Asset Backed & Rates (MBS/ABS & Rates), Corporate Credit and ClearPoint divisions. It also provides capital raising, research-based investment analysis, and securities brokerage services, and, through the Company's ClearPoint Funding, Inc. subsidiary (ClearPoint), engages in residential mortgage lending."

Paulson & Co Adds To Mallinckrodt (MNK) Stake

John Paulson's hedge fund firm Paulson & Co has filed a Form 4 with the SEC regarding their position in Mallinckrodt (MNK).  Per the filing, Paulson acquired 786,207 shares on  May 7th, 8th, and 9th at prices between $73.0131 and $76.8431. 

After these transactions, Paulson now owns over 6.7 million MNK shares.  For a reference point, they owned 5.6 million shares at the end of 2013 per their 13F filing.  The hedge fund was recently granted an option to increase its stake in MNK to 20%.

Mallinkckrodt has been one of the many pharmaceutical plays involved in M&A lately.  After acquiring Cadence Pharmaceuticals, they recently announced an agreement to acquire the controversial Questcor Pharma (QCOR).  Barry Rosenstein's hedge fund JANA Partners also has a sizable stake in MNK as well.

Per Google Finance, Mallinckrodt is "a global specialty pharmaceuticals company. The Company develops, manufactures, markets and distributes both branded and generic specialty pharmaceuticals, active pharmaceutical ingredients (API) and diagnostic imaging agents. The Company uses its API products in the manufacture of its generic pharmaceuticals and also sells them to other pharmaceutical companies. The Company operates through two segments: Specialty Pharmaceuticals and Global Medical Imaging."

You can view other portfolio activity from Paulson & Co here.

ValueAct Capital Acquires More Microsoft Shares

Jeff Ubben's hedge fund firm ValueAct Capital has filed a Form 4 with the SEC regarding their stake in Microsoft (MSFT).  Per the filing, ValueAct has acquired over 2.9 million shares on May 8th and 9th at prices ranging from $39.49 to $39.59.

This comes in addition to the 66.8 million shares ValueAct already owns.

Recently, we highlighted that ValueAct's Mason Morfit stepped down from Valeant Pharmaceuticals' board and the hedge fund will also likely be reducing their stake.

Morfit is now on Microsoft's board as they look to push the company in the right direction after new CEO Satya Nadella has replaced Steve Ballmer.

Per Google Finance, Microsoft is "engaged in developing, licensing and supporting a range of software products and services. The Company operates in five segments: Windows & Windows Live Division (Windows Division), Server and Tools, Online Services Division (OSD), Microsoft Business Division (MBD), and Entertainment and Devices Division (EDD). The Company’s products include operating systems for personal computers (PCs), servers, phones, and other intelligent devices; server applications for distributed computing environments; productivity applications; business solution applications; desktop and server management tools; software development tools; video games, and online advertising."

Larry Robbins' Slideshow Presentation From Sohn Conference: HUM, WLP, MON

We posted up notes from the 2014 Sohn Conference in New York if you haven't seen them.  At the event, Larry Robbins of Glenview Capital pitched longs of Humana (HUM), WellPoint (WLP), and Monsanto (MON).  The conference has recently released his slideshow presentation and it is embedded below:



Be sure to check out the rest of the Sohn conference notes here.

David Einhorn's Slideshow Presentation on AthenaHealth From Sohn Conference

If you missed it, we recently posted up notes from the 2014 Sohn Conference in New York.  There, David Einhorn of Greenlight Capital unveiled a short of Athena Health (ATHN).  The conference has released his full slideshow presentation now and it is embedded below:



Be sure to check out the rest of the hedge fund pitches from Sohn here.

What We're Reading ~ Hedge Fund Links 5/9/14

The rich list: highest earning hedge fund managers of the past year [II Alpha]

Hedge fund managers paid too much? [Pension Pulse]

Why do investors love large hedge funds? [All About Alpha]

On navigating a big ship [Research Puzzle]

The case for alternative mutual funds [HF Intelligence]

UK dominates European hedge fund assets by wide margin [P&I]

Does big money hurt hedge fund returns? [Barrons]

Rising interest rates will hurt these hedge funds [Barrons]

Greenlight asked SEC for delay on disclosure of Micron stake [Dealbook]

FPA's Romick hoards cash, sees few opportunities [Reuters]

Sotheby's, Loeb end fight over board [Dealbook]

High frequency trading hurts hedge funds [Marketwatch]

"My time on the sell side" [A Wealth of Common Sense]

ValueAct Steps Down From Valeant Board, To Trim Position

ValueAct Capital filed an amended 13D with the SEC regarding their position in Valeant Pharmaceuticals (VRX).  Per the filing, they note that Mason Morfit will be stepping down from the board of directors.

The key takeaway here is that ValueAct says they're doing this in order to trim their position size because they have a "practice of reducing portfolio weightings in companies where we no longer serve on the board of directors."

Their current stake is valued at approximately $2.5 billion and the letter specifically references that they'd like to still maintain "more than $1 billion in shares."  As far as the timetable of their sales, the letter hints that they might choose to sell some of their stake "later this year."


Mason Morfit's Letter to Valeant

Here's the full letter of his resignation:

"Dear Mike, 

I am hereby resigning effective today as a director of Valeant Pharmaceuticals International. 

As you know, ValueAct Capital has been a shareholder of Valeant Pharmaceuticals since 2006 and I have been a member of the board of directors since 2007. My team and I are proud to have worked with you and to have been a part of tremendous value creation for all shareholders. As I have told you, after seven years on the board of directors, and with my new position on the board of directors of Microsoft, the time has come for me to reallocate my time to other board work. The company is in an extremely strong position and I feel good about the future of Valeant. 

Due to the company?s strategy, there have been very long periods during which we have not been able to buy and sell shares. Most recently, ValueAct Capital has been restricted from selling any shares in Valeant since June 2013, during which time the stock has risen from $85 to $135. Beginning in February 2014, I expressed to you and the board my desire to manage down this position in our fund (currently approximately $2.5 billion out of our $14 billion in assets under management). By resigning today, with the Allergan transaction in the public domain and with Valeant?s earnings report later this week, this will create an opportunity for ValueAct Capital to sell if we choose (of course depending on stock price) later this year. Serving out the remaining term of my board service, could potentially create additional delays and complications, particularly if Allergan enters into negotiations with Valeant. 

To reiterate, we are making a portfolio management decision, not a decision about Valeant?s fundamental business, future performance or the merits of the Allergan deal.  ValueAct Capital has a practice of reducing portfolio weightings in companies where we no longer serve on the board of directors. We have done this consistently since our inception in 2000. That being said, after my resignation we still plan to be large Valeant shareholders for some time. We currently plan to hold more than $1 billion in shares and Valeant should remain one of our top positions. I wish you, your team and my board colleagues all the best and look forward to many more years of extraordinary performance.  Sincerely,  /s/ G. Mason Morfit"


For more on ValueAct, head to Jeff Ubben on Valeant in his recent interview as well as Mason Morfit's lecture on activist investing.