Hedge funds are now a $3 trillion industry [Barrons]
Inside the mind of Fairholme's Bruce Berkowitz [Institutional Investor]
How to craft the world's worst pitchbook [HF Intelligence]
Cybersecurity firm says large hedge fund attacked [CNBC]
Omega Advisors' Einhorn says bull market not over [Reuters]
Paulson & Co amasses large stake in Allergan [Reuters]
Relational said to plan activist campaign against Manitowoc [Dealbook]
Jeff Ubben has new target: his hedge fund peers [WSJ]
Former ESL pros open activist operation [HF Alert]
Hedge fund investors are fussy about fees [Funds Europe]
Hedge funds face higher prime broker charges under Basel III [Risk.net]
Saba, Brevan Howard struggle as volatility disappears [BusinessWeek]
Investors adopting partnership-driven approach to hedge funds [COO Connect]
HF analyst: the things I know for sure [Wall Street Oasis]
Friday, June 27, 2014
What We're Reading ~ Hedge Fund Links 6/27/14
Tuesday, June 24, 2014
Jeff Ubben & Barry Rosenstein on Activist Investing at Milken Institute
At the Milken Institute Global Conference, prominent hedge fund managers gathered on a panel about activist investors and the search for alpha. The panel consisted of:
- Jeff Ubben, ValueAct Capital
- Barry Rosenstein, JANA Partners
- Clifton Robbins, Blue Harbour Group
- Chris Teets, Red Mountain Capital
In it, the fund managers talked about the different styles of activist investing.
Rosenstein said that, "I'm happy to be friendly as long as the company does what I want them to do."
Robbins contributed, "I think that there's been a palpable change in the last four or five years generally in the attitudes of boards and CEOS in their willingness to listen to large stockholders."
Ubben took issue with activist investing being 'daytrader fodder' and labeled it as 'bad.' Ubben revealed he had built an eBay stake at $50 and wanted to buy more but Icahn's involvement pushed shares higher. He says Carl's a great stockpicker, but the activist situation there was a non-event.
Ubben later noted that he thinks activist investing is too short-term these days rather than building a company over the long-term. Robbins agreed with him. However, Rosenstein took the other side of the argument.
Embedded below is the full activist investing panel from the Milken Institute Global Conference:
For more on the subject, head to Mason Morfit's lectures on activist investing (he's part of ValueAct with Ubben).
Tiger Global Discloses Zhaopin Position
Chase Coleman and Feroz Dewan's hedge fund Tiger Global has filed a 13G with the SEC regarding shares of Zhaopin (ZPIN). Per the filing, Tiger Global now owns 18.6% of the company with over 2.49 million shares (represented by over 1.24 million ADR shares).
The filing was made due to activity on June 12th as the company has just completed its initial public offering (IPO).
You can view other recent portfolio activity from Tiger Global here.
Per Google Finance, Zhaopin is "a career platform in China, focusing on connecting users with relevant job opportunities throughout their career lifecycle. The Company’s zhaopin.com Website is a career-focused Website in China. The Company provides a range of services, including online recruitment, campus recruitment, assessment and other human resources related services. Through its zhaopin Websites and mobile applications, it provides classified job postings and display advertisements, resume access services and other online services. The Company provides campus recruitment services primarily to customers seeking to recruit college and university students. These services include selecting campuses, organizing recruiting events, collecting and managing resumes and conducting interviews and assessment tests with candidates."
Valinor Management & Lee Cooperman Update dELiA's Stakes
David Gallo's hedge fund firm Valinor Management has filed an amended 13D and form 4 with the SEC regarding their stake in dELiA's (DLIA). Per the filing, Valinor now owns 27.9% of the company with aggregate exposure to 24.8 million shares.
This marks an increase of over 18.2 million shares of common stock since the end of the first quarter. Valinor automatically converted their Secured Convertible Notes into shares of Series B Convertible Preferred Stock. The filing was made due to activity on June 17th.
The 13D notes that Valinor has nominated Seth Cohen to dELiA's board and he is now a director. The hedge fund also has the right to nominate another individual to the board, but that person cannot be an employee of the fund.
Valinor originally started its dELiAs stake in October of 2013.
Lee Cooperman Updates Stake Too
Omega Advisors' Lee Cooperman has also filed an amended 13G with the SEC regarding dELiA's too. Lee has revealed he owns 11.42% of the company with over 8.5 million shares.
His stake is comprised of 3.75 million shares of common stock (issuable upon conversion of 30,000 shares of Series B Convertible Preferred Stock).
A few months ago, we also highlighted that Tiger Global raised its dELiA's stake.
Per Google Finance, dELiAs is "a retail company comprised of two lifestyle brands primarily targeting teenage girls and young women. The Company generates revenue by selling predominantly to teenage consumers through direct mail catalogs, Websites and retail stores. It operates in dELiA*s brand. Through its e-commerce Webpages, catalogs and retail stores, dELiA*s (the brand) offers a variety of product categories to teenage girls to cater to an entire lifestyle. Through its catalogs and the e-commerce Webpages, it sells many name brand products along with its own brand products in key teenage spending categories. These products include apparel and accessories. Its mall-based dELiA*s specialty retail stores derive revenue primarily from the sale of apparel and accessories and, to a lesser extent, branded apparel to teenage girls. It operates in two segments: direct marketing and retail stores."
Sunday, June 22, 2014
Our 50% Discount to the Value Investing Congress Expires in 2 Days: Only 123 Seats Left
Just a reminder for readers that our 50% discount to the Value Investing Congress in New York City expires in just 2 days! Click here to register and use discount code: MARKETFOLLY
*** Please note that this venue is much smaller than previous years and there are now only 123 seats left. ***
Event Details
Date: September 8 & 9, 2014
Location: Florence Gould Hall in New York City near Central Park
Hotel: Discounted group rate at the Loews Regency Hotel
Hedge Fund Speakers
Lee Cooperman, Omega Advisors
Jeff Smith, Starboard Value
Alex Roepers, Atlantic Investment Management
Carson Block, Muddy Waters Research
Sahm Adrangi, Kerrisdale Capital
Guy Gottfried, Rational Investment Group
David Hurwitz, SC Fundamental
Michael Kao, Akanthos Capital
Whitney Tilson, Kase Capital
John Lewis, Osmium Partners
Tim Eriksen, Eriksen Capital Management
Cliff Remily, Northwest Priority Capital
50% Discount Expires on June 24th
Again, there are only 123 seats left and Market Folly's 50% discount expires in just 2 days. You can grab one of the last few seats by registering here. Your price is cut in half by using our discount code: MARKETFOLLY
Thursday, June 19, 2014
Marcato Capital Increases Life Time Fitness Stake
Mick McGuire's hedge fund firm Marcato Capital today filed an amended 13D with the SEC regarding their stake in Life Time Fitness (LTM). Per the filing, Marcato has indicated they own 7.6% of the company now with over 3.11 million shares. This is up from the 2.9 million shares they previously disclosed.
The filing notes that "On June 17th (Marcato) received notification granting their request for early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Following such notification, (Marcato) exercised options that they owned and purchased additional shares."
We highlighted Marcato's original 13D filing on LTM here.
Per Google Finance, Life Time Fitness "operates multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment."
Senator Investment Group Discloses Peabody Energy Position
Alex Klabin and Doug Silverman's hedge fund firm Senator Investment Group has filed a 13G with the SEC regarding shares of Peabody Energy (BTU). Per the filing, Senator now owns 5.5% of the company with 15 million shares. This position is inclusive of call options exercisable into 10 million shares.
This is a newly disclosed equity position as they did not report ownership at the end of the first quarter. The filing was made due to activity on June 2nd.
You can view additional recent portfolio activity from Senator here.
Per Google Finance, Peabody Energy is "a private-sector coal company. The Company owns interests in 28 active coal mining operations located in the United States and Australia. The Company has a majority interest in 27 of those coal operations and a 50% equity interests in the Middlemount Mine in Australia. The Company also owns a noncontrolling interest in a mining operation in Venezuela. In addition to the Company's mining operations, the Company markets and broker coals from its operations and other coal producers, both as principal and agent, and trade coal and freight-related contracts through trading and business offices. The Company conducts business through four principal segments: Western United States. Mining, Midwestern U.S. Mining, Australian Mining and Trading and Brokerage. The Company's fifth segment, Corporate and Other, includes mining and export/transportation joint ventures, activities associated with certain energy-related commercial matters, Btu Conversion."
For more from this hedge fund, head to Senator's thesis on Air Products & Chemicals.
Wednesday, June 18, 2014
What We're Reading ~ Analytical Links 6/18/14
Market valuation overview: yet more expensive? [Advisor Perspectives]
Lessons learned on finance, investing and more [Morgan Housel]
A look at Admiral Plc [Value and Opportunity]
Why millennials should try their luck in Mexico [BlackRock]
Slide deck on the emerging global web [View From the Blue Ridge]
Why smart people struggle with strategy [Harvard Business Review]
A look at Capital Group's Gordon Crawford [American Funds]
Why you have way too much invested in US stocks [Advisor Perspectives]
Don't do what you love, do what you do [Harvard Business Review]
AIG's collapse: the part nobody likes to talk about [American Banker]
Is Silicon Valley the future of finance? [NYMag]
A look at Apple under Tim Cook [Daring Fireball]
On Google's Skybox acquisition [WSJ]
The age of transformation [Mauldin]
Why China doesn't want to be number one [East Asia Forum]
Don't worry about illiquidity, worry about being right [MicroCapClub]
Eminence Capital Boosts Allscripts Healthcare Solutions Position
Ricky Sandler's hedge fund firm Eminence Capital has filed a 13G with the SEC regarding shares of Allscripts Healthcare Solutions (MDRX). Per the filing, Eminence has revealed a 5.1% ownership stake in MDRX with over 9.2 million shares.
This marks an increase of over 847,000 shares in their position since the end of the first quarter. The filing was made due to activity on June 3rd.
You can view other recent portfolio activity from Eminence here.
Per Google Finance, Allscripts Healthcare Solutions "is a provider of clinical, financial, connectivity and information solutions and related professional services to hospitals, physicians and post-acute organizations. The Company provides a variety of integrated clinical software applications for hospitals, physician practices and post-acute organizations. For hospitals and health systems these applications include its Sunrise Enterprise suite of clinical solutions, consisting of a range of acute care Electronic Health Record (EHR), integrated with financial/administrative solutions, including performance management and revenue cycle/access management. The Company’s acute care solutions include Emergency Department Information System (EDIS), care management and discharge management."
TPG-Axon Increases GNC Holdings Stake
Dinakar Singh's hedge fund firm TPG Axon has filed a 13G with the SEC regarding shares of GNC Holdings (GNC). Per the filing, TPG has revealed a 5.8% ownership stake in GNC with over 5.28 million shares.
This marks an increase of 1,258,000 shares in their position size since the end of the first quarter. The filing was made due to activity on June 16th.
You can view some previous investment picks from Dinakar Singh here.
Per Google Finance, GNC Acquisition is "a global specialty retailer of health and wellness products. The Company has three segments: Retail, Franchise and Manufacturing/Wholesale. Corporate retail store operations are located in the United States, Canada, and Puerto Rico, and in addition the Company offers products domestically through GNC.com, LuckyVitamin.com and www.drugstore.com. Franchise stores are located in the United States and 54 international countries, including distribution centers where retail sales are made. The Company operates its primary manufacturing facilities in South Carolina and distribution centers in Arizona, Pennsylvania and South Carolina. The Company manufactures the majority of its branded products, but also merchandises various third-party products. It sells products through a worldwide network of more than 8,100 locations operating under the GNC brand name."
Friday, June 13, 2014
Eminence Capital Increases Fossil Group Stake
Ricky Sandler's hedge fund Eminence Capital has filed a 13G on shares of Fossil Group (FOSL). Per the filing, the hedge fund has disclosed a 5.1% ownership stake in with over 2.7 million shares.
This marks an increase of 854,042 shares since the end of the first quarter. The filing was made due to activity on June 2nd.
You can view other recent portfolio activity from Eminence Capital here.
Per Google Finance, Fossil Group is "a global designer, marketer and distributer company that specializes in consumer fashion accessories. The Company’s offerings include a line of men's and women's fashion watches and jewelry, handbags, small leather goods, belts, sunglasses, soft accessories and clothing. Its products are distributed globally through various distribution channels, including wholesale in countries where it has a physical presence, direct to the consumer through its retail stores and commercial websites and through third-party distributors in countries where the Company do not maintain a physical presence."
Julian Robertson Likes Google, Gilead Sciences: Interview
Tiger Management's Julian Robertson made his rare yearly media appearance on CNBC and talked about why investors have piled into stocks and some of his favorite equities these days.
Robertson noted that, "Bonds are so unattractive that people have no alternative to put their money... so they're jamming them into stocks. I wonder what will happen when the bond market turns?"
Robertson continues to hold a large position in Google (GOOG) and thinks the company has such a great moat that "no one can breach it."
He also mentioned he likes Uber and uses it often. He said he'd invest in Uber at twice the price that Google initially bought in at.
The Tiger Management founder also likes Gilead Sciences (GILD), citing their various drugs and management's ability to buy companies at good prices. He sees cashflow ramping up from their Hepatitis C drug.
Robertson was also asked who he thinks is the best investor these days. He replied:
"The man I respect the most in the business is probably Stan Druckenmiller. He's just so smart and so good and so up on everything. I think he's a fantastic investor."
Embedded below is a clip of Robertson's interview:
What We're Reading ~ Hedge Fund Links 6/13/14
Profile on Ray Dalio/Bridgewater: how the largest hedge fund operates [WSJ]
Oaktree Capital said to cut fund as distressed deals diminish [Bloomberg]
Azentus Capital likes India and Maruti [HedgeWorld]
Hedge funds fret student loan reform [HedgeWorld]
Sureview Capital shuts down [FINalternatives]
On derivative reporting in Europe [COOConnect]
Do you know what alternative investments are? Many investors don't [BizJournals]
Wednesday, June 11, 2014
What We're Reading ~ Analytical Links 6/11/14
Sons of Wichita: profile of the Koch Brothers [Daniel Schulman]
On value traps [Aleph Blog]
On the importance of ROIC part 2 [Base Hit Investing]
Comparing golf to investing: leave the driver in the bag [Value & Opportunity]
Lost generation casts shadow over housing market [WSJ]
On the future of cash use [Federal Reserve]
Negative piece on AmTrust Financial Services [Barrons]
On spotting frauds [Glenn Chan]
On the wisdom of crowds [Good Judgment]
Bill Nygren's favorite stocks [Barrons]
Odey Asset Management Boosts Cadiz Positiion
Crispin Odey's hedge fund firm Odey Asset Management has filed a 13G with the SEC regarding shares of Cadiz (CDZI). Per the filing, Odey has revealed a 10.5% ownership stake in CDZI with over 1.7 million shares.
This marks an increase of 720,300 shares since the end of the first quarter. The filing was required due to activity on May 31st.
You can view other activity from Odey here.
Per Google Finance, Cadiz is "engaged in acquiring and developing land and water resources. The Company’s primary asset consists of 45,000 acres of land in three areas of eastern San Bernardino County, California. The Company’s portfolio of water resources is located in proximity to the Colorado River and the Colorado River Aqueduct (CRA), the principal source of imported water for Southern California, and provides the Company with the opportunity to participate in a variety of water supply, water storage, and conservation programs with public agencies and other partners. It owns approximately 34,000 acres of land and the subsurface strata, inclusive of the unsaturated soils and appurtenant water rights in the Cadiz and Fenner valleys of eastern San Bernardino County (the Cadiz/Fenner Property). It also own approximately 10,800 additional acres in the eastern Mojave Desert, including the Piute and Danby Dry Lake properties."
Tiger Global Raises Restoration Hardware Stake
Chase Coleman and Feroz Dewan's hedge fund Tiger Global has filed a 13G with the SEC regarding shares of Restoration Hardware (RH). Per the filing, Tiger Global has revealed a 6.4% ownership stake in RH with over 3.19 million shares.
This marks an increase of over 1.25 million shares since the end of the first quarter. The filing was made due to activity on June 2nd.
You can view additional recent portfolio activity from Tiger Global here.
Per Google Finance, Restoration Hardware is "a holding company. The Company is merchants of home furnishings. Restoration Hardware Holdings offers merchandise assortments across a number of categories, including furniture, lighting, textiles, bath ware, decor, outdoor, garden, and baby and child products. The Company’s business is integrated across its multiple channels of distribution, consists of its stores, catalogs and Websites."
Carl Icahn Takes Family Dollar Stake, Company Adopts Poison Pill
Activist investor Carl Icahn has taken a 9.39% stake in Family Dollar (FDO) per a filing with the SEC. After disclosing his stake, shares jumped over 14%.
It seems Icahn's plan here is to get the company sold. While private equity firms or Dollar General (DG) could be logical suitors, Family Dollar announced that they've adopted a shareholder rights plan.
Icahn is looking to talk to FDO's board so we'll see what comes of his activism. While dollar stores have been popular plays among hedge funds, many long/short managers have preferred shares of DG (such as Lone Pine, Tiger Global, Glenview, Senator, Corvex and more).
That said, Family Dollar's largest shareholder list as of the end of Q1 included Nelson Peltz's Trian Fund as well as Paulson & Co.
Tuesday, June 10, 2014
Notes From Berkshire Hathaway's Annual Meeting 2014
Berkshire Hathaway's 2014 annual meeting has come and gone. While many of you have undoubtedly already read synopses of the event, here's a set of detailed notes for a further glimpse into the minds of Warren Buffett and Charlie Munger.
Berkshire Hathaway Annual Meeting 2014 Notes
The meeting started out with Warren Buffett (WB) discussing the results from the first quarter. $77B in float. Insurance business is great. Insurance earnings dragged down operating income, but a lot of that was foreign exchange.
Resolutions for dividend. 97% of the 'A' share voted against with 1% voting for. Almost the exact percentages of the 'B' shares as well, 97% to 2%. Almost as many people voted for WB as they voted not to put a dividend in place.
Q&A Session
WB - Both Rail and Utility could do more with debt. If they were younger, they'd probably do it. Good idea. They'd do it if a deal came along. Should not have used BRK stock in BNSF.
SH - Question about 0% interest rates.
CM - In Japan no one would have expected low rates in 20 years. Very confusing to economics professors. If not confused, then didn't understand.
WB - Collection of businesses has worked well for America. Thinks business plan is good. System for allocating capital. As if conglomerate is buying using cash or stock.
CM - They have more investment options than others. Can buy companies, insurance companies, marketable securities, etc.
JB - Forest River vs. Thor for recreational vehicles?
WB - Bought Forest River about 10 years ago. Pete sold it to PE firm in 90s. PE firm created hell for him. He quit, it went BK. Pete bought it out of BK and sold it to BRK 10 years ago. WB doesn't know the RV business and no one else at BRK does. Talks to Pete once every couple years. His company. Six IT people.
WB - Business in Marmon does business with Oil Sands. Owns some XOM with business in oil sands. Also has BNSF moving oil. Rail moves oil 2x faster than pipelines. Oil sands are important for mankind over centuries to come.
CM - Economic if NatGas is cheap and oil expensive.
-----
2ND HALF
WB - Sent out 11,000 more tickets this year compared to prior year.
BQ - Question about Energy Future Holdings. Also, other companies in umbrella of similar risk.
WB - He gets credit on Energy Future Holdings. Business models can be at risk. Geico - Mail - Phone - Internet. When change from government employees at one point they almost went broke.
CM - Remove your ignorance, scramble out of mistakes.
WB - He will be filing public statements. Has historically had 15% margins and expects those to go up over time.
SH - Expand on thoughts of investment opportunity. Why buy some companies vs others? Example, ones he bought vs. KO or Moody's.
WB - Bought a bit early in Fall of 2008 vs. early 2009. Did reasonably well overall. Plus they did get BNSF in Fall of 2009. Want to buy good businesses for reasonable prices over time.
CM - Private businesses more ideal target than stocks, and guesses that will continue, right Warren?
CM - Love buying transmission lines in Alberta. Have to adapt to BRK.
WB - Have bought a fair amount of Wells Fargo last couple years. Weak banks have bounced back the most.
AS - Geico and usage based pricing and impact on auto industry and Geico. Also, self-driving cars. Would you sell Geico if need for auto insurance went away?
WB - Won't sell. Underwriting in auto a bit different than life. Different variables. Feels very good about Geico, the management, and ability to manage risk. Self-Driving cars will be good for society and bad for auto insurers.
CM - Things can take long time. Example is movies on demand. Thinks self-driving cars will take a while.
WB - No preference for US businesses, but that seems to be where the deals are coming from. More recognition in the US. Some awareness. Lots of great things to say about Iscar. April had record sales.
SH - Circle of competency. How does one know what their circle of competency is?
WB - Good question. Need to be self-realistic. Was out of his circle of competency when he bought Berkshire Hathaway. Has also stretched in the area of retail. Ms. B (of Nebraska Furniture Mart) didn't take BRK stock because it wasn't in her circle of competency. Her areas were cash, retail, and real estate.
CM - Not that different. Someone that's 5'2" probably isn't going to be great at basketball and someone that's 350 pounds probably not going to be great at ballet. 95 year old probably not going to get the leading role in a romantic movie. Circle of competence can be a relative concept. I need to compete against idiots and there's a large supply.
CL - Question about the logic of comparing the annual change in Berkshire's Book Value vs. S&P 500.
CM - (Charlie interrupted Buffett from answering) - Doesn't make any sense. It's insane and doesn't make sense, but WB likes impossible challenges.
WB - Given that wishy washy answer, Buffett won't add to it.
JB - Question about Prices on Marmon and Iscar.
WB - Iscar was 80% then put the rest. Marmon was an installment sale with 64% was first, then 36% was 2nd and 3rd installment.
CM - Price went up as value went up.
WB - With both transactions, all feelings are good.
SH - What non-tech thing would you do if you were 23?
WB - I'd probably do what I did, go into investment business. One question he'd ask if they had to put all money in one business (not their own) for 10 years, what would it be?
CM - Larry Bird trick - asked every agent, if I don't go with you, who's the 2nd best I'd go with?
BQ - Capitalism vs. Rooms given his comments about people using AirBnB.
WB - Omaha can't size itself to the event. Doesn't like 3-day minimum rule.
CM - Nothing to add.
JG - Question about Geico. Allstate's share = 10%, State Farm's = 19%.
WB - Passing Allstate this year. State Farm is a great company. Recommends "The Farmer from Merna". Says he thinks Geico will be number one by time he's 100. Tells Geico he'll do his part.
CM - Geico is like Costco in that cost is part of its soul. Easy to talk the game, but they can back it up.
WB - Bought house in 1958. CM bought his in 1960. Life would be worse with more. At certain point there is inverse correlation.
CM - It'd be crazy.
GW - Union Pacific moving freight to Mexico, thoughts relative to BNSF?
WB - UP has edge in Mexico. KSU has good presence in Mexico, but also good prospects elsewhere.
SH - Intrinsic value difference and what are competitors to Berkshire?
WB - Intrinsic value is present value of all future cash. Aesop bird in the hand is equal to two birds in a bush. Sees no competition to Berkshire.
CM - Too tough to replicate and no one teaches it.
CL - Question about inflation from Goodhaven.
WB - Berkshire would be worse off. EPS would go up. Intrinsic value would go up in dollar terms.
WB - Having a corporate acquisition team is bad because they always want to do acquisitions.
CM - Fault goes to parents. Very hard to fix people with bad parents. Lots of problems with college business schools and economics departments.
