Peltz's Trian Discloses New Stake in Bank of New York Mellon

Nelson Peltz's activist investment firm Trian Partners has filed an amended 13F with the SEC.  Per the filing, they've disclosed a new position in Bank of New York Mellon (BK).  This amendment was made to their first quarter 2014 13F filing.

This means that they owned 9,330,230 shares as of March 31st, 2014.  In their original Q1 13F, Trian had filed for confidential treatment of their position with the SEC.

For more on this firm, we've posted some of Trian's Q1 letter.

Per Google Finance, Bank of New York Mellon is "a global financial services company. The Company divides its businesses into two principal segments: Investment Management and Investment Services. It has an Other segment, which includes credit-related activities, the lease financing portfolio, corporate treasury activities (including its investment securities portfolio), its equity investments in Wing Hang Bank Limited and ConvergEx Group, business exits and corporate overhead. Its two banks are The Bank of New York Mellon, which houses its institutional businesses, including asset servicing, issuer services, treasury services, broker-dealer and advisor services and the bank-advised business of asset management, and BNY Mellon, National Association (BNY Mellon, N.A.), which houses its wealth management business. In May 2014, the Company acquired HedgeMark International, LLC, a provider of hedge fund managed account and risk analytic services."

Soros Fund Seeks Sale of Penn Virginia

George Soros' family office Soros Fund Management has filed an amended 13D with the SEC on shares of Penn Virginia (PVA).  Per the filing, Soros' Chief Investment Officer Scott Bessent has sent a letter that pushes for a sale of the company. 


Soros Fund's Letter to Penn Virginia

The letter reads:

"June 25, 2014  
Board of Directors
Penn Virginia Corporation
4 Radnor Corporate Center
100 Matsonford Road, Suite 200
Radnor, PA 19087  

Gentlemen and Lady:  

We are extremely disappointed that, as indicated in the letter we received from Mr. Cloues dated June 18, 2014, Penn Virginia Corporation ("Penn Virginia" or the "Company") has rejected our suggestions to provide additional financial incentives to its management team in the event of a sale. We made those suggestions to further align management's interests with the best interests of shareholders, as we have previously communicated to you our belief that you should explore strategic alternatives as a means to maximize shareholder value. We believe that the optimal means to maximize value is for the Company to be sold. By reasserting in the letter your belief in your operating strategy, it appears to us that you are not going to undertake a formal evaluation of Penn Virginia's strategic alternatives.  

As the largest shareholder of Penn Virginia, we are deeply concerned by the Company's recent missteps. Management's presentations at several recent conferences have been underwhelming, culminating in a wholly avoidable revision of its investor presentation type-curve disclosure.1 We believe that these investor relations disasters are the reason why the Company’s stock dropped 14.4% from $16.48 on May 29, 2014 to $14.11 on June 10, 2014, underperforming its peer companies by 15% over that period.2  

In light of this poor stretch of share price performance, which we believe was driven almost entirely by the Company’s disappointing investor-relations effort, we were then astounded by the timing of the June 10, 2014 press release announcing Penn Virginia's proposed private offering of convertible preferred stock. The issuance of this convertible preferred stock was at a significant discount to inherent value and diluted existing equity holders by approximately 21%.3  While the timing of this transaction was particularly egregious, the strategic rationale  

__________________________   1 In presentations, the Company revised down its reported type-curves, showing third-party numbers without explaining to investors the reason behind the decrease. It is common in the E&P industry for third-party type-curve estimates to be lower than company estimates. However, without proper disclosure, this revision was taken by investors as a signal that the Company’s wells had started to deteriorate – which we believe is very much not the case. 2 The SIG Oil Exploration & Production Index (“EPX”) rose 0.6% from 537.04 to 540.00 in the same period. 3 $325mm converts at $18.34/share = 17.72mm shares, versus previous fully diluted share-count of 85.7mm shares.      

was not much better. The Company's intended use for the proceeds of this offering is to finance the acceleration of its development program and increase its lease acquisition effort in the Eagle Ford Shale. Based on management’s own estimates for the present value created by this accelerated drilling program, however, it is clear this decision has destroyed shareholder value.  

We believe that the shares of the Company are fundamentally undervalued, and that issuing equity or equity-linked securities at these prices to accelerate drilling in the manner contemplated fails to optimize per-share value. Other potential owners of this asset have a lower cost of capital and better scale in the Eagle Ford Shale and are clearly its optimal owners. Regrettably, the board’s decision to grow in this dilutive manner indicates to us that it is more interested in “empire building” than maximizing shareholder value.  

The board apparently views this decision as one targeted at building the Company for the long run. But we note that this board of directors has presided over a long period of decline at Penn Virginia, which has resulted in a current stock price that is lower than the stock price ten years ago.4 This record of failure to create value over the long term is not a track record that justifies making dilutive transactions today in the hopes that someday in the future the enhanced scale will somehow benefit shareholders more than a sale today would.  

Again, we believe that the Company should promptly pursue a sale in order to maximize shareholder value. We believe there are numerous potential acquirers who would be interested in acquiring the Company at a material premium to its current trading price, as demonstrated by any number of precedent transactions in the industry. Decisions about the future direction of your development program should be left to the buyers, who enjoy a considerably lower cost of capital and can therefore accelerate drilling in a more accretive manner.  

The time has come for the Company to put itself up for sale as the surest path to maximize shareholder value. Should you fail to start exploring sale alternatives, we reserve the right to take any and all actions we believe necessary to ensure that shareholder value is not further eroded.  

Very truly yours,  

/s/ Scott Bessent
Scott Bessent
Chief Investment Officer"

Capitalize For Kids Investment Idea Contest

Just a head's up for readers that in conjunction with the upcoming Capitalize For Kids conference, they are also running an Investment Idea Contest we thought many of you would be interested in with the opportunity to allocate some of the winnings to the Hospital for Sick Children.  Here are the details:

Prizes:

Winner gets $20,000, complimentary admission to the conference, and a 1-year subscription to Impact Research

2nd place gets $5,000, complimentary admission to the conference, and a 1-year subscription to Actionable Alpha

3rd place gets complimentary admission to the conference  and a 1-year subscription to Actionable Alpha


Eligibility:  You must be employed full-time in the institutional investment industry and have permission from your employer to compete.  MBA students are also welcome to enter.

Deadline:  Ideas must be submitted by July 31st, 2014

Apply: You can view more details and apply for the contest via this link.


Embedded below is the flyer for Capitalize For Kids' Intelligent Investing Challenge:



Good luck!

What We're Reading ~ Hedge Fund Links 6/27/14

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]

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."

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

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.

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."

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]

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.