Passport Capital Ups Hortonworks Stake

John Burbank's hedge fund firm Passport Capital has filed an amended 13G with the SEC regarding its stake in Hortonworks (HDP).  Per the filing, Passport now owns 12.2% of the company with over 6.66 million shares.

This is an increase over the 1.7 million shares Passport owned at the end of 2015.  The filing was made due to activity on February 29th.

Per Google Finance, Hortonworks is "a provider and distributor of an enterprise-grade Hadoop solution called the Hortonworks Data Platform (HDP). The Company's platform integrates with data center technologies to enable data architectures and enables its customers to collect, store, process and analyze existing and new data types in a way that augments rather than replaces their existing data center infrastructure. It provides support subscription offerings and related professional services around the HDP, which is its open source software distribution of Apache Hadoop and associated projects. Its products include Hortonworks Data Platform and Hortonworks Sandbox. Its range of professional services are training and consulting. It caters to vertical markets, including online services, education, financial services, Government, healthcare/pharmaceuticals, industrials/manufacturing, media/entertainment, retail/ecommerce, technology and telecommunications.."

Three Bays Capital Files 13D on Cypress Semiconductor, Boosts Position

Matthew Sidman's hedge fund Three Bays Capital has filed a 13D with the SEC regarding shares of Cypress Semiconductor (CY).  Per the filing, Three Bays now owns 7.1% of the company with over 22.46 million shares.

This is an increase over the 15.8 million shares Three Bays owned at the end of 2015.  The filing was made due to activity on March 3rd.  The 13D contains the standard boilerplate noting that they've met with management.

Prior to founding Three Bays in 2013, Sidman worked at Highfields Capital.

Per Google Finance, Cypress Semiconductor is "a provider of mixed-signal programmable solutions. The Company's offerings include PSoC 1, PSoC 3, PSoC 4 and PSoC 5LP programmable system-on-chip families. It caters to markets, including industrial, mobile handsets, consumer, computation, data communications, automotive and military. The Company operates in four segments: Programmable Systems Division, Memory Products Division, Data Communications Division and Emerging Technologies Division. The Programmable Solutions Division designs and develops solutions for end-product manufacturers. The Memory Products Division designs and manufactures SRAM products and non-volatile RAMs (random access memories). The Data Communications Division focuses on solutions for industrial, handset and consumer applications. The Emerging Technologies Division consists of the Company's subsidiaries, AgigA Tech, Inc. and Deca Technologies, Inc.."

Carl Icahn Trims Stakes In Nuance Communications, Tegna & Mentor Graphics

Activist investor Carl Icahn has been busy lately, filing numerous portfolio disclosures with the SEC.  Here's a breakdown of his activity:

Trims Nuance Communications Stake

Per a Form 4 filed with the SEC, Icahn sold 26.3 million shares of Nuance Communications (NUAN) on March 9th at a price of $19.  After the sale, he still owns over 34.46 million shares of the company.  This means he still owns 11.32% of NUAN.

Per Google Finance, Nuance Communications is "a provider of voice and language solutions for businesses and consumers across the world. The Company's solutions are used in healthcare, mobile, consumer, enterprise customer service, and imaging markets. The Company offers accuracy, natural language understanding capability, domain knowledge and implementation capabilities. The Company's solutions are based on the Company's voice and language platform and are used by businesses for tasks and services, such as requesting information from a phone-based self-service solution, dictating medical records, searching the mobile Web by voice, entering a destination into a navigation system, or working with portable document format (PDF) documents. The Company offers its solutions to its customers in a range of ways, including through products, hosting, professional services and maintenance and support. The Company operates in four segments: Healthcare, Mobile and Consumer, Enterprise, and Imaging."


Reduces Tegna Exposure

Additionally, Icahn filed an amended 13D with the SEC regarding his stake in Tegna (TGNA).  Per the filing, he sold shares throughout early March at prices around $24.xx.  After selling around 2.07 million shares, Icahn still owns 4.88% of the company with over 10.7 million shares.

Per Google Finance, Tegna is "a media and marketing solutions company. The Company is engaged in providing local content on a range of platforms in the United States. The Company operates through Broadcasting and Digital segments. It also provides digital marketing services and Internet-based human resource solutions. Its digital media products and services include search, social media and Website development, among others. The Company offers its services in a range of geographies, demographics and content areas. The Company provides consumers with the information and entertainment, and connects consumers to their communities through various platforms, such as television stations, desktop, smartphone and tablet products. Its Broadcasting segment includes an independent station group of network affiliates. The Company's Digital business segment includes Cars.com, CareerBuilder and Shoplocal."


Sells Some Mentor Graphics

Lastly, the activist investor has sold some of his Mentor Graphics (MENT) position per a 13D filed with the SEC.  Icahn was selling shares on March 7th and 8th at prices of $19.46 and $19.54 and now owns 4.6% of the company with over 5.48 million shares.  This compares to his previous ownership of 16.1 million shares of MENT at the end of 2015.

Per Google Finance, Mentor Graphics is "a supplier of electronic design automation (EDA) tools - computer software and emulation hardware systems used to automate the design, analysis and testing of complex electro-mechanical systems, electronic hardware and embedded systems software in electronic systems and components. The Company's products are used in the design and development of a diverse set of electronic products, including automotive electronics, computers and workstations, digital cameras, cellular telephones, medical devices, smart phones, industrial electronics and manufacturing systems. The Company segregated revenues into five categories of similar products and services: Scalable Verification, IC Design to Silicon, Integrated System Design, New and Emerging Products, and Services and Other."

ValueAct Capital Reduces MSCI & Motorola Solutions Stakes

Jeff Ubben's activist investment firm ValueAct Capital has filed numerous disclosures with the SEC regarding some of their positions recently.


ValueAct Trims MSCI Stake

First, they've filed an amended 13D with the SEC regarding shares of MSCI (MSCI).  ValueAct now owns 4.1% of the company with over 4.06 million shares.

This is down from the 6.32 million shares they owned at the end of 2015.  They sold shares at the end of February and beginning of March at prices between $69.25 and $71.96.

Per Google Finance, MSCI "together with its wholly owned subsidiaries, is a provider of investment decision support tools, including indexes, portfolio risk and performance analytics and multi-asset class market risk analytics products and services. The Company’s products include global equity indexes and environmental, social and governance (ESG) products marketed under the MSCI and MSCI ESG Research brands, its private real estate benchmarks marketed under the IPD brand, its portfolio risk and performance analytics covering global equity markets marketed under the Barra brand, its multi-asset class, market and credit risk analytics marketed under the RiskMetrics and Barra brands and its performance reporting products and services offered to the investment consultant community marketed under the InvestorForce brand."


Ubben Reduces Motorola Solutions Position

Second, ValueAct has also filed a Form 4 with the SEC regarding their stake in Motorola Solutions (MSI).  They sold over 6.6 million shares at prices of $70 and $74.14 on March 1st and February 29th.  After these sales, they now own 10.96 million shares of MSI, or 6.3% of the company.

Per Google Finance, Motorola Solutions "provides communication infrastructure, devices, accessories, software and services. The Company operates business in two segments: Products and Services. The Products segment offers a portfolio of infrastructure, devices, accessories and software. The primary customers of the Products segment are Government, public safety and first-responder agencies, municipalities, and commercial and industrial customers. The Products segment has two principal product lines: devices and systems. The Services segment provides a set of service offerings for Government, public safety and commercial communication networks. The Services segment has the following principal product lines: Integration services, Lifecycle Support services, Managed services, Smart Public Safety Solutions and Integrated Digital Enhanced Network (iDEN) services. The Company serves customers in more than 100 countries."

London Value Investor Conference 2016

The fifth annual London Value Investor Conference will take place on Thursday 26th May 2016 at the QEII Conference Centre in Westminster; with speakers including Howard Marks, Jean-Marie Eveillard and James Montier.  Both Howard Marks and Jean-Marie Eveillard will hold extensive audience Q&A sessions hosted by the conference moderators: David Shapiro of Willis Towers Watson and Richard Oldfield of Oldfield Partners.


The conference will also be a showcase for less well known fund managers to present detailed investment ideas:  click here for the full speaker line-up.


There is an overview video available of the London Value Investor Conference 2015 which provides a good introduction to the event (video link if it doesn't show up below):





Two other features of the conference this year are the Value Investor Awards (for which nominations are currently being accepted) and the London Value Investor Conference Dinner which takes place in the Members Dining Room at the House of Commons after the conference finishes.


Until 31st March, our readers can save £180 (inc VAT) with the discount code: MARKETFOLLY-MARCH-DISCOUNT

What We're Reading ~ 3/2/16

Quality Investing: Owning the best companies for the long term [Lawrence Cunningham]

How to learn from market mistakes [WSJ]

In-depth interview with JPMorgan's Jamie Dimon [Bloomberg]

Key checklist items [Value Investing World]

The great investment advice hidden in Warren Buffett's annual letter [Fortune]

Hard truths for investors to wrap their heads around [Morgan Housel]

Software is the new oil [AVC]

A pitch on Broadridge Financial Solutions [Intrinsic Investing]

Thoughts on industrial gases [Dislocated Value] 

Why restaurants hate GrubHub Seamless [Tribeca Citizen]

Why the economy isn't about labor productivity anymore [Bloomberg]

What I learned from losing $200 million [Nautil.us]

Visa moves at the speed of money [Forbes]

How mobile payments reshape lifestyles [WSJ]

The robots are coming for Wall Street [NYTimes]

Why media titans would be wise not to overlook Netflix [NYTimes]

Expedia thinks it can help you find the dream vacation you didn't know you wanted [Bberg]

Top tips from China's richest man [CNN Money]

Eminence Capital Discloses Restoration Hardware Position

Ricky Sandler's hedge fund firm Eminence Capital has filed a 13G with the SEC regarding shares of Restoration Hardware (RH).  Per the filing, Eminence now owns 3.1% of the company with over 1.25 million shares.

This is a newly disclosed position as the firm did not report owning a stake at the end of 2015 in their latest 13F filing.  The new 13G filing was made due to portfolio activity on February 25th.

Shares of RH have absolutely cratered over the past three months, falling from $105 down to current levels of $38.

Per Google Finance, Restoration Hardware is "The Company, together with its subsidiaries, is a luxury home furnishings retailer that offers various categories, including furniture, lighting, textiles, bathware, decor, outdoor and garden, tableware and children's furnishings. These products are sold through the Company's stores, catalogs and Websites. The Company operated a total of approximately 67 retail stores and over 17 outlet stores in approximately 29 states, the District of Columbia and Canada, and had sourcing operations in Shanghai and Hong Kong. The Company's retail stores are located primarily in upscale malls and street locations. The Company operates stores in Alabama, Arizona, California, Colorado, Connecticut, Florida, Massachusetts, Michigan, New York, Pennsylvania, Texas, Tennessee and British Columbia, among others."

Viking Global Boosts Kite Pharma Stake

Andreas Halvorsen's hedge fund firm Viking Global has filed a 13G with the SEC regarding shares of Kite Pharma (KITE).  Per the filing, Viking now owns 5% of the company with 2.44 million shares.

This is up from the 2.2 million shares they owned at the end of 2015 and the latest filing was made due to activity on February 18th.

To see the rest of Viking Global's portfolio, head to the brand new issue of our Hedge Fund Wisdom newsletter.

Per Google Finance, Kite Pharma is "a clinical-stage biopharmaceutical company. The Company is focused on the development and commercialization of cancer immunotherapy products to eradicate cancer cells. The Company does this using its engineered autologous cell therapy (eACT), which is an approach to the treatment of cancer. eACT involves the genetic engineering of T cells to express either chimeric antigen receptors (CARs) or T cell receptors (TCRs). It is conducting a Phase II clinical trial of a TCR-based therapy and multiple Phase I-IIa clinical trials of CAR- and TCR-based therapies. The Company's lead product candidate KTE-C19, is a CAR-based therapy, for the treatment of refractory diffuse large B cell lymphoma (DLBCL), primary mediastinal B cell lymphoma (PMBCL) and transformed follicular lymphoma (TFL). It is developing a pipeline of eACT-based product candidates for the treatment of advanced solid and hematological malignancies: CD19CAR, KTE-C19CAR and EGFRvlll CAR, among others.."

New Hedge Fund Wisdom Issue Available; 50% Off Sale Ends Next Week

The brand new Q4 issue of our Hedge Fund Wisdom newsletter was just released.  Subscribers: please login at www.hedgefundwisdom.com to read it.

Our quarterly newsletter is currently on sale for 50% off.  This is your last chance to save as prices are going back up in one week!  To see what you're missing, check out a full past issue here.

The brand new issue features:

- Consensus buy/sell lists of the most popular hedge fund stocks
- The latest portfolios of 25 top hedge funds
- Commentary on each fund's moves now with international short selling activity
- Equity analysis of 3 stocks that hedge funds have been active in

Save 50% Now; Sale Ends March 1st

When you sign up, you'll get immediate access to the new issue and the entire archive of past issues.  Take advantage of these low prices before they disappear.  


1 Year Subscription (4 issues): Normal Price $399.99  Sale Price $199.99 per year (50% off!)

Quarterly Subscription: Normal Price $119.99  Sale Price $59.99 per quarter (50% off!)

Want to pay by check or soft dollar account?  Please email us:  info (at) hedgefundwisdom (dot) com and we'll be happy to set that up.

What We're Reading ~ 1/13/16

George Soros: it's the 2008 crisis all over again [CNBC]

Rare interview with Michael Burry (of The Big Short fame) [NYMag]

Daniel Kahneman on intuition and loss aversion [Farnam Street]

Barron's top 10 stock picks for 2016 [Barrons]

The 2016 Crossing Wall St buy list [Crossing Wall Street]

On Amazon's entrance into India [Fortune]

Amazon and world domination [Value Venture]

A painful year for contrarian trades [A Wealth of Common Sense]

The difference between patience and stubbornness [Fool]

In Silicon Valley now, it's almost always winner takes all [New Yorker]

Baidu's Li says investors don't get China's coming internet boom [Bloomberg]

The digital future of consumer-packaged goods companies [McKinsey]

50 unfortunate truths about investing [Morgan Housel]

Cordcutting: myth or reality? [Value Seeker]

How FICO became outdated [PYMNTS]

Meet the 'new' lower margin, lower quality Chipotle [HVST]

Current case for Liberty Global (LBTYA/K) [Jnvestor]

Nearly 95% of young renters want to buy, but many say they can't afford it [WSJ]

Watch the First Episode of Showtime's Billions For Free

Showtime's new show Billions is about power politics in high finance and is the first major show centered on the industry in quite some time.  The first episode has been released for free and you can watch the video below.

The series features Emmy and Golden Globe winners Paul Giamatti as US Attorney Chuck Rhoades and Damian Lewis as hedge fund billionaire Bobby Axelrod.

The cast also includes Maggie Siff (previously of Sons of Anarchy and Mad Men) as well as Malin Akerman, Toby Leonard Moore, and David Costabile.

As if you didn't already have enough reasons to watch, the show's creators include Brian Koppelman (Rounders) and Andrew Ross Sorkin (Too Big To Fail.)

Embedded below is the first full episode of Showtime's Billions for free:

Kyle Bass on Wall Street Week

Anthony Scaramucci and Gary Kaminsky's rebooted Wall Street Week continues their run of impressive guests with Kyle Bass of Hayman Capital joining them this time around.

Their discussion started by talking about taking the leap of starting your own firm and Bass' play on the housing crisis.

They also talked about how excess capacity fueled by debt has now led to oversupply of various things, which has led to deflation.

Bass feels strongly that China is going to "dramatically devalue its currency" and walked through his thoughts on China in-depth.

Embedded below is the video of Kyle Bass' interview on Wall Street Week:



For previous interviews from this show, head to Wall Street Week's episode with Point72's Doug Haynes.

Sohn London Conference Notes 2015 - Burbank, Singh, Block & More

We're posting up notes from the Sohn London 2015 Investment Conference that recently took place.  It featured prominent investment managers sharing their latest ideas to benefit cancer research.  Click the links below to go to the presentations.


Notes From 2015 Sohn London Conference

- John Burbank (Passport Capital): Long CF Industries

- Michael Karsch (Hunter Peak Investments): Long Houghton Harcourt 

- Carson Block (Muddy Waters): Short Proofpoint

- Selvan Masil (Westray Capital): Long Rolls Royce, Short Ericsson

- Bran Cornelisse (Farringdon Capital): Pair trade

- Dinakar Singh (TPG-Axon Capital): Long Yutong Bus Company

- Vikram Kumar (TT International): Long TomTom

- Robert Harteveldt (Trishield Capital): Long New Media Investment Group

- Franck Falezan (Primestone Capital): Long Dorma Kaba

- Guillaume Rambourg (Verrazzano Capital): Long Unipol Group

- Per Johansson (Bodenholm Capital): Long eBay, Short ACS 

- Bo Bortemark (Carve Capital): 3 long ideas

- Beltram Lastra (Bestinver): Long Indra

- Elif Aktug (Pictet Asset Mgmt): Long Mead Johnson Nutrition

- Mike Wilkins (Kingsford Capital): On short selling

John Burbank's Sohn London Presentation: Long CF Industries

We're posting up notes from the Sohn London Investment Conference 2015.  Next up is Passport Capital's John Burbank who pitched a long of CF Industries (CF).


John Burbank's Sohn London Presentation 2015

Long CF Industries (CF) 

Burbank said that he is generally very bearish on commodities but he likes CF industries for the following reasons.

- They know CF well and have been researching them for at least two year’s.

- CF is the leader in nitrogen fertilizers. The nitrogen fertilizer business is better than the potash business because farmers have to apply it to the soil.

- CF made two good deals in 2015. CF is buying OCI which is listed in the Netherlands. It will give CF a 50% share of the US nitrogen fertilizer business.  Owning a large share of the market will allow CF to charge higher prices. Buying Netherlands based OCI enables a tax inversion which will reduce CF’s tax rate from 35% to between 20-25%. The CF OCI deal should close in mid-2016. The other good deal that CF has done in 2015 is to allow its largest customer, CHS Co-Op, to buy 9% of it shares at $107/ share or $2.8bn. That’s more than double the current stock price. Burbank thinks that CF will use the money to buy back stock. He also believes that analysts have been slow to recognise that the deals will lead to 25% extra product capacity.

- CF is a shareholder friendly company with a long history of share buybacks. Capital returns in dividends and buybacks have been running at 10% per year since 2011. They have reduced the shares by 35% since 2012. Executives are net buyers rather than net sellers of the stock.  Burbank said that CF stock may not do anything for the next four to five months. Then the deals will close, the big buyback will happen and the stock price will go up.

What can go wrong? Burbank thinks that China will devalue. “If China devalues everything in the World will go down in value.” CF’s earnings will get hit too by about 7%. Passport has bought CF against a basket of commodity shorts. They are hedging the downside risk in non-miner, CF, by being short potash miners like Potash Corp (POT), Mosaic (MOS) and Agrium (AGU).

Be sure to check out the rest of the Sohn London Conference presentations.

Carson Block Short Proofpoint: Sohn London Presentation

We're posting up notes from the Sohn London Investment Conference 2015.  Next up is Carson Block of Muddy Waters who pitched a short of Proofpoint (PFPT).


Carson Block's Sohn London Presentation 2015

Short Proofpoint (NAS: PFPT) 

Proofpoint is priced for perfection. They went public in 2012. Block said that the more Proofpoint sells the more it loses. There is something wrong with the business model as they have had plenty of time to turn sales into profit.

Management mischaracterise their company as a cyber security company but it only focuses on email. Email security is a tiny market compared to cyber. Email security is a mature market. The number of business emails might actually be shrinking according to one analyst.

Management fudges the organic growth numbers. The real figure is much less than the market thinks.

Proofpoint is facing increasing competitive pressures. Microsoft, Google and Cisco are putting more effort into email security and are catching up. Proofpoint are losing some of their big accounts. Billing and revenue rates are flat lining. The growth rate is at risk. Proofpoint will not be able to maintain its premium pricing and there are already signs they are selling software at greater discounts. Many companies do not see email security as vitally important and are happy to use a free product that is good enough.



Be sure to check out the rest of the Sohn London Conference presentations.

Michael Karsch's Sohn London Presentation: Long Houghton Harcourt

We're posting up notes from the Sohn London Investment Conference 2015.  Next up is Michael Karsch of Hunter Peak Investments.  He pitched a long of Houghton Harcourt.


Michael Karsch's Sohn London Presentation 2015

Long Houghton Harcourt (NAS: HMHC) 

Houghton Harcourt is primarily a school text book publisher. It dominates in books for reading, maths and science. Houghton is the largest developer of text book content from Kindergarten to 12th grade in the US. It has 40% market share of the overall spend in the US. The school publishing market is an oligopoly. HMHC is a well-established company that has been trading for over 100 years. HMHC stock currently trades with a beta < 1.

HMHC went through bankruptcy in 2007 after an LBO and a second private equity owner encouraged it to take on too much leverage.  Houghton re-emerged from bankruptcy about a year ago and has been significantly de-levered.

Text books are a good business as revenues are fairly stable. There is a never ending stream of children entering the education system that need to be educated. It costs about $10,000 to educate a student in the US - approximately $100 per year comes from text books.

Houghton is not vulnerable to digital disruption – 40% of their orders are already for digital products. The text book market should not be compared with newspapers in this respect. Houghton has not lost margins from the move to digital. News Corp tried to break into the school digital market by giving away tablets but failed and had to write off the costs. There may actually be benefits from the digital revolution.  For example, print cost savings.

Houghton has complex accounting partly because revenues from textbooks are spread over 7 years even though the fee for the books is received up front. It’s a lumpy business that is hard to predict quarter by quarter. In the last two quarters Houghton has missed earnings expectations. Only 4 analysts following the stock. The earnings disappointments’ have provided a good entry point. Expect the company to buyback 20% of the shares in the next 12 months.

Be sure to check out the rest of the Sohn London Conference presentations.

Selvan Masil's Sohn London Presentation: Long Rolls Royce, Short Ericsson

We're posting up notes from the Sohn London Investment Conference 2015.  Next up is Selvan Masil of Westray Capital who pitched a long of Rolls Royce (RR.L) and a short of Ericsson (STO:ERIC-A, ERIC-B).


Selvan Masil's Sohn London Presentation 2015


Selvan Masil founded long/ short equity fund Westray Capital Management in April 2014. Before that he worked at Theorema Advisors, Pelham Capital, and Lansdowne Partners.


Long Rolls Royce (LON: RR) Rolls Royce primarily makes and services jet engines for aircraft. Aero engines are a good business:

- Air passengers double every 15 years

- The order backlog for wide bodied planes is at historic highs

- Fuel is the largest cost for airlines – around 60%. New engines that provide fuel savings are crucial to the future of airlines.

- The barriers to entry are high due to safety concerns and because engine development for wide bodied planes takes time to pay off. New engines lose money for the first 10-15 years before breaking even.

- There are few competitors : GE, Safran, Pratt and Whitney.  Masil sees no sign of a new entrant for the next 10 to 15 years.

- Rolls Royce has issued 5 profit warnings in a row in the last two years. The previous management did not communicate well with investors. Masil thinks that Rolls Royce is at an inflection point.

- Rolls Royce is at the start of capturing new market share. The order book suggests that it will double its market share in wide bodied engines in the next 15 years.

- Profitability will trough in 2016 and then pick up. Masil thinks that margins will pick up sharply by 2019. Consensus estimates for 2019 only show margins making a small improvement from today. 

- RR’s profit margins are not as good as Safran or GE’s which are around the 20% mark. RR can potentially close this gap over time.

- The new CEO, Warren East, is addressing some of the problems with a package of self-help measures – cost cutting, management redundancies and better communication with investors.


Short Ericsson (STO: ERIC-A; ERIC-B) Ericsson is a network equipment company. The industry dynamics are poor. There is pricing pressure in an increasingly commoditised industry due to competition from Asian manufacturers. The recent merger of Alcatel and Lucent has also created a stronger competitor. EBIT margin will be under pressure for a number of years. Ericsson has not done well in taking market share of the 4G market.  Ericsson’s P+L statement overstates profitability – the restructuring charges are not one off/ exceptional but rather ongoing.

Be sure to check out the rest of the Sohn London Conference presentations.

Bran Cornelisse's Sohn London Presentation: Long First Group, Short Student Transportation

We're posting up notes from the Sohn London Investment Conference 2015.  Next up is Bran Cornelisse of Farringdon Capital who pitched a pair trade involving two bus companies.


Bran Cornelisse's Sohn London Presentation 2015


Short Student Transportation Inc (TSE: STB): Student Transport is a Canadian school bus company. It owns about 12,000 buses. STB appears to have good growth and pays a very large 10.7% dividend.

The company is not strong financially:

- Net income has been negative since 2007. The company has burnt nearly $200m of cash since 2007.

- The company is increasingly relying on operating leases.

- Cornelisse said that STB cannot afford to pay the dividend. It is being funded by shareholders via the issue of new equity. The company is being poorly run and management have the wrong priorities.


Long First Group (LON: FGP): First Group is a UK based company that runs buses in the UK and operates the famous Greyhound service in the US. It is 4x larger than STB. The two companies do compete in the school bus market.

First Group has consistently generated much higher margins and it is consistently profitable. Unlike Student Transport, First Group does not pay a dividend and does not grow. First Group cut the dividend in 2013 and did a large rights issue. The share price was cut in half and has not recovered since.

First Group has outstanding debt. Interest charges from loans are higher than net income but the first bond will mature in 2018. First Group are paying 6-7% on financing. By 2024 all the bonds will have matured and any new financing should be able to be done at better rates. Once the debt has been paid off expect a profit increase of £60m/ year. Even though First group has expensive debt the balance sheet is strong.

                 Student Transport       First Group  
PE                      62.7                         8.5
EV/CE               2x                            1.8x

Be sure to check out the rest of the Sohn London Conference presentations.

Vikram Kumar's Sohn London Presentation: Long TomTom

We're posting up notes from the Sohn London Investment Conference 2015.  Next up is Vikram Kumar of TT International who pitched a long of TomTom (AMS:TOM2).


Vikram Kumar's Sohn London Presentation 2015

Long TomTom (AMS: TOM2) 

TT International  have owned TomTom stock for two and half years.

The Satellite Navigation industry has been shrinking by 25% per annum since 2007. TomTom is misunderstood. It is primarily a mapping software company not a seller of devices/ hardware. Its main business is intellectual property. There are only three global mapping databases: Nokia, TomTom and Google. The barriers to entry are extremely high as it would take at least 10 years to build up a global mapping database.

Google’s map data is not good enough according to interviews that TT International has done with car companies. Accurate maps will be crucial to self-driving cars. It is the key underpinning for the next stage in the development of the automobile. Mapping is going to become more important. Kumar sees Nokia and TomTom as a duopoly. They will have great pricing power in the future.

All Apple mapping data is underpinned by TomTom data. TomTom have recently signed an agreement with Uber to provide all their mapping data. Kumar believes that location based advertising through mobile devices is going to be very important for businesses like Facebook. Push and pull advertising will be targeted by map based technology depending on your location.

In the spring of 2015 Nokia announced that it had been approached by multiple parties and eventually was bought by a consortium led by VW, Audi, Daimler and BMW. Kumar said that this deal proves that mapping is growing in importance to car makers. TomTom is the last remaining independent owner of mapping software in the world. It will be the target of other car companies.

Given that Nokia sold for $3.1bn Kumar thinks that TomTom is worth between $3-5bn.



Be sure to check out the rest of the Sohn London Conference presentations.

Robert Harteveldt Long New Media Investment Group (Sohn London Conference)

We're posting up notes from the Sohn London Investment Conference 2015.  Next up is Robert Harteveldt of Trishield Capital Management who pitched a long of New Media Investment Group (NEWM).


Robert Harteveldt's Sohn London Presentation 2015

Long New Media Investment Group (NYSE: NEWM) 

New Media is a newspaper publisher that utilizes a roll-up strategy buying small and medium sized local newspaper businesses.

NEWM owns 575 publications in total, 125 daily publication and 490 related websites EV multiple 2015 6.3x; FCF 17.9%; Dividend 7.3%. NEWM will pay no income tax for the foreseeable future. Revenue and FCF has been growing over the last 3 years. New Media is managed by the private equity arm of Fortress Investment Group.

No one wants to touch newspaper businesses because of the challenge from digital media. Total newspaper circulation in the US has fallen from 51m in 2007 to 44m in 2010. However, Harteveldt argued that if you know where to look you can find thriving newspaper businesses. Newspaper circulation sales trends have stabilised. Small, local papers are here to stay and are sustainable. People need local news and local papers are the main way to get it – school news, obituaries, police blogs etc. There are few alternatives.

Trishield specialises in looking for businesses that are going through a hard time but are misunderstood by the market. New Media’s digital revenues are growing. They receive strong revenues from local advertising.

NEWM have made ten acquisitions since 2013. They will need to acquire $200m more small and medium sized newspapers in the future to hit their targets. This can be achieved via internally generated funds without the need for a rights issue. They make cost savings at newly acquired businesses by centralising administration and raise revenue by raising prices strategically.

Be sure to check out the rest of the Sohn London Conference presentations.