The Man Who Solved The Market Book Review: How Jim Simons Launched The Quant Revolution By Gregory Zuckerman

  Three-time winner of the Gerald Loeb award, author Gregory Zuckerman has just released his latest book, The Man Who Solved The Market: How Jim Simons Launched The Quant Revolution. 

Before diving in, let's take a second to acknowledge that it's amazing such a book exists in the first place.  The subject of the book, Jim Simons and his firm Renaissance Technologies ('Rentec'), have always been shrouded in secrecy.  Most on Wall Street have at least heard of their mysterious Medallion Fund and heard rumors of the insane returns it generates.  But little was actually known about the firm and how it made money.

For those unfamiliar with Rentec, a quote from the book jacket sums up why you should care (emphasis ours): "No other investor - Warren Buffett, George Soros, Peter Lynch, Steve Cohen, or Ray Dalio - can touch the track record of Renaissance Technologies founder Jim Simons.  Since 1988, Renaissance's signature Medallion fund has generated average annual returns of 66 percent.  The firm has recorded trading gains of more than one hundred billion dollars.  Simons himself is worth twenty-three billion dollars." (The book also has a yearly performance breakdown in the Appendix.)

While value investors look up to Warren Buffett and Seth Klarman, and traders look up to Stan Druckenmiller and George Soros, in the quant world Medallion is quite literally the gold standard.  And while many hedge funds charge 2 and 20 (percentage management fee and performance fee), Medallion charges an audacious 5 and 44.

Over the years, we've talked to a few former employees of the firm and even then they would be very vague about their work, never giving specifics, and certainly wouldn't go on the record about anything.  'Googling' the founder and his firm yields only a handful of rare interviews with Simons (mostly about mathematics) and some performance numbers, but that's about as in-depth as it gets.

So the fact that Zuckerman was able to interview more than 40 current and former employees, Simons's friends and family, as well as Simons himself, says a lot.  It's safe to say that doesn't happen without Zuckerman's excellent work in the past as a journalist and author.  His previous book, The Greatest Trade Ever about John Paulson is one of our favorite financial reads and no doubt laid the groundwork for him to be able to write this new book on Simons.

The Man Who Solved The Market profiles Simons's journey from mathematician and Soviet code breaker to quant pioneer in a Long Island strip mall.  It highlights how he hired physicists, mathematicians, and computer scientists to blaze an entirely new path on Wall Street, one dominated by fundamental analysis and human traders at the time.

Some of the biggest takeaways from the book were the lessons on culture, management, and alignment of interests.  For a firm so reliant on computers, the human aspect was perhaps the most intriguing, from managing people to building models around human behavior in order to exploit it.

Interlaced throughout the story are also interesting anecdotes, like when Rentec once had a 'fat-finger' trade buying 5x more wheat contracts than they were supposed to and the next day the media blamed a 'poor harvest' for the price move.

One unanticipated turn the book takes is by examining some of the inner turmoil at the firm and in particular the effects of all the wealth Rentec partners and employees wound up with, like how Rentec senior executive Robert Mercer is basically responsible for Donald Trump's presidency.

Normally, we end each book review outlining who should read the book or might benefit from it.  But honestly, we think everyone would enjoy it.  Even if you're not a quant or have zero interest in quants, there's still lessons to be gleaned and it's a very entertaining read.  After all, we're big believers in learning from all types of investors or traders, regardless of which strategy you follow. 

Obviously, the book isn't going to just give away Rentec's secrets and outline the blueprint to market success.  More than anything, The Man Who Solved The Market gives you a peek behind the curtain of a notoriously secretive firm and tells a previously untold story.  We highly recommend Zuckerman's profile of the 'modern-day Midas' and it's the perfect gift this holiday season for anyone interested in markets.

Sohn London Investment Conference: Only 2 Weeks Away

The 8th annual Sohn London Investment Conference is only two weeks away.  It will take place on the 14th November at London Marriott Hotel, Grosvenor Square. 

It will feature some of Europe's top fund managers sharing their best investment ideas to benefit charity including the Sohn Conference Foundation, which is dedicated to the treatment and cure of paediatric cancer and other childhood diseases.

This year also includes the second Sohn Women's Brunch, as a forum for women in finance aiming to promote diversity in the industry. 

You can get more information about the conference here: https://www.sohnconference.org/london/


Sohn London 2019 Speakers List

- Brian Baldwin, Trian Fund Management

- Catherine Berjal, CIAM

- Fadi Arbid, Amwal Capital

- James Hanbury, Odey Asset Management

- Jason Ader, SpringOwl Asset Management

- Lucy Macdonald, Allianz Global Investors

- Måns Larsson, Makuria

- Pieter Taselaar, Lucerne Capital Management

- Per Johansson, Bodenholm Capital

- Tamas Eisenberger, Sikra Capital


Conference Details

When: 14th November 2019

Where: London Marriott Hotel, Grosvenor Square


This should be another great event as always. You can click here to register for the conference.

Glenview Capital Trims Brookdale Senior Living Stake

Larry Robbins' Glenview Capital now owns 9.59% of Brookdale Senior Living (BKD) with over 17.63 million shares, per a 13G recently filed with the SEC.  This marks a slight decrease from the 18.43 million shares they owned at the end of the second quarter.  The filing was made due to portfolio activity on October 30th.

Per Yahoo Finance, Brookdale "owns and operates senior living communities in the United States. It operates through five segments: Independent Living, Assisted Living and Memory Care, CCRCs, Health Care Services, and Management Services."

ValueAct Capital Reduces Alliance Data Systems Position

Jeff Ubben's activist firm ValueAct Capital has also filed both a Form 4 and a 13D with the SEC regarding its stake in Alliance Data Systems (ADS). 

ValueAct now only owns 2.7% of the company with a little over 1.377 million shares.  This is down from the 3.7 million they reported owning back at the end of Q2.
The Form 4 filing notes that ValueAct converted its previously disclosed 150,000 shares of Series A non-voting convertible preferred stock into 1.5 million shares of common stock.  The 13D also indicates that ValueAct sold 2 million ADS shares at $101.50 on October 28th and sold another 1.83 million shares at $102 the next day.

Per Yahoo Finance, Alliance Data Systems "provides data-driven marketing and loyalty solutions worldwide."

What We're Reading ~ 10/30/19

The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution [Gregory Zuckerman]

How TikTok holds our attention [The New Yorker]

Inside the Nordstrom dynasty [NYTimes]

Is Amazon unstoppable? [The New Yorker]

Schwab kills commissions to feed its flywheel of scale [Intrinsic Investing]

Learning from Costco's Jim Sinegal [MastersInvest]

How Irish butter Kerrygold conquered America's kitchens [Bloomberg]

TheRealReal: the internet's luxury consignment shop [The New Yorker]

On the importance of humility [NYTimes]

With summer over, will hard setlzer's popularity go away? [LATimes]

The strange revival of vinyl records [The Economist]

On filtering the barrage of financial news [CFA Institute]

Third Point's Q3 Letter: EssilorLuxottica Thesis

Dan Loeb's hedge fund firm Third Point is out with its third quarter letter.  In it, they touch on activist investing, their successful investment in Sotheby's (BID), an update on Sony (SNE) and Argentine Credit, and also outline their thesis on newer holding EssilorLuxottica.

Of the latter, they write:

"Our analysis of potential merger synergies points to over €1 billion in additional profit through efficiencies and revenue growth, almost double the Company’s current targets.  In the near‐term, this will be driven by cross‐selling to wholesale customers, insourcing lens procurement, and supply chain efficiencies.  The longer‐term opportunity to disrupt the industry value chain is even more appealing: combining lens and frame to shrink raw material need and waste, reducing shipping costs by merging prescription labs with global distribution hubs, and providing a true omni‐channel sales offering.  These initiatives will transform the way glasses are sold, significantly improving the customer experience."

Third Point sees the company earning over 8 euros of EPS in 2023 and for earnings and FCF to grow at a mid-teens compound annual growth rate.

Embedded below is Third Point's Q3 letter:



You can download a .pdf here.

For other recent hedge fund letters, you can also read Howard Marks' latest letter here.

What We're Reading ~ 10/23/19

Blackstone CEO's new book: What It Takes [Stephen Schwarzman]

Taking a look at Domino's [Timberwolf Equity Research]

Quick new interview with Peter Lynch [Fidelity]

Denise Chisholm on historical sector valuations [Barrons]

With DataXu buy, Roku unveils big ad ambitions [Digiday]

At Costco, everything resonates with the consumer [Retail Dive]

Disney, IP, and returns to marginal affinity [Matthew Ball]

Apple Pay and the future of mobile payments [PYMNTS]

Technical overview of Elastic (ESTC) [Motley Fool]

Inside Apple's long, bumpy road to Hollywood [Hollywood Reporter]

20 countries that will face population declines [Business Insider]

New Howard Marks Letter on Negative Interest Rates: "Mysterious"

Oaktree Capital's chairman Howard Marks is out with his latest memo.  It is entitled "Mysterious" and deals with the topic of negative interest rates.

He writes, "The fact that we know what they are–as we do with inflation and deflation – doesn’t alter the fact that we don’t know for sure why negative rates are prevalent today, how long they’ll continue in force, what might cause them to turn positive, what their consequences are, or whether they’ll reach the U.S."

The rest of his letter follows.  Embedded below is Howard Marks' latest letter:



You can download a .pdf copy here.

For more from this manager be sure to check out his books Mastering the Market Cycle as well as The Most Important Thing.

Corvex Management Goes Activist on ForeScout Technologies

Keith Meister's hedge fund firm Corvex Management has filed a 13D with the SEC regarding shares of ForeScout Technologies (FSCT).  Per the filing, Corvex now owns 7.2% of ForeScout with over 3.34 million shares.  However, the 13D is being filed jointly with Jericho Capital Asset Management which also owns shares, bringing their collective exposure to 14.5% of the company with over 6.68 million shares.

The filing shows Corvex as buying throughout September and October initially at prices around $35.xx but really ramped up their buying when shares traded down to $25.xx.

The 13D also contains information about their new activist stance: "After the close of business on October 18, 2019, the Corvex Persons agreed with the Jericho Persons to work together to engage with the Issuer and its management regarding its business and prospects. The Corvex Persons and the Jericho Persons believe that combining their complementary expertise, skill sets and perspectives will be beneficial in discussions with the Issuer. The Corvex Persons and the Jericho Persons anticipate having private discussions with the Issuer as soon as practicable."

Per Yahoo Finance, ForeScout Technologies "provides network security products in the Americas, Europe, the Middle East, Africa, the Asia Pacific, and Japan. It offers CounterACT that provides for visibility and control capabilities across campus information technology and Internet of Things (IoT) devices, operational technology devices, data center physical and virtual devices, and cloud virtual devices; and SilentDefense, which offers visibility and control capabilities within the operational technology portion of the network."

Glenview Capital Files 13D on Meritor

Larry Robbins' hedge fund firm Glenview Capital has filed a 13D with the SEC on shares of Meritor (MTOR).  Per the filing, Glenview now owns 14.7% of the company with exposure to over 12.1 million shares.  This is inclusive of 4.9 million shares underlying call options.

This is up from the previous 7.2 million shares Glenview had exposure to at the end of the second quarter, per their most recent 13F filing.  So basically Glenview has added call option exposure and then gone activist on the name.

The filing also includes the standard activist investor boilerplate: "The Reporting Persons intend to engage in discussions with the Company and the Company’s management and board of directors, other shareholders of the Company and other interested parties on issues that may relate to the business, management, operations, assets, capitalization, financial condition, strategic plans, governance, board composition and the future of the Company.  Glenview Capital Management has entered into a customary confidentiality agreement with the Company in order to facilitate these discussions."

Per Yahoo Finance, Meritor "designs, develops, manufactures, markets, distributes, sells, services, and supports integrated systems, modules, and components to original equipment manufacturers (OEMs) and the aftermarket for the commercial vehicle, transportation, and industrial sectors. It operates through two segments, Commercial Truck; and Aftermarket, Industrial and Trailer."

Mantle Ridge Files Form 4 on CSX

Paul Hilal's investment firm Mantle Ridge LP has filed a Form 4 with the SEC regarding its stake in CSX (CSX).  Per the filing, Mantle Ridge sold 3.45 million shares on October 17th at $67.91.  The filing notes this was "in order to repay Mantle Ridge Fund obligations under a secured credit facility. The Reporting Persons have no current plans to sell any additional shares of the Issuer, although they reserve the right to do so in their discretion."

The Form 4 also shows Mantle Ridge made pro rata distributions of over 34.49 million shares to direct and indirect owners of the Mantle Ridge funds.  Also, 36,813 shares were contributed to certain charitable organizations.

Prior to founding Mantle Ridge, Hilal worked at Pershing Square and runs a similar activist strategy, though more concentrated.

Sohn San Francisco Notes 2019: Kacher, Yusko, Kawaja & More

The Sohn San Francisco Investment Conference just concluded and featured hedge fund managers sharing their latest investment ideas to benefit charity.  The event benefits the Excellence in Investing for Children's Causes Foundation and a portion of the proceeds also go to The Sohn Conference Foundation.

We've already posted up notes from Next Wave Sohn San Francisco which featured emerging managers.  Now below are notes from the main event.


Sohn San Francisco 2019 Notes


Kevin Oram, Praesidium Investment Management Company, LLC

Idea: Instructure (INST)

•    Hidden value that can be unlocked
•    2 key products:
o    Canvas is a leader in education learning software which is ~90% of revenue
o    Bridge is corporate learning software
•    Canvas is student and educator collaboration software
•    Biggest competitor is Blackboard – which has a legacy on premise software and has had trouble transitioning to a cloud model
• Software is a great business but vertical software is even better as it serves a very specific market
•    Believe there is a significant margin expansion opportunity from 24% in 2019 to 40%+ by 2022
•    Has an opportunity to roll up software in other adjacencies given a lot of fragmentation of players in education software
•    Believe it is worth $2.5bn versus current valuation of $1.5bn
•    Undervalued due to large losses in Bridge – corporate learning
•    Bridge software is good but significant competition in the corporate market with entrenched players
•    Bridge has very little synergy with Canvas given different source code and dedicated sales team
•    Opportunity to unlock value by divesting from Bridge via sale, shutdown and focus on Canvas
•    Engaging actively with management over last several months to present case on value destruction of Bridge
•    Dec 3rd – Will have an analyst day to describe company’s new strategy and operating model – could be the catalyst market has been looking for



Gil Simon, SoMa Equity Partners

Idea: Sailpoint (SAIL)

•    Believe that there is 100% upside to $35-40 per share
•    Best of breed software trading at a reasonable valuation (<3x 2022e="" p="" sales="">•    Identity is central to enterprise security but this is difficult because the modern large enterprise is running hundreds of applications
•    Identity and access management is the #1 priority within security
•    Identity Governance and Administration (IGA): Ensure employees access only what they need to access
•    2 key products: Identity IQ and IdentityNow
•    ~1,300 customers
•    Extending the lead over legacy competition like IBM and Oracle
•    8,500 customers market opportunity from legacy competitors
•    CA and Oracle not likely to focus on this space
•    Buying opportunity on missed execution; have recently strengthened the management team
•    Expect revenue growth to re-accelerate which should drive a snap back in the share price



Adam Fisher, Commonwealth Asset Management

Idea: China Interest Rate Convergence

•    Japanese working population peaked in 1995
•    China is a good analog for Japan – working age population peaked in 2015 – projected to fall by 125 million through 2040
•    China’s 4 megacities are already as rich as the rest of East Asia
•    Ne net: Believes that interest rates in China are coming down and going to zero



Glen Kacher, Light Street Capital

Idea: Talend (TLND)

•    $6.5bn data integration market growing >10%
•    Most robust platform across on-premise and cloud environments
•    $218mm of ARR, growing 29% yoy with mix shift towards cloud
•    87% recurring revenue
•    Founded in 2005 and went public in 2016
•    Focused on ETL products: Extract, Transform, Load
•    Talend is the growth leader in the data integration market
•    Hadoop hit a wall but Talend benefits from the cloud database wave
•    Revenue model is based on seat based subscription software revenue, seat and consumption based saas revenue, 3) project based revenue
•    Cloud mix shift should increase over time
•    Believes value could be +86% in the base case



Debbie McCoy, Blackrock

Pitch on theme of sustainable investing and ESG (environmental, social, government)

•    Increasing sustainable investing adoption across large money managers
•    Built an internal model to evaluate companies rather than using third party ESG scores
o    Look at employee happiness as a factor in the model
o    Incorporate other unique factors that third party scores don’t take into account



Myron Scholes, Janus Henderson Investors

The Advantages of Time Diversification: Risks from Option Prices that Inform Investment Decisions.  Tails are important to investors – if you remove the extreme tail gains, realized return falls to almost zero and take out extreme tail losses, realized return nearly doubles over the very long term



Connor Browne, Thornburg Investment Management

Idea: Alkermes plc

•    Biopharma company focused on patient inspired solutions
•    A unique focus on hard to treat patients  - 2 key drugs for opioids addiction and schizophrenia
•    Vivitrol – treatment for opioid misuse disorder; blocks the opioid receptor in the brain
o    Competes with methadone and suboxone and aimed on getting you off the drug
•    Aristada
o    Long acting injectable for schizophrenia
o    Strong revenue growth
o    Expect market share to grow from 5.8% to 9.9%
•    Some optionality in other drugs under development
o    Vumerity – novel oral fumerate for the treatment of multiple sclerosis
o    ALKS 3831- efficacy of olanzapine (Zyprexa) without the associate weight gain
o    ALKS 4230 – novel selective IL-2 fusion protein; more early stage
•    Valuation
o     4 different scenarios of value: currently approved drugs, +Vumerity, +3831, +Vumerity and 3831



Mike Wilkins, Kingsford Capital Management (short-only firm)

Idea: Shorts and frauds

•    Focused on shorting pump and dump schemes
•    Large flows into passive investing creates opportunity
•    Russell 2000 inclusion is very rules based and rebalances in May– if you can get to $150million market cap, index will include you with no regard to if it is a legitimate company
•    Russell 2000 stock promotions – get into index in May and then get ETFs to buy in June and then dump the stock after
•    Several fraudsters have taken advantage of the Russell 2000 fraud including Jason Galanis, Benjamin Wey, Howard Appel
•    Class of 2019 potential frauds – gained admission to Russell 2000 in June but have not gone to zero yet
o    YCBD – merged with Level Branding to get listed on NYSE
o    Pareteum: telecom
o    Wrap Technologies: next gen solution for non lethal law enforcement



Mark Yusko, Morgan Creek Capital Management

Macro Idea: Don’t Cry, It’s Me Argentina

•    Argentina – very low % of their GDP is equitized versus the US which is very high; bullish on long term prospects for Argentina
•    Investors fled Argentina when they should have been buying
•    Argentina Stock Picks
o    Pampa Energy is top stock pick to play this thesis
o    Argentinian banks
o    YPF is a double play on Argentinian shale



Carl Kawaja, Capital World Investors

Idea: D. R. Horton (DHI)

•    Largest homebuilder by volume in the US with over 55k homes sold in 2018
•    Housing market has room for growth
•    Best in class operator
•    Changing their business model that will make it more valuable
•    Limits on credit have driven slower but steady growth in housing
•    Home ownership will continue to become more attractive as mortgage rates fall alongside interest rate
•    Much better deal to buy versus rent in many of DR Horton’s markets
•    Industry leading ROE
•    DR Horton wants to be more like NVR
•    DHI made a strategic shift to focus on lower priced homes with Express Homes and tilts more to the lower end of the market versus competition
•    Trying to transition to a business model that is less capital intensive by using land options
•    Asset light model yields much higher NPV and IRR
•    Should trade closer to other asset light home builders like NVR


Be sure to also check out notes from Next Wave Sohn San Francisco featuring emerging managers and their ideas.

Next Wave Sohn San Francisco Notes 2019: Perkins, Sinantha, Venkatesan, Weldon

We're posting up notes from the Sohn San Francisco Investment Conference which featured hedge fund managers sharing their latest investment ideas to benefit charity.  The Next Wave segment featured emerging managers Stephen Perkins (Toronado Capital), Touk Sinantha (AltraVue Capital), Raj Venkatesan (Trinity Alps Capital), and Christopher Weldon (Stamina Capital).

We've also posted up notes from the main event of Sohn San Francisco so be sure to check that out as well.


Notes from Next Wave Sohn San Francisco 2019


Stephen Perkins, Toronado Capital Management

Idea: Blackline (BL)

•    Software business models are great but software is not undiscovered anymore
•    Blackline (BL) – software company modernizing finance and accounting processes for mid-size enterprises
•    Replaces excel with a vast process improvement
•    Strong user growth – 19% CAGR in users from 2015- Q2 2019
•    SAP relationship will help drive future growth
•    Market is large and underpenetrated and little competition
•    Strong renewal rates at 97-98% dollar retention over last 5 years
•    Founder led with the founder owning ~10% of the company
•    Competition is really thin
•    Focus on this one part of the enterprise is a competitive advantage


Touk Sinantha, AltraVue Capital – value investing firm

Idea: SIGA Technologies (SIGA)– Specialty Pharma

•    Post bankruptcy microcap
•    Focused on biodefense and only company with vaccine for Small Pox
•    US and Russia continue to keep stock of the virus and possible to recreate the virus synthetically
•    Siga was a good business that went bankrupt because of legal fight over acquisition by another company
•    Continue to provide Small Pox vaccine to national stockpile
•    Stock became orphaned for a number of reasons
•    $600mm BARDA contract
•    Core value estimated at $7 per share or ~30% upside
•    Optionality:
o    International sales: ~$4 per share
o    TPOXX Label expansion: $2 value
o    New products: $0 value
•    Sum of the core value and potential upside value = $7+$4+$2= $13 per share
•    Risks: BARDA funding risk, Capital allocation risk, new competition, liability risk


Raj Venkatesan, Trinity Alps Capital Partners (long only, global and sector agnostic)

Idea: Afya (Brazil – but trades as an ADR)

•    Focused on medical education
•    Good reform happening in Brazil that are tailwinds to the business
•    Population in Brazil is aging and healthcare spend is growing at low double digits
•    Low number of doctors on a per capital basis and applicants/openings for med schools have declined
•    70% of medical education in Brazil is private
•    Path to become a doctor and specialist is long (like the US)
•    Earnings power of a specialist doctor is very high
•    Payback for general physician education is 5 years
•    Pure play way to play medicine in Brazil
•    Multiple growth levers:
o    TAM doubles in 5 years to R$32B
o    Roll up strategy
o    Regulated brownfield and greenfield growth opps
o    Asset light monetization of content  - vertical and horizontal
•    Value: Think Afya is a double
•    Risks: Macro/currency, regulatory framework, Recent IPO/limited history


Christopher Weldon, Stamina Capital ($200mm AUM, 3 years in)

Idea: Adyen long (3 year double)

•    Payment processor/merchant acquirer based out of the Netherlands
•    Visa is a good case study for Adyen – great operating leverage as revenue and costs are completely unrelated
•    Lowest cost operator
•    Value: believe it can double in 3 years driven by ~35% revenue, >50% FCF CAGR
•    Displacing legacy merchant acquirers given cost advantage: First Data and WorldPays of the world
•    Growth levers:
o    Customers growing quickly
o    Wallet share gains
o    New customers
o    New services
•    Digital payments are a secular share gainer in global transactions
•    Very large TAM of $25 trillion card based payments
•    Base case: +80% upside; Reward Case: +250%; Risk case: -25%


Click here to also read notes from the main event of Sohn San Francisco.

What We're Reading ~ 10/16/19

The Ride of a Lifetime: Lessons Learned from 15 Years as CEO of Walt Disney [Bob Iger]

The active manager paradox: high-conviction overweight positions [CFA Institute]

In-depth piece on Amazon: Jeff Bezos's master plan [The Atlantic]

How cloud gaming will and won't disrupt [Matthew Ball]

A look at TradeDesk [Greytab Investments]

A pitch on Interactive Brokers [Barrons]

On unsustainable consumer subsidies in the new app world [The Atlantic]

Recent commentary from Bill Nygren [Oakmark]

Top 20 business transformations of the last decade [HBR]

TJMaxx prices, experience make it immune to Amazon [Business Insider]

T. Boone Pickens on what made him successful [Twitter]

How baseball cards got weird [The Atlantic]

New Graham & Doddsville Issue: Pabrai, Moroz, Carr, Peterson & More

Columbia Business School is out with the Fall 2019 issue of its Graham & Doddsville newsletter.  It features interviews with Mohnish Pabrai (Pabrai Investment Funds), Paul Moroz (Mawer Investment Management), Ellen Carr (Weaver C. Barksdale), and Matthew Peterson (Peterson Capital).

These managers talk about names such as Wolters Kluwer, Alphabet (GOOG), Constellation Software (CSU.TO), GrafTech (EAF), DailyJournal (DJCO), and more.

The issue also features student investment pitches from the Pershing Square Challenge, including long Aramark (ARMK), long ServiceMaster (SERV), long US Foods (USFD).


Embedded below is the Fall 2019 issue of Graham & Doddsville:



You can download a .pdf copy here.

Sohn San Francisco Investment Conference: One Week Away

The Sohn San Francisco Investment Conference is just one week away.  It features hedge fund managers sharing their latest investment ideas to benefit charity.  It benefits the Excellence in Investing for Children's Causes Foundation and a portion of the proceeds also go to The Sohn Conference Foundation.  You can get more details about the event here.


Sohn San Francisco 2019 Event Details

When: October 16th, 11:30am to 6pm
Where: Hyatt Regency San Francisco
Schedule: Networking & buffet lunch, 'Next Wave' speakers, main event speakers, finished with a cocktail reception


Sohn San Francisco Speakers List

Main Event

Connor Browne, Thornburg Investment Management

Glen Kacher, Light Street Capital

Carl M. Kawaja, Capital World Investors

Debbie McCoy, Blackrock

Michael McLochlin, Highland Capital Management

Adam Fisher, Commonwealth Asset Management

Kevin Oram, Praesidium Investment Management

Myron Scholes, Janus Henderson Investors

Gil Simon, SoMa Equity Partners

Mike Wilkins, Kingsford Capital

Mark Yusko, Morgan Creek Capital Management


Next Wave Sohn Emerging Manager Speakers

Stephen Perkins, CFA, Toronado Capital Management

Touk Sinantha, CFA, AltraVue Capital

Raj D. Venkatesan, Trinity Alps Capital Partners

Christopher Weldon, Stamina Capital


Click here to register for the conference.  This is always a great event so be sure to register before next week!

What We're Reading ~ 9/18/19

Super Pumped: The Battle for Uber [Mike Isaac]

Inside the rise and fall of MoviePass [Business Insider]

Interview with Shopify's COO [Barrons]

Talking types of moats with Pat Dorsey [Outlook Business]

Profile of UiPath's Daniel Dines: the bot billionaire [Forbes]

Value investing's heady days aren't coming back [Institutional Investor]

A look at Berkshire Hathaway [Morningstar]

The economics of meal delivery [The Economist]

On Amazon's balance between reinvestment and harvesting [Stratechery]

Less than half of Google searches now result in a click [SparkToro]

On McCormick's spices resurgence [Forbes]

A profile of Unilever's old CEO Paul Polman [NYTimes]

ValueAct Sells Some KKR and CBRE Group

Jeff Ubben's investment firm ValueAct Capital has been active in markets recently.  We just highlighted how they went activist on LKQ and also sold some Arcosa.  Well, they've now also revealed two other portfolio moves.


ValueAct Trims KKR Stake

First, ValueAct has filed an amended 13D with the SEC regarding its stake in KKR (KKR).  It notes they sold shares in late July and also now in early September, with the bulk of their recent sales coming on September 13th at a weighted average price of $28.23. 

Per the filing, ValueAct now owns 8.8% of the company with 48.1 million shares.

Per Yahoo Finance, KKR is "a private equity and real estate investment firm specializing in direct and fund of fund investments. It specializes in acquisitions, leveraged buyouts, management buyouts, credit special situations, growth equity, mature, mezzanine, distressed, turnaround, lower middle market and middle market investments"


ValueAct Sells Some CBRE Group

Second, Ubben's firm has filed a Form 4 with the SEC regarding its position in CBRE Group (CBRE).  They sold 3 million shares on September 12th at $53.86.  After this transaction, they now own 10.22 million shares.

Per Yahoo Finance, CBRE Group is "operates as a commercial real estate services and investment company worldwide. It operates through Americas; Europe, Middle East and Africa; Asia Pacific; Global Investment Management; and Development Services segments. The company offers strategic advice and execution to owners, investors, and occupiers of real estate in connection with leasing; integrated property sales, and mortgage and structured financing services under the CBRE Capital Markets brand; and valuation services that include market value appraisals, litigation support, discounted cash flow analyses, and feasibility studies, as well as consulting services, such as property condition reports, hotel advisory, and environmental consulting. It also provides facilities management, project management, transaction management, and strategic consulting services to occupiers of real estate; and property management services comprising construction management, marketing, building engineering, accounting, and financial services for owners of and investors in office, industrial, and retail properties. In addition, the company provides investment management services under the CBRE Global Investors brand to pension funds, insurance companies, sovereign wealth funds, foundations, endowments, and other institutional investors; and development services under the Trammell Crow Company brand name primarily to users of and investors in commercial real estate. CBRE Group, Inc. was founded in 1906 and is headquartered in Los Angeles, California."

Carl Icahn Boosts Hertz Position

Activist investor Carl Icahn has filed numerous documents to the SEC recently (13D's and Form 4's) regarding his position in Hertz Global (HTZ).  Per the most recent 13D, Icahn now owns 30.92% of the company with exposure to over 43.92 million shares (inclusive of 2.03 million shares underlying forward contracts).

His recent purchases also are via forward contracts.  Per the filing, Icahn acquired exposure to over 1.15 million shares via forward contracts that expire on September 8, 2021.
The price per share is listed at $14.73 and $15 in the transactions.  And the filing notes that these contracts "Represents a forward price of $12 per Share, plus the amount per Share the Reporting Person paid the counterparty to the forward contract upon entering into such forward contract. The forward price is subject to adjustment to account for any dividends or other distributions declared by the Issuer. In addition, the Reporting Person paid a financing charge to the counterparty to such forward contract."

ValueAct Reveals Activist LKQ Stake, Sells Some Arcosa

Jeff Ubben's activist investment firm ValueAct Capital has filed a couple of 13D's with the SEC recently.

ValueAct Reveals Activist LKQ Stake

First, per a 13D regarding shares of LKQ Corp (LKQ), ValueAct now owns 5.2% of LKQ with over 16.03 million shares as of September 3rd.  This is a brand new position for the firm.

The filing indicates they were out buying shares throughout August and into early September with weighted average purchase prices coming between $24.91 and $27.49. 

The 13D also includes this note regarding their stake: "The Reporting Persons have had and anticipate having further discussions with officers and directors of the Issuer in connection with the Reporting Persons' investment in the Issuer. The topics of these conversations have covered or will cover a range of issues, including those relating to the business of the Issuer, management, board composition (which include whether it makes sense for a ValueAct Capital employee to be on the Issuer's board of directors), investor communications, operations, capital allocation, dividend policy, financial condition, mergers and acquisitions strategy, overall business strategy, executive compensation, and corporate governance."

Per Google Finance, LKQ "distributes replacement parts, components, and systems used in the repair and maintenance of vehicles. It operates in three segments: North America, Europe, and Specialty. The company distributes bumper covers, automotive body panels, and lights, as well as automotive glass products, such as windshields; salvage products, including mechanical and collision parts comprising engines; transmissions; door assemblies; sheet metal products, such as trunk lids, fenders, and hoods; lights and bumper assemblies; scrap metal and other materials to metals recyclers; and brake pads, discs and sensors, clutches, steering and suspension products, filters, and oil and automotive fluids, as well as electrical products, including spark plugs and batteries."


ValueAct Sells Some Arcosa Shares

Second, in a separately amended 13D, ValueAct has disclosed it has sold some Arcosa (ACA).  Per the 13D, the fund sold shares on September 9th through 13th at weighted average prices of around $34.50.

After the sales, ValueAct still owns 5% of the company with over 2.41 million shares.

Per Yahoo Finance, Arcosa "manufactures and sells infrastructure-related products and services for the construction, energy, and transportation markets. It operates through three segments: Construction Products Group, Energy Equipment Group, and Transportation Products Group. The Construction Products Group segment offers lightweight and natural construction aggregates, and trench shields and shoring products that are used in construction landscape, including commercial, industrial, road and bridge, and underground construction. It serves concrete producers; commercial, residential, industrial, and highway contractors; manufacturers of masonry products; state and local governments; and equipment rental dealers. The Energy Equipment Group segment provides structural wind towers for wind turbine producers; steel utility structures for electricity transmission and distribution; and pressurized and non-pressurized storage and distribution containers that store and transport various products, such as propane, anhydrous ammonia, and natural gas liquids. The Transportation Products Group segment offers hopper barges, tank barges, fiberglass covers, hatches, castings, and winches for commercial marine transportation companies and industrial shippers; axles, circular forgings, and coupling devices for freight, tank, locomotive, and passenger rail transportation equipment, as well as for other industrial uses; and cast components for use in the industrial and mining sectors. The company is headquartered in Dallas, Texas."