What We're Reading ~ Hedge Fund Links 5/31/13

Proposal of new hedge fund fee structure: 1% and 33% of alpha [Economonitor]

Cohen mulls plans to shutter SAC, open family office [Fox Business]

Is anyone any good at picking hedge fund managers? [The Big Picture]

Vanguard opposes petition to shorten deadline for 13F filings [ValueWalk]

How hedge funds transfer wealth from investors to managers [Forbes]

Asset managers yield to pressure on fees [Institutional Investor]

What's hurting hedge funds' performance? Their hedges (duh) [II Alpha]

Tiger Global invests $50 million in WordPress [Reuters]

Dan Loeb says Japan rally in early stages [WSJ]

Loeb's letter to Sony, arguing for a breakup [Dealbook]

Mortgages are investment du jour for hedge funds [Term Sheet]

Beware of that hedge fund in the window [Term Sheet]

Hedge funds to turn cold shoulder on advertising [Buzzfeed]

How Elliott and Hess settled a bitter proxy battle [Dealbook]

How New York hedge funds lost their shirts on Tesla [TheStreet]

Kerrisdale's Adrangi makes a killing by raiding the dodgy dealers [AFR]

Paul Tudor Jones: in macro trading, babies hurt a woman's focus [Washington Post]

Hedge fund and poker pros go heads up in Vegas [Hedge Fund Intelligence]

Maverick Capital Exits Bluefly Stake; Clearlake Capital Buys 90% of Company

Lee Ainslie's hedge fund firm Maverick Capital filed an amended 13D and a Form 4 with the SEC regarding shares of Bluefly (BFLY).  Per the filings, Maverick has sold out of its BFLY position and no longer owns any shares.  On May 23rd, Maverick sold its 3,704,101 shares.

Bluefly just announced that Clearlake Capital Partners has purchased 90% of outstanding shares from the company's principal stockholders and also entered into an agreement with the company where they bought additional shares from the company.  Clearlake is looking to re-energize the business.

Per Google Finance, Bluefly is "an online retailer of designer apparel brands and accessories at discount prices."

To see what US stocks Maverick has been buying, head to the just released issue of our premium newsletter.

Glenview Capital Sought Hart-Scott-Rodino Clearance To Buy More Health Management; Issues Press Release

Earlier this month, we highlighted how Larry Robbins' hedge fund firm Glenview Capital added to its Health Management Associates (HMA) stake and filed a 13D with the SEC.  Yesterday, Glenview filed an amended 13D and included a press release seeking to clarify its holdings in HMA given that they sought Hart-Scott-Rodino clearance to buy more shares.  The full press release is below:


"Statement of Clarification by Glenview Capital, 14.6% Shareholder of Health Management Associates, Inc. 

NEW YORK, NY (May 28, 2013) – Glenview Capital Management LLC, issued the following statement of clarification regarding its holdings in Health Management Associates, Inc. (NYSE: HMA):                

“Investment funds advised by our firm, Glenview Capital Management, LLC (“Glenview”), presently hold approximately 37.8 million shares of Health Management Associates, Inc. (“HMA”), or approximately 14.6% of the Company. In our thirteenth year of operation as an investment partnership, we at Glenview are proud of not only our investment track record but of our track record of dealing directly, respectfully and privately with senior management and, as appropriate, members of the Board of Directors. We have never filed a public letter to a company or its shareholders and our strong preference is to avoid doing so in the future.  

However, we feel the 8-K issued by HMA in conjunction with the Board’s decision to enact a shareholder rights plan, commonly referred to as a poison pill, may cause confusion regarding our intentions and may lead to undue volatility in the stock price. As such, we offer the following points of clarification so that fellow shareholders may have a more complete understanding of the situation prior to the resumption of trading in HMA shares:  

i) As a result of developments regarding HMA, Glenview converted its Schedule   13G filing to a 13D on May 6, 2013.  

ii) Consistent with our 13D filing, we sought clearance, under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR”), as required by law in order to be in a position to acquire even one additional share of HMA.  

iii) Under HSR requirements, each investment fund within our fund family is required to make its own HSR filing.  Each fund may file to acquire up to a maximum of $141.8 million, $709.1 million or a greater amount in HMA voting shares.  Due to the size of our funds, and the proximity of their present ownership stake to the thresholds, three funds filed for the higher authorization size of up to $709.1 million and one filed for authorization of up to $141.8 million, thus adding up to $2.2 billion of stock. 

iv) Notwithstanding the simple math of adding up these maximum threshold amounts, such an investment size is both beyond our present intention and beyond our present resources available for any single position.  Such a filing was required to facilitate even a modest increase in our present holdings.  In plain English, we have no present intention or future plan to buy either $2.2 billion of stock or 75% of HMA.  

v) Finally, in HMA’s description of the adoption of the poison pill, they indicate that such a rights plan will “help promote the fair and equal treatment of all stockholders of the Corporation (not just Glenview)…”  As perhaps this statement could lead to misinterpretation, we wish to clarify that Glenview has made no proposals, either to HMA or to any of its holdings over a thirteen year period, which are to the exclusive benefit of Glenview.  On the contrary, every discussion we have engaged in, including any recommendations we have made, represent suggestions that we believe materially improve value creation for all long-term shareholders.   

It is out of respect for our fellow HMA shareholders that we have made an exception to our long-standing practice of avoiding such open written communications, and we hope that this insight helps all market participants make intelligent decisions about their own investment positions in the Company.  We look forward to continuing our discussions with HMA in private and will use the governance tools available (which for us always starts with respectful and constructive dialogue) to pursue our common objectives of long-term value creation.”


For more recent activity from this hedge fund, we also detailed how Glenview trimmed their Tenet Healthcare stake.

Scout Capital Discloses CST Brands (CST) Stake

Adam Weiss and James Crichton's hedge fund firm Scout Capital filed a 13G with the SEC regarding shares of CST Brands (CST).  Per the filing, Scout has disclosed a 5.9% ownership stake in CST with 4,485,000 shares.

This is a brand new position for the hedge fund and Scout crossed the threshold requiring an SEC filing on May 15th. 

This month CST was spun-off from Valero (VLO).  Scout did not report ownership of VLO at the end of Q1, so it's hard to say if they bought VLO shares more recently and received shares via the spin, or if they simply built a position once CST started trading.

Shareholders of Valero on the books as of mid-April received 1 CST share for every 9 VLO shares owned.

Per Google Finance, CST Brands is "a retailer of transportation fuels and convenience goods in North America. As of April 30, 2013, the Company operated 1,032 Corner Stores throughout the United States, including Texas, Louisiana, Arkansas, Oklahoma, New Mexico, Colorado, Wyoming, Arizona and California. Its stores also provide prepared foods. The Company offers a range of products, such as snack foods, tobacco products, beverages and fresh foods, including its own brands: Fresh Choices sandwiches, salads and packaged goods; U Force energy drinks; Cibolo Mountain coffees (the United States); Transit Cafe coffee and bakery (Canada); FC bottled sodas, and Flavors 2 Go fountain sodas."

For more portfolio activity from this hedge fund, we recently posted about another stock Scout has been buying.

Lone Pine Capital Starts FleetCor Technologies (FLT) Position

Steve Mandel's hedge fund Lone Pine Capital filed a 13G with the SEC regarding shares of FleetCor Technologies (FLT).  Per the filing, Lone Pine has revealed a 5.3% ownership stake in the company with 4,336,936 shares.

This is a brand new position for the hedge fund and the filing was required due to portfolio activity on May 15th.  Just yesterday, we flagged another stock Lone Pine has been buying.


Other Hedge Funds Involved in FLT

FleetCor Technologies has garnered increased interest from tons of hedge funds, many of whom have ties to Julian Robertson's old Tiger Management in some form or another.  Chase Coleman's Tiger Global was one of the largest FLT shareholders at the end of Q1.

Other top 10 institutional holders at the end of Q1 include Lee Ainslie's Maverick Capital and Robertson-seeded Hound Partners, managed by Jonathan Auerbach.  While Tiger Global and Maverick own more shares, Hound has a much more concentrated position in FLT as it represents around 9% of their portfolio.

Lone Pine's recent activity, however, trumps all of these funds on an absolute share basis.  Their 4.3 million FLT shares means they own even more than Tiger Global.


About FleetCor Technologies

Per Google Finance, FleetCor Technologies is "an independent global provider of fuel cards and workforce payment products and services to businesses, commercial fleets, major oil companies, petroleum marketers and government entities in countries throughout North America, Latin America and Europe. It provides its payment products and services in a variety of combinations to create customized payment solutions for its customers and partners. The Company operates in two segments: North American and International. The Company provides its customers with various card products that typically function like a charge card to purchase fuel, lodging, food and related products and services at participating locations."

To view the rest of Lone Pine's portfolio, head to the brand new issue of our Hedge Fund Wisdom newsletter that was just released.

What We're Reading ~ Analytical Links 5/29/13

Is the U.S. the next hot 'emerging market'? [WSJ]

Margin debt hits a record [WSJ]

The bull case on Hertz Global (HTZ) [Barron's]

TripAdvisor's (TRIP) margins could expand after years of slimming [Trefis]

On cutting your losses [The Atlantic]

Goldman Sachs says AIG shares still most loved by hedge funds [Marketwatch]

On share repurchase fever [Capital Observer]

What happens when QE ends [AllStarCharts]

Searching for yield [Mebane Faber]

If you only know 5 things about investing, make it these [Motley Fool]

Bid on lunch with Warren Buffett [eBay]

Activist investors: let's do it my way [The Economist]

Atlas of public stocks: mapping all publicly listed companies [Simoleon Sense]

Embrace the business model that threatens you [Harvard Business Review]

Behavioral investing principles are more relevant than ever [Institutional Investor]

PepsiCo (PEP) resistance against activists looks futile [Reuters]

A rush to recruit young analysts only months on the job [Dealbook]

Studying the dark art of leaking deal talks [Dealbook]

House flipping back in style [WSJ]

Strategist Jeff Saut on the Stock Market Buying Stampede

Checking in with market strategist Jeff Saut we see that his latest weekly market commentary is entitled 'Buying Stampede' due to all the questions he's received lately about the market.

Saut writes, "I continue to believe the SPX is going to trade north of 1700 into the end of 2Q13 before becoming vulnerable to a more significant decline beginning in the July/August timeframe.  Obviously I have never seen a buying stampede like this one, which has lifted the senior index above a basing formation in the charts that was 13 years in the making."

He then notes that there have been four previous 'bases' that have launched secular bull markets that have lasted 12 years or longer (1906-1924, 1929-1955, 1966-1982, and then 2000-2013).

Saut cites a slidedeck of this data that says "The characteristics of the market when it breaks out of a base that exceeds 12 years in length is different. Investor behavior reflects an underlying distrust or disinterest and is characterized by underinvestment in equities.  This results in a rebound that is relentless, providing little opportunity to buy on pullbacks."  Sound familiar?


Embedded below are Saut's full analysis and comments:



You can download a .pdf copy here.


For more thoughts from this strategist, head to Jeff Saut on investor sentiment and you can also see his best stock ideas for the next 3-5 years that he outlined early this year.

Lone Pine Capital Raises Realogy Holdings (RLGY) Position

Steve Mandel's hedge fund firm Lone Pine Capital filed a 13G with the SEC regarding shares of Realogy Holdings (RLGY).  Per the filing, Lone Pine has revealed a 5.1% ownership stake in Realogy with 7,457,505 shares.

This marks a 207% increase in Lone Pine's position size since the end of the first quarter.  The 13G filing was required due to portfolio activity on May 14th. 


Other Hedge Funds Involved in Realogy

Our premium newsletter last week highlighted how Blue Ridge Capital and Paulson & Co are also involved in this stock.

Hedgies seem to like Realogy as a play on the recovering US housing market and find the company's high margin (and low capital intensity) business model attractive as RLGY benefits from increased sale volumes and rising prices.

Per Google Finance, Realogy Holdings "through its subsidiaries, provides real estate and relocation services. The Company operates in four segments: Real Estate Franchise Services, Company Owned Real Estate Brokerage Services, Relocation Services and Title and Settlement Services. Through its Real Estate Franchise Services segment (RFG), is a franchisor of some of the most recognized brands in the real estate industry. Through its subsidiary, NRT LLC (NRT), it owns and operates a full-service real estate brokerage business in more than 35 of the metropolitan areas of the United States. Through its subsidiary, Cartus Corporation (Cartus), it is a provider of outsourced employee relocation services and the provider in the United States."

This hedge fund has been active lately as we detailed some of Lone Pine's other portfolio activity.

Nantahala Capital Boosts Stake in The Dolan Company (DM)

Wilmot Harkey's hedge fund firm Nantahala Capital Management has filed a 13G with the SEC regarding shares of The Dolan Company (DM).  Per the filing, Nantahala has revealed a 11.52% ownership stake in Dolan with 3,562,282 shares.

This means their equity stake has roughly doubled.  They previously owned just over 1.7 million shares at the end of March. The SEC filing was required due to portfolio activity on May 22nd.

Nantahala initiated a position in DM shares in the fourth quarter of 2012.  Then they added to their position in the first quarter and have continued to buy as shares have fallen further.


About Nantahala

Nantahala focuses on small cap stocks and have a market-neutral discipline.  Wil Harkey founded Nantahala in 2004.  Prior to that, he worked at Sagamore Hill Capital.


About The Dolan Company

Per Google Finance, Dolan is "a provider of necessary professional services and business information to legal, financial and real estate sectors in the United States. The Company operates through two operating divisions: its Professional Services Division and its Business Information Division. Its Professional Services Division consists of two segments: mortgage default processing services and litigation support services. Its Business Information Division produces legal publications, business journals, court and commercial media, other online information products and services, and operates Websites and produces events for targeted professional audiences in 21 geographic markets across the United States. Its information is delivered through a variety of methods, including approximately 60 print publications and 80 Websites."