What We're Reading ~ Hedge Fund Links 10/4/13

Transcript of an old David Tepper speech [Santangel's Review]

Crispin Odey's latest views [eFinancialNews]

Highfields Capital wants to shrink [Reuters]

Pitney Bowes CEO to hedge funds: don't short us [CNBC]

Latest thoughts from hedge fund manager Daniel Khoshaba [Barrons]

Event-driven hedge funds dominate inflows & performance [Marketwatch]

New additions to the hedge fund hall of fame [II Alpha]

Short star Goshen crushed in rising market [HF Intelligence]

Buffett's Berkshire set to get nearly $2.15 billion of Goldman stock [Reuters]

Third Point bidding for Depfa? [FT]

Falcone's funds sell Harbinger Group shares to Leucadia [Bloomberg]

How to spot a hedge fund fraudster [II Alpha]

The key to hedge fund success [Wealth Professional]

Hedge funds' interest in reinsurance roils markets [PI]

Considering a hedge fund? Here's key questions to ask [WSJ]

Consultants control $830 billion of hedge fund AUM [COO Connect]

Ackman should stick with heavy industry [Dealbook]

Lone Pine Capital Starts Pandora Stake

Steve Mandel's hedge fund firm Lone Pine Capital has filed a 13G with the SEC regarding shares of Pandora (P).  Per the filing, Lone Pine has revealed a 5.3% ownership stake in P with 10,085,216 shares.

This is a brand new position for the hedge fund and the filing was required due to activity on September 23rd.  It's worth highlighting that the company announced a secondary offering in September as well.

Pandora operates in the internet radio segment and shares have been on a tear this year.  Recently, some investors have questioned whether Apple's entrance into the space via their iTunes radio offering will hurt P. 

For more from this hedge fund, head to more recent portfolio activity from Lone Pine.

Excellence in Investing San Francisco Conference: Burbank, Billick, McGuire & More

The 4th annual Excellence in Investing: San Francisco conference is coming up on October 23rd.  In partnership with the Sohn Conference Foundation, this event features hedge fund managers pitching investment ideas to support education and children's causes.  You can find out more about the event here.

2013 Speakers List

Kurt Billick, Bocage Capital
John Burbank, Passport Capital
Mick McGuire, Marcato Capital
Malcolm Fairbairn, Ascend Capital
David Herro, Harris Associates
Chris James, Partner Fund Management
Carl Kawaja, Capital World Investors
Chris Lord, Criterion Capital
Michael Moe, GSV Capital
Mason Morfit, ValueAct Capital
Brian Zied, Charter Bridge Capital
Christopher Balding, Peking University HSBC Business School


Excellence in Investing San Francisco Conference Details

When:  Wednesday, October 23rd, 2013
Where: The Bently Reserve, San Francisco, CA
Time: 2:30-6:00 PM
Website: www.excellencesf.org

The 4th annual event features a great line-up of speakers, so if you're a financial professional or investor on the West Coast, this is definitely one of the premier events in the area.

Embedded below is the conference flyer:





This is a public charity, and as such, all conference registrations and donations are tax deductible.  You can register for the event by clicking here.

Bill Ackman & Pershing Square's Q3 Letter: Converts 40% of Herbalife Short to Put Options

Bill Ackman recently sent out his letter to investors from hedge fund Pershing Square Capital.  In it, he reveals that he's switched out almost half of his Herbalife (HLF) short position from equity to put options.  He made this move largely for risk management purposes.

He also talks about his new activist position in Air Products & Chemicals (APD) where they've already made progress by replacing the CEO.

Bill Ackman's Q3 letter is embedded below, courtesy of The New York Post:

 


If you missed it: Ackman also dumped his J.C. Penney stake as well.

Citadel Boosts Global Brass & Copper Stake

Ken Griffin's hedge fund firm Citadel has filed a 13G with the SEC regarding shares of Global Brass & Copper (BRSS).  Per the filing, Citadel has revealed a 5.8% ownership stake in the company with 1,223,190 shares.

This marks a 253% increase in their position size since the end of the second quarter.  The filing was required due to activity on September 26th.

Per Google Finance, Global Brass & Copper "a converter, fabricator, distributor and processor of specialized copper and brass products in North America. The Company operates in three segments: Olin Brass, Chase Brass and A.J. Oster. The Company is engaged in metal melting and casting, rolling, drawing, extruding and stamping to fabricate finished and semi-finished alloy products from processed scrap, copper cathode and other refined metals. The Company’s products include a range of sheet, strip, foil, rod, tube and fabricated metal component products that it sells under the Olin Brass, Chase Brass and A.J. Oster brand names. The Company’s products are used in a range of applications, including the building and housing, munitions, automotive, transportation, coinage, electronics/electrical components, industrial machinery and equipment and general consumer end markets."

David Einhorn on Green Mountain Coffee, Vodafone & More: Interview

Greenlight Capital's David Einhorn appeared on Bloomberg Television today and talked about his short of Green Mountain Coffee Roasters (GMCR) and his long of Vodafone (VOD), two longstanding positions.  Here are some of the highlights and the video interview is below:


On whether he is still short Green Mountain Coffee:  “Yes. We are still short Green Mountain.  It has been on the toughest things going on in our portfolio this year. The books are over caffeinated, if you would.  The company says that they sell a lot of coffee, there is no doubt they sell a lot of coffee. We do not think they sell anywhere near as much as they say and there are real discrepancies in the accounts. They had an analyst day a few weeks ago and they were asked to explain the numbers, and the CEO’s cavalier response was they do not do straight math and they are not going to get into this now. If you do not get into this on an investor call, when are you going to?” 

“There is a lot of ways for Green Mountain to pan out for us. This year, so far it has not been panning out for us. The competition has been increasing; they are losing market shares in their stores. Their platform has been commoditized. Anybody can make a cakeup. The Supply is now out there. The prices are falling. I think they will miss on the business side form an earnings perspective sometime over the next year. Ultimately they will be commoditized away. In addition, you have the regulatory risk when someone wakes up one day and says these numbers are not what they are represented to be.”


On being big on Vodafone the last three years:  “When we bought it you were getting no credit for their stake in Verizon Wireless now we see that was a very valuable stake. I think $130 billion. I think Vodafone remains pretty attractive because one you strip out the consideration for Verizon, the rest of the European business is at a pretty cheap value.”    


On whether there are opportunities in the U.S. for Vodafone:  “No, I think Vodafone exits from the U.S. if anything it could ultimately be a target for someone like AT&T that wants to get exposure into Europe”    


On whether Vodafone could have held on to Verizon Wireless longer:  “I would give Vodafone an A or an A plus on this negotiation. Verizon took a very aggressive tact with them for a lot of years saying, you are a minority; we are not going to pay you dividends and eventually Verizon needed a dividend so they started paying it but sporadically. They really tried to squeak these guys out. They finally came in the spring. It turned out they could not bridge the great act. Vodafone held out. Verizon came back to the table. They paid a higher price than I think they even would have paid in the spring… Vodafone is not mostly a wireline business. They are mostly cellular in Europe. So you have that wireless component there. When you strip out the Verizon Wireless valuation, you are buying it at two turns of EBITA less than comparable companies. I think it has better prospects better growth and better network than many of its peers.”


Embedded below is the video of David Einhorn's interview with Bloomberg Television:



For more on this manager, we've posted some of Greenlight's recent portfolio activity here.

What We're Reading ~ Analytical Links 10/2/13

Why most investors/traders fail [Reformed Broker]

Red flags flying over Boulder Brands [Herb Greenberg]

The outlook for healthcare stocks [Morningstar]

Blackstone: we're in an epic credit bubble' [CNBC]

Satellite TV providers plan for survival as growth fades [BusinessWeek]

10 stealth economic trends that rule the world today [The Atlantic]

Grounded: Brazil has stalled [Economist]

Interview with Amazon's Jeff Bezos [CNBC]

Aubrey McClendon launches new gas company [CNBC]

How Mohnish Pabrai uses checklist investing [Forbes]

Why Wall Street loves houses again [The Atlantic]

Google unveils major overhaul of its search engine [USA Today]

As J.C. Penney flounders, lack of control evident [Dealbook]

Younger generations' approach to investing [NYTimes]

Third Point Becomes Sotheby's Largest Shareholder, Sends Letter & Wants Board Seat

Today Dan Loeb's hedge fund firm Third Point filed an amended 13D with the SEC regarding their position in Sotheby's (BID).  Per the filing, Third Point has disclosed a 9.3% ownership stake in BID with 6,350,000 shares.

This marks a 154% increase in the size of their position since they initially filed a 13D on Sotheby's back in August.  Third Point was out buying BID shares sporadically throughout August and then really ramped up their stake on September 30th, buying a ton of shares in the low $49's.


Loeb's Letter To Sotheby's CEO

Loeb then sent Sotheby's CEO a letter which we've embedded below:




Third Point highlights pressing issues at the company, management's lack of alignment with shareholders, and limitations in formulating and executing strategic initiatives.

As we've highlighted before, a few other activist hedge funds own BID shares as well, such as Nelson Peltz's Trian Fund and Mick McGuire's Marcato Capital Management.

One funny sidenote to the story: CNBC's David Faber spoke with Loeb, who said that BID sent him to the investor relations department when he reached out to the company.  Classic.


Third Point's September Exposure Report

Also worth mentioning: Third Point's Offshore Fund finished September up 2.6% and is up 18% year-to-date.  The hedge fund's net long equity exposure at the end of the month was 45.8% net long (61.4% long, -15.6% short).

ValueAct Capital Increases Rockwell Collins Stake

Jeff Ubben's hedge fund ValueAct Capital filed various forms with the SEC regarding their position in Rockwell Collins (COL).  Per the filing, ValueAct now shows a 9.7% ownership stake in COL with 13,113,000 shares.

The 13D filing breaks down their recent buys and shows they were purchasing COL shares between September 20th and 27th at prices in the high $68's.  They've purchased over 1.7 million shares since their last disclosure.  Also worth highlighting: COL is currently trading below levels where ValueAct bought.

ValueAct seems to like Rockwell's dominance in avionics as it gives them pricing power (their only main competitor is Honeywell).  Ubben apparently also likes the company's penchant for share repurchases.

Per Google Finance, Rockwell Collins is "engaged in design, production and support of communications and aviation electronics for commercial and military customers worldwide. The Company’s products and systems are primarily focused on aviation applications, The integrated system solutions and products it provide to its served markets include communications, navigation, automated flight control, displays/surveillance, simulation and training, integrated electronics and information management systems. The Company also provides a range of services and support to its customers through a network of service centers, including equipment repair and overhaul, service parts, field service engineering, training, technical information services and aftermarket used equipment sales. The Company operates in two segments: Government Systems and Commercial Systems."

If you missed it, be sure to check out Jeff Ubben's presentation from the Value Investing Congress.

Perry Capital Dumps Almost Half of J.C. Penney Stake

Richard Perry's hedge fund firm Perry Capital yesterday filed an amended 13D with the SEC regarding shares of J.C. Penney (JCP).  Per the filing, Perry has disclosed a 3.28% ownership stake with 10 million shares of JCP.

This means that Perry has dumped almost half of the JCP position they recently took.  Their latest filing shows they sold shares on September 27th at prices ranging from $9.02 to $9.5887.  This is around the time J.C. Penney announced that they would be issuing a ton of stock. 

When Perry initially took the stake, we pointed out that they were already down on the position as they started buying around $17.77 and added again around $14.86.  Then, a month later, they bought some of the shares that Bill Ackman was liquidating at around $12.90.  Then, as illustrated above, Perry capitulated and sold almost half of their stake in the $9's.

Things have only gotten worse as JCP now trades around $8.76.  While Perry has had a quick about-face on their JCP position size, it remains to be seen if they'll retain the rest of their shares. 

J.C. Penney has quickly become somewhat of a hedge fund graveyard.  Other hedge funds have been involved as well, such as Glenview Capital and Soros Fund.   And last month, we also highlighted that Kyle Bass' Hayman Capital had also started a J.C. Penney position.  We'll have to see if any of these other managers have a change of heart as well.

Senator Investment Group Adds to PHH Position

Alex Klabin and Doug Silverman's hedge fund Senator Investment Group recently filed a 13G with the SEC regarding shares of PHH (PHH).  Per the filing, Senator now owns 7.6% of the company with 4,391,007 shares.

The fine print of the filing shows that this stake is inclusive of notes convertible into 391,007 shares.  The filing was required due to activity on September 20th and this updated stake includes over 1.9 million more shares than they had at the end of the second quarter.

Per Google Finance, PHH is "an outsource provider of mortgage and fleet management services. PHH operates in three segments: Mortgage Production, Mortgage Servicing and Fleet Management Services. The Company provides mortgage banking services to clients, including financial institutions and real estate brokers, throughout the United States. The Company’s mortgage banking activities include originating, purchasing, selling and servicing mortgage loans through its wholly owned subsidiary, PHH Mortgage Corporation and its subsidiaries (PHH Mortgages). It provides commercial fleet management services to corporate clients and government agencies throughout the United States and Canada through its wholly owned subsidiary, PHH Vehicle Management Services Group LLC (PHH VMS). PHH VMS is a fully integrated provider of fleet management services with a range of product offerings, including managing and leasing vehicle fleets and providing other fee-based services for its clients’ vehicle fleets."

Balyasny Asset Management Starts Walter Energy Stake

Dmitry Balyasny's firm Balyasny Asset Management has filed a 13G with the SEC regarding shares of Walter Energy (WLT).  Per the filing, Balyasny now owns 5.22% of the company with 3,264,002 shares.

The filing was required due to activity on September 10th and this is a newly disclosed position for the hedge fund as they did not own any shares at the end of Q2.

This isn't the first time they've owned a stake either.  Balyasny previously owned WLT shares a little under a year ago.

Per Google Finance, Walter Energy is "a producer and exporter of metallurgical coals for the global steel industry. The Company also produces thermal coal and industrial coal, anthracite, metallurgical coke, coal bed methane gas (natural gas) and other related products. The Company operates in two segments: the Company's United States operations segment and its Canadian and United Kingdom operations segment. United States operations segment includes the operations of the Company's underground mines, surface mines, coke plant and natural gas operations located in Alabama and its underground and surface mining operations located in West Virginia. The Canadian and United Kingdom operations segment includes the operations of surface mines in Northeast British Columbia (Canada) and an underground mine and surface mine in South Wales (U.K.)."

Market Strategist Jeff Saut's Latest Commentary: "Character"

It's been a while since we checked in with market strategist Jeff Saut, so today we read his latest investment strategy commentary entitled "Character."

In it, Saut details the worries of the debt ceiling and potential government shutdown.  For what it's worth, he thinks it's "noise' in the intermediate term and that eventually it will get resolved.

In such a scenario, he sees the stock market shifting its attention to an improving economy and better economic numbers out of China.  He also points out that mega cap stocks have been the weakest.

Embedded below is Jeff Saut's latest market commentary:




You can download a .pdf copy here.

For an older but long-term focused piece from this strategist, head to Jeff Saut's best stock ideas for the next 3-5 years.

Kyle Bass' Hayman Capital Discloses PennyMac Mortgage Investment Trust Stake

Kyle Bass' hedge fund firm Hayman Capital has filed a 13G on shares of PennyMac Mortgage Investment Trust (PMT).  Per the filing, Hayman has disclosed a 5.1% ownership stake in with 3,570,000 shares.

The filing was required due to activity on September 27th and marks a new disclosure.  Earlier this summer, we noted that Omega Advisors and Bridger Capital took stakes in PennyMac Financial Services, the company whose subsidiary manages PennyMac Mortgage Investment Trust.

Per Google Finance, PennyMac Mortgage Investment Trust is "a specialty finance company that invests primarily in residential mortgage loans and mortgage-related assets. The Company is a real estate investment trust (REIT). The Company operates in two segments: investment activities and correspondent lending. The correspondent lending segment focuses on the purchase for resale of newly originated mortgage loans. The investment activities segment focuses on mortgage assets that are acquired and held for investment purposes. The Company’s primary investment objective is to maximize the value of the mortgage loans that it acquires, a substantial portion of which may be distressed and acquired at discounts to their unpaid principal balances, either through loan modification programs, special servicing and other initiatives focused on keeping borrowers in their homes, or, when necessary, through timely acquisition and liquidation of the property securing the loan."


For more on Hayman, we recently posted up Kyle Bass' macro discussion at the Alpha Hedge West conference.

Eminence Capital & Tiger Consumer Add to Aeropostale Positions

Ricky Sandler's hedge fund firm Eminence Capital has filed a 13G on retailer Aeropostale (ARO).  Per the filing, Eminence now owns 5.4% of the company with just over 4.2 million shares.

This marks a 39% increase in their position size since the end of the second quarter when they owned just over 3 million shares.  The 13G was required due to portfolio activity on September 17th.


Tiger Consumer Management Buys Aeropostale Too

Eminence isn't the only hedge fund that's been buying shares either.  Patrick McCormack's Tiger Consumer Management has also filed a 13G on ARO in recent weeks.

Tiger Consumer now owns over 6.4 million shares and filed the 13G due to activity on September 4th.  They've boosted their holdings in ARO by almost 81% since the end of the second quarter.   Patrick McCormack's fund now owns 8.21% of the company.

Per Google Finance, Aeropostale is "a mall-based, specialty retailer of casual apparel and accessories, principally targeting 14 to 17 year-old young women and men through its Aeropostale stores and 4 to 12 year-old kids through its P.S. from Aeropostale stores. P.S. from Aeropostale products can be purchased in P.S. from Aeropostale stores, in certain Aeropostale stores, and online at www.ps4u.com."