Glenn Greenberg of Brave Warrior Advisors sat down with CNBC for a rare interview. Here's some key takeaways:
- He looks to buy stocks that will have around a 10% free cashflow yield 1-2 years from now
- Focused on 2-3 years ahead, less concerned about short-term swings or quarterly volatility. Likes to focus on companies that build wealth.
- Long financial stocks JPMorgan (JPM), Primerica (PRI), and Charles Schwab (SCHW). "We made a big bet that normal interest rates would not stay at zero. It was that simple and we didn't know when they would change, but the payoff we felt would be substantial so we have had a lot of financial stocks in our portfolio the last few years."
- On JPM: "They should be earning $8-9 in a couple of years if rates track at the moderate increases that are in the dot plot (of the Federal Reserve)."
- On SCHW: "Amazing franchise" and sees it largely as a bet on interest rates normalizing ... 175 bps now versus 350 bps back in 2007 on client cash positions.
- On Freddie Mac: "Best business model I have ever seen."
- "(Interest) rates could go a lot higher, Inflation could go a lot higher."
- Also owns Airbus (AIR.PA), Express Scripts (ESRX)
- Says Valeant Pharmaceuticals (VRX) was "biggest investment mistake over last 30 years" for him. But still broke even on it.
If you missed the interview on TV today, it looks like the video replay is behind CNBC's paywall.
Friday, March 17, 2017
Glenn Greenberg's Brave Warrior: Long Financials (CNBC Interview)
ValueAct Capital Buys More Valeant Pharmaceuticals
Jeff Ubben's activist firm ValueAct Capital has filed a 13D and Form 4 with the SEC regarding its position in Valeant Pharmaceuticals (VRX). Per the 13D, ValueAct now owns 5.2% of the company with over 17.99 million shares.
They purchased 3 million shares in total on March 14th, with the bulk of the trade coming at $10.81 per share with some shares coming at $10.88.
This comes on the heels of Bill Ackman's Pershing Square exiting its Valeant investment entirely.
Per Google Finance, Valeant Pharmaceuticals is "a pharmaceutical and medical device company. The Company is engaged in developing and marketing a range of branded, generic and branded generic pharmaceuticals, over-the-counter (OTC) products, and medical devices (contact lenses, intraocular lenses, ophthalmic surgical equipment, and aesthetics devices). It operates through two segments: Developed markets and Emerging markets. In the Developed Markets segment, it focuses on the areas of dermatology, neurology, gastrointestinal disorders, and eye health therapeutic classes. In the Emerging Markets segment, it focuses on primarily on branded generics, OTC products and medical devices. Its pharmaceutical products include Xifaxan, Solodyn and Glumetza. Its OTC products include PreserVision, Biotrue and Boston. Its other generic products include Latanoprost and Metronidazole. Its ophthalmic surgical products include intraocular lenses, such as Akreos, enVista, Crystalens and Trulign."
Thursday, March 16, 2017
Paulson & Co Trims Extended Stay America / ESH Hospitality Position
John Paulson's hedge fund firm Paulson & Co filed a 13D with the SEC regarding its position in Extended Stay America (STAY). Per the filing, Paulson now owns 10.3% of STAY with over 20 million shares.
This is a decrease of over 8.54 million shares since the end of 2016 when they previously owned 28.6 million STAY shares. These are paired shares with ESH Hospitality which Paulson also owns and they trimmed that position proportionately as well.
Paulson sold some STAY shares on March 10th at $16.70 per a Form 4 filed with the SEC. We previously highlighted that Paulson trimmed this position back in November as well.
Per Google Finance, Extended Stay America is "an integrated owner/operator of Company-branded hotels in North America. The Company operates in hotel operations segment. The Company's business operates in the extended stay sector of the lodging industry. As of December 31, 2016, the Company owned and operated 629 hotels comprising approximately 69,400 rooms located in 44 states across the United States and in Canada. The Company owns and operates its hotels under its brand, Extended Stay America, which serves the mid-price extended stay sector. As of December 31, 2016, the Company also owned and operated three Extended Stay Canada hotels. The Company operates its hotels owned by ESH Hospitality, Inc. (ESH REIT). The hotels are operated by the Operating Lessees, subsidiaries of the Company and are managed by ESA Management LLC (ESA Management), a subsidiary of the Company. ESH Strategies, a subsidiary of the Company, owns the brands related to its business."
Tiger Global Shows Teladoc Position
Chase Coleman's hedge fund firm Tiger Global has filed a 13G with the SEC regarding shares of Teladoc (TDOC). Per the filing, Tiger Global now owns 9% of TDOC with over 4.89 million shares.
This is a newly disclosed position and the filing was made due to activity on March 14th. We recently highlighted another stock Tiger Global has been buying as well.
Per Google Finance, Teladoc is "a telehealth company. The Company offers telehealth platform, delivering on-demand healthcare anytime, anywhere, through mobile devices, the Internet, video and phone. The Company operates through health services segment. Its solution connects its Members, with its over 3,000 board-certified physicians and behavioral health professionals who treat a range of conditions and cases from acute diagnoses, such as upper respiratory infection, urinary tract infection and sinusitis to dermatological conditions, anxiety and smoking cessation. Its enterprise scale platform is offered for real-time sharing of clinical and non-clinical data in real time among the Teladoc constituents, which include Members, Providers, physician network operations center staff, nurses, SureScripts for electronic medication prescription writing, routing and fulfillment and health plans for claims processing, clinical summaries and clinical alerts."
Third Point Adds To Kadmon Holdings
Dan Loeb's hedge fund firm Third Point has filed a Form 4 with the SEC regarding its position in Kadmon Holdings (KDMN). Per the filing, Third Point bought 1.48 million shares of KDMN on March 13th at $3.36 per share. After this transaction, they now own over 9.4 million shares. Included in the transaction were 595,238 warrants to purchase 0.40 shares of common stock each. These have an expiration date of April 13, 2018 and an exercise price of $4.5. We've posted other recent portfolio activity from Third Point here.
Per Google Finance, Kadmon Holdings is "an integrated biopharmaceutical company engaged in the discovery, development and commercialization of small molecules and biologics to address disease areas of various unmet medical needs. The Company is developing product candidates in a number of indications within autoimmune and fibrotic disease, oncology and genetic diseases. Its product pipeline consists of KD025, Tesevatinib and KD034. The Company's other products include Ribasphere RibaPak, Ribasphere, Qsymia, Tetrabenazine and Valganciclovir. KD025 is an orally available, selective small molecule inhibitor of Rho-associated coiled-coil kinase 2 (ROCK2), a molecular target in multiple autoimmune, fibrotic and neurodegenerative diseases. Tesevatinib is an oral tyrosine kinase inhibitor (TKI) designed to block key molecular drivers of tumor growth, metastases and drug resistance. KD034 is the Company's portfolio of enhanced formulations of trientine hydrochloride for the treatment of Wilson's disease."
Fairholme Capital Buys Some Sears Shares
Bruce Berkowitz's investment firm Fairholme Capital has filed a Form 4 with the SEC regarding its position in Sears Holdings (SHLD). Per the filing, Berkowitz bought 84,200 SHLD shares on March 10th at $8.33 and then bought another 197,700 shares on March 14th at $8.82.
Fairholme owns over 27.7 million shares of SHLD and keep in mind they own warrants as well with an expiration of December 15th, 2019 and exercise price of $25.686.
Per Google Finance, Sears Holdings is "an integrated retailer. The Company is the parent company of Kmart Holding Corporation (Kmart) and Sears, Roebuck and Co. (Sears). It operates through two segments: Kmart and Sears Domestic. It operates approximately 940 Kmart stores across over 50 states, Guam, Puerto Rico and the United States Virgin Islands. Kmart stores carry an array of products across various merchandise categories, including seasonal merchandise, toys, lawn and garden equipment, food and consumables and apparel, including products sold under labels, such as Jaclyn Smith, Joe Boxer and Alphaline and certain Sears brand products (such as Kenmore, Craftsman and DieHard) and services. Its Sears Domestic segment's operations consist of full-line stores, specialty stores, commercial sales and home services. Full-line stores offer an array of products and service offerings across various merchandise categories, including appliances, consumer electronics/connected solutions and tools."
Tuesday, March 14, 2017
Elon Musk's Recommended Reading List
If you haven't noticed before, on the right sidebar of the website we've catalogued various recommended reading lists from top investors. Many of these investors have recommended expanding your horizons beyond just books on investing.
So this time around we're taking a look at a recommendations from an entrepreneur. Elon Musk is the founder of electric car company Tesla (TSLA), space exploration company SpaceX, and he also previously co-founded online payments firm PayPal (PYPL).
Here are books Elon Musk has recommended over the years, as well as books he said shaped him into who he is today.
Elon Musk's Recommended Reading List
Musk has also recommended various fiction books such as The Foundation Trilogy by Isaac Asimov, as well as The Hitchhiker's Guide To The Galaxy by Douglas Adams, and The Lord of the Rings by J.R.R. Tolkien.
If you're looking for more investing-focused books, be sure to check out Charlie Munger's recommended reading list as well as Seth Klarman's favorite books.
Pershing Square Exits Valeant Pharmaceuticals
Bill Ackman's activist firm Pershing Square Capital Management has announced it sold 27 million shares and options in Valeant Pharmaceuticals (VRX).
Per the release, "We elected to sell our investment and realize a large tax loss which will enable us to dedicate more time to our other portfolio companies and new investment opportunities."
Around the time of sale, Pershing's VRX position size was smaller by their standards, between 1.5% to 3% of their funds. Like many hedge funds involved, they suffered sharp losses.
With this news, the only other major funds involved with Valeant as of the end of 2016 include ValueAct Capital (who have now roundtripped their investment) and Paulson & Co.
Per Google Finance, Valeant Pharmaceuticals is "a pharmaceutical and medical device company. The Company is engaged in developing and marketing a range of branded, generic and branded generic pharmaceuticals, over-the-counter (OTC) products, and medical devices (contact lenses, intraocular lenses, ophthalmic surgical equipment, and aesthetics devices). It operates through two segments: Developed markets and Emerging markets. In the Developed Markets segment, it focuses on the areas of dermatology, neurology, gastrointestinal disorders, and eye health therapeutic classes. In the Emerging Markets segment, it focuses on primarily on branded generics, OTC products and medical devices. Its pharmaceutical products include Xifaxan, Solodyn and Glumetza. Its OTC products include PreserVision, Biotrue and Boston. Its other generic products include Latanoprost and Metronidazole. Its ophthalmic surgical products include intraocular lenses, such as Akreos, enVista, Crystalens and Trulign."
Monday, March 13, 2017
8th Annual March Madness Bracket Contest: Enter For Free
It's the most wonderful time of the year! March madness is back with college basketball's championship tournament. It's time for the 8th annual Market Folly Madness. Entry is completely free, so sign up below!
Enter Market Folly Madness For Free
To join the free contest, click here: http://marketfolly.mayhem.cbssports.com
If it asks you for a group password, enter: folly
(If you don't have a CBS Sports account, simply create a free account to join the contest)
Contest Prizes
1st place: 1-year subscription to our Hedge Fund Wisdom quarterly newsletter ($300 value)
2nd place: A copy of the first season of Showtime's show about a hedge fund manager: Billions
3rd place: Your choice of either a copy of Howard Marks' book The Most Important Thing or a copy of the recent financial movie The Big Short
To be eligible, you must fill out your bracket before the start of the main games on Thursday, March 16th. Only one entry person. Good luck!
Carl Icahn Buys More Herbalife & Navistar
Activist investor Carl Icahn has submitted two SEC filings regarding his positions.
Icahn Buys More Herbalife
Icahn added to his Herbalife (HLF) position, per SEC filings. In a 13D filing, Icahn disclosed he now owns 24.57% of HLF with over 22.87 million shares.
This means he purchased 372,324 shares at a price of $51.35 on March 10th per the 13D.
For more on this investor, we also highlighted how Icahn started a Bristol-Myers Squibb stake.
Per Google Finance, Herbalife is "a global nutrition company. The Company develops and sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products, as well as personal care products. The Company's segments include North America; Mexico; South & Central America; Europe, Middle East, and Africa (EMEA); Asia Pacific, and China. The Company markets and sells over 140 products, encompassing approximately 5,000 stock keeping units (SKUs) globally. Its product categories include Weight Management; Targeted Nutrition; Energy, Sports and Fitness; Outer Nutrition, and Literature, Promotional and Other. The Company's representative products include Formula 1 Healthy Meal, Herbal Tea Concentrate, Protein Drink Mix, Personalized Protein Powder, Total Control, Prolessa Duo, Protein Bars, Aloe Concentrate, Niteworks, Garden 7 phytonutrient supplement, Best Defense for improved immune system, COQ10 Plus and Herbalife SKIN line."
Icahn Adds To Navistar Position Too
Second, Icahn now owns 17.02% of Navistar (NAV) with over 16.69 million shares, per a 13D filed with the SEC.
The filing notes Icahn bought 423,404 shares in total across March 8th, 9th, and 10th at prices of $25.47, $25.37, and $25.92.
Per Google Finance, Navistar is "a holding company whose principal operating entities are Navistar, Inc. and Navistar Financial Corporation (NFC). The Company's segments include Truck, Parts, Global Operations (collectively, Manufacturing operations) and Financial Services, which consists of NFC and its foreign finance operations (collectively, Financial Services operations). The Truck segment manufactures and distributes Class 4 through 8 trucks, buses and military vehicles under the International and IC Bus brands, along with production of engines. The Parts segment supports its brands of International commercial trucks, IC buses and engines. The Global Operations segment includes operations of its subsidiary, International Industria de Motores da America do Sul Ltda. (IIAA). The Financial Services segment provides and manages retail, wholesale and lease financing of products sold by the Truck and Parts segments and their dealers."
Market Strategist Jeff Saut on Being Wrong and Still Making Money
Raymond James market strategist Jeff Saut is out with his latest commentary entitled, "Being Wrong and Still Making Money." It's been a while since we checked in with Saut, so here's what he's saying these days.
He has been cautious over the past month or so and admits his stance has been 'too cautious.' Saut then dove into the concept of being wrong and still making money. He quotes Peter Bernstein, who wrote:
"The trick is to survive! Performing that trick requires a strong stomach for being wrong because we are all going to be wrong more often then we expect. The future is not ours to know. But it helps to know that being wrong is inevitable and normal, not some terrible tragedy, not some awful failing in reasoning, not even bad luck in most instances. Being wrong comes with the franchise of an activity whose outcome depends on an unknown future (maybe the real trick is persuading clients of that inexorable truth)."
Saut then goes on to reference a piece that divides investors into three categories: Rabbits, Hunters, and Assassins, based on how they act in the market. Written by Lee Freeman-Shor, it states:
"My findings suggest the odds are that an investor's great ideas will lose money. As such, before you invest a cent into an investment idea, it is imperative to have a plan of action as to what you will do if you find yourself in a losing position. When losing, the successful investors I worked with planned to become either Assassins or Hunters. Assassins sold losing investments that fell by a certain percentage or that declined by any amount and showed no signs of recovery after a certain period of time. Hunters invested a lesser amount at the outset and with a plan of buying significantly more shares if the price fell. Hunters were also unafraid to sell if it became clear that they had made a mistake. The bad investors didn't have a plan and consequently turned into Rabbits. When losing money, Rabbits neither bought more shares nor sold their holdings. Once forming an initial perception, Rabbits were achingly slow to change their opinion of a stock. Which tribe will you become a member of?"
As to where Saut is looking to put any money to work on pullbacks, he recommended Hilton (HLT), Flexion Therapeutics (FLXN), Nvidia (NVDA), Iridium (IRDM), and Texas Capital Bancshares (TCBI).
Embedded below is Jeff Saut's latest market commentary: Being Wrong and Still Making Money
You can download a .pdf copy here.
