Hedge Fund Links ~ 7/14/17

Bridgewater's Ray Dalio says 'keep dancing' but party ending soon [CNBC]

Ex-Viking CIO Sundheim plans to start equity hedge fund [Bloomberg]

Tourbillon's Jason Karp: this market doesn't make any sense [Business Insider]

Robert Soros stepping down from Soros Fund to start his own [Business Insider]

Insurance dedicated funds: the hot new way to avoid taxes [Bloomberg]

Hedge funds makes the case for humans over AI [Bloomberg]

The book tour approach to launching a hedge fund [All About Alpha]

The last hedge fund pit bull [Institutional Investor]

Investing pioneer Jay Regan on hedge funds, fees and competitive markets [Collaborative Fund]

2 Non-Consensus Stock Reports From Boyar Research

Boyar Research recently profiled two companies that are currently very much out of favor in the investment community. Western Union (WU) is the second most shorted stock in the S&P 500 and Discovery Communications (DISCK) has 28 analysts covering it with only 3 buy ratings.

To receive Boyar’s complimentary full-length report on both of these companies, please click here.

For over forty years, Boyar Research has been providing profitable non-consensus stock picks to their subscribers. They have demonstrated time and again that they are not afraid of challenging popular opinion or providing their clients with a profitable contrarian perspective, from profiling financial companies in 1987, when they sold at a significant discount to the rest of the market; to advocating purchasing drug company shares in 1993 after the S&P drug group lost nearly 40% of its value due to fears over “Hillarycare”; to being bullish on U.S. housing-related stocks in 2011."


To receive their complimentary full-length reports on both Western Union and Discovery Communications, please click here.


So what attracts Boyar to Western Union, which has 14% of its shares sold short?

-  WU’s rapidly growing digital money transfer business, WU.com, could single-handedly lift the Company’s EPS growth to 10%-13% by 2020, from flattish today. WU.com is a hidden asset within WU. Using conservative assumptions, they estimate that WU.com will account for 27% of Western Union’s enterprise value in 2020, up from 11% in 2016.

-  Recent precedent transactions—namely, PayPal’s takeover of Xoom, the #2 digital money transfer provider, and the bidding war for MoneyGram, the #2 global retail C2C money transfer provider—highlight WU as substantially undervalued. Moreover, WU is the #1 player in both of these businesses.

-  Applying a 3.5x revenue multiple to WU.com, which is a discount to Xoom’s 4.8x revenue takeover multiple, and 15x EV/FCF to WU’s remaining businesses (retail C2C, C2B, and B2B), which is a substantial discount to MoneyGram’s 21x EV/FCF takeover valuation, they derive an intrinsic value estimate of ~$33 per share for WU at the end of 2020, offering ~72% upside, or a 3.5-year IRR of ~20% including the dividend (3.7% current yield).

To receive Boyar’s Western Union report, please click here.



Why does Boyar Research like Discovery Communications despite the consensus view that traditional cable companies are secularly challenged?

-  Following a number of key affiliate fee renewals in both U.S. and international markets, DISCK has significant revenue and cash flow visibility. Notably, international affiliate fee revenues are expected to increase at a low-double-digit percentage rate over the next few years.

-  A host of potential growth opportunities should favorably impact Discovery’s future results, including increased consumer adoption of Discovery GO (streaming content); further traction with various subscription-based initiatives, including the Eurosport Player; and increased pay-TV penetration in key international markets.

-  Since 2010, DISCK has deployed $8 billion toward buybacks (~50% of its current market cap)—reducing diluted shares outstanding by over 30%—including $1.4 billion utilized in 2016 to repurchase ~53 million shares at an average cost of ~$26 a share. They expect share repurchases to be a recurring theme as a result of the Company’s strong revenue and cash flow visibility, coupled with DISCK’s currently depressed share price and attractive valuation.

-  Applying discounted multiples (relative to precedent industry transactions) of 10.0x and 9.0x our 2019E EBITDA for the U.S. and International Networks segments, respectively, they derive an estimate of intrinsic value of $47 a share, representing over 80% upside from current levels. They also believe Discovery represents an attractive acquisition target.


To receive Boyar's Discovery Communications report, please click here.

Viking Global Trims Rice Energy & EnCana; Adds to Calithera Biosciences

Andreas Halvorsen's hedge fund firm Viking Global has just filed three separate 13G's with the SEC. 

Viking Global Trims Rice Energy Stake

First, Viking has disclosed that they now own 5.8% of Rice Energy (RICE) with 12 million shares.

This is a decrease of over 5.45 million shares as they previously owned 17.57 million shares at the end of the first quarter.  The filing was made due to activity on July 1st.

Rice recently received a takeover offer from EQT (EQT) and we highlighted how JANA Partners opposes the transaction.

Per Google Finance, Rice Energy is "an independent natural gas and oil company. The Company is engaged in the acquisition, exploration and development of natural gas, oil and natural gas liquids (NGL) properties in the Appalachian Basin. The Company conducts its operations through two segments: Exploration and Production, and Midstream. The Exploration and Production segment is engaged in the acquisition, exploration and development of natural gas, oil and NGLs. The Exploration and Production segment operates in the cores of the Marcellus and Utica Shales. The Company controls approximately 231,000 net acres in the Marcellus and Ohio Utica Shale cores. It operates approximately 1,164 drilling locations. The Midstream segment is engaged in the gathering and compression of natural gas, oil and NGL production of, and in the provision of water services to support the well completion activities of, Rice Energy and third parties."


Halvorsen's Firm Reduces EnCana Position

Second, Viking has also disclosed they now own 7.5% of EnCana (ECA) with 72.77 million shares. 

This is a decrease of 6.53 million shares as they previously owned 79.3 million shares at the end of the first quarter.  The filing was due to activity on July 1st.

Per Google Finance, EnCana is "an energy producer that is focused on developing its multi-basin portfolio of natural gas, oil and natural gas liquids (NGLs) producing plays. The Company's operations also include the marketing of natural gas, oil and NGLs. All of its reserves and production are located in North America. It operates through three segments: Canadian Operations, USA Operations and Market optimization. Its Canadian Operations segment includes the exploration for, development of, and production of natural gas oil and NGLs and other related activities within Canada. Its Canadian operations include Montney in northeast British Columbia and northwest Alberta and Duvernay in west central Alberta. The USA Operations include the exploration for, development of, and production of natural gas, oil and NGLs, and other related activities within the United States. The Market Optimization activities are primarily responsible for the sale of the Company's production to third party customers."


Viking Adds To Calithera Biosciences

Third, Halvorsen's firm also disclosed they now own 6.9% of Calithera Bioscience (CALA) with 2.42 million shares.

This is an increase of 114,706 shares since the end of the first quarter.  The filing was made due to activity on July 1st.

Per Google Finance, Calithera Bioscience is "a clinical-stage pharmaceutical company. The Company focuses on discovering and developing small molecule drugs directed against tumor and immune cell targets that control key metabolic pathways in the tumor microenvironment. It is engaged in developing agents that take advantage of the metabolic requirements of tumor cells and cancer-fighting immune cells, such as cytotoxic T-cells. The Company's lead product candidate, CB-839, is a critical enzyme in tumor cells. Its other product candidate, CB-1158, is being developed for hematology and oncology indications. CB-1158 is a potent and selective orally bioavailable inhibitor of the enzyme arginase. CB-839 is a selective, reversible and orally bioavailable inhibitor of human glutaminase. CB-1158 has single agent anti-tumor activity in syngeneic mouse tumor models that has been demonstrated to act through an immune mechanism. CB-1158 is being tested in a Phase I clinical trial in patients with solid tumors."

Eminence Capital Boosts Cornerstone OnDemand Stake

Ricky Sandler's hedge fund firm Eminence Capital has filed a 13G with the SEC regarding shares of Cornerstone OnDemand (CSOD).  Per the filing, Eminence now owns 5.4% of the company with over 3 million shares.

This is an increase of 714,564 shares since the end of the first quarter when they owned 2.34 million shares.  The filing was made due to activity on June 29th.

Per Google Finance, Cornerstone OnDemand is "a cloud computing company. The Company provides learning and human capital management software, delivered as Software-as-a-Service (SaaS). Its human capital management platform combines the talent management solutions with analytics and human resources (HR) administration solutions to enable organizations to manage the employee lifecycle. Its enterprise human capital management platform consists of four product suites: its Recruiting suite, which helps organizations to source and attract candidates, assess and select applicants, onboard new hires and manage the entire recruiting process; its Learning suite, which enables clients to manage training and development programs; its Performance suite, which provides tools to manage goal setting, performance reviews, compensation management and succession planning, and HR Administration suite, which supports employee records administration, workforce planning and compliance reporting."

Pershing Square Trims Restaurant Brands Stake: Report

CNBC is reporting that Bill Ackman's activist firm Pershing Square Capital Management has sold $610 million worth of Restaurant Brands (QSR) in a block trade, selling 10 million shares at $61 per share.

After this trade, Pershing would still own 29 million shares of QSR using the latest figures from their first quarter 13F filing.  While QSR was previously Ackman's top holding, this sale means there's potential for it to slip down a spot to his second largest holding, behind Air Products (APD).

For more on this hedge fund, check out Pershing Square's Q1 letter here.

Per Google Finance, Restaurant Brands is "a quick service restaurant (QSR) company. The Company had over 20,000 restaurants in more than 100 countries and the United States territories, as of December 31, 2016. It operates through two segments: Tim Hortons (TH) and Burger King (BK). Tim Hortons restaurants are quick service restaurants with a menu that includes blend coffee, tea, espresso-based hot and cold specialty drinks, baked goods, including donuts, Timbits, bagels, muffins, cookies and pastries, grilled paninis, classic sandwiches, wraps and soups, among others. Burger King restaurants are quick service restaurants that feature flame-grilled hamburgers, chicken and other specialty sandwiches, French fries, soft drinks and other food items. The Company operates coffee roasting facilities in Hamilton, Ontario and Rochester, New York. The Company sells its raw materials and supplies, including coffee, sugar, paper goods and other restaurant supplies to Tim Hortons restaurants."