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Wednesday, December 21, 2011

Reuters interview with David Einhorn

I recently read a good interview that Reuters had with David Einhorn (of Greenlight Capital fame) where they discussed in detail his Green Mountain (GMCR) thesis. He makes it sound as if he is still short (this despite the initial massive 40%+ drop and subsequent rally).

The full interview can be found here.

Here is an excerpt of my favorite parts:

REUTERS: Which of the issues you raised in your presentation do you believe Green Mountain has answered so that you would change them?

EINHORN: "Actually, I think everything we said in the presentation is as right now as it was then -- and in many cases even more so. Some of the things we pointed out, like the inexplicable sales of K-Cups in the June quarter, have now been revealed to have been very valid concerns and the rest remain unanswered. And some of them are things will have to sort of play out in the future like the competition."

REUTERS: Management says that fourth-quarter sales were hurt by wholesale orders, and do not indicate any accounting issues. In other words, you were right, but for the wrong reasons. Were you surprised by the earnings miss?

EINHORN: "The thing about an investment like this is that there are really a lot of ways for us to come out well because the risk-reward for the stock is so poor. And there are so many problems that they don't all have to hit at the same time in order for us to get a good result. In terms of what actually did cause them to miss the quarter? It was largely a sales miss, which seemed to follow from the unexplained sales spike that we highlighted in the presentation."

REUTERS: Management stated, "Though disappointing, we take the recent allegations of misconduct seriously. Our Audit Committee has reviewed the allegations and we are confident there is no misconduct. There is no wrongdoing." What is your response to this?

EINHORN: "Simply saying that you take allegations with misconduct seriously does not mean that you actually take the allegations of misconduct seriously. In other words, their response came only about three weeks after the presentation and there was an enormous amount of material that if somebody was going to take the material comment seriously, they would have to review. It doesn't seem to make a lot of sense to me -- or even be possible -- to think that somebody who took our concerns seriously would even be able to review it in three weeks. As a result, it kind of feels like a whitewash to me. The question at this point, since the company wasn't able to give any substantive answers to the most serious of the questions that were raised -- they instead deferred to a general statement from the audit committee -- the question now becomes whether the audit committee itself is part of the problem as opposed to being a part of the solution."

REUTERS: One of your concerns was that Green Mountain couldn't explain its capital spending. When the company announced earnings, it detailed its capital spending for 2011 and 2012 by category. What did you take away from that?

EINHORN: "I actually think the extra information led further support to our view that the capital spending is unlikely to be going for the purposes that Green Mountain says that they are. In the sense that when you break out the spending, they broke it into various categories.

"For example, they say they are spending $225 million this coming year on portion packs. By our calculation, that would be enough to add approximately 15 billion K-cups of annual capacity. And yet the company only needs to add about 4 billion cups of capacity. So there is a rather large delta there. But the clearest one of all (involving Green Mountain's capital spending) actually is the manufacturing facilities where they said that they are going to spend $175 million. They said the big pieces of this are at their expansion in Virginia and in Ethics, Vermont. We went into the various property records and the building permits relating to these kinds of expansion and we were only able to total in those properties -- and actually including another property in Waterbury, Vermont -- we were only able to find about $50-60 million of capital spending on the pieces that they say are the biggest pieces of the $175 million facilities and infrastructure spent.

"All of this adds together to leave us with the view that it is very unlikely that they have an adequate explanation for where approximately $665 million of capital spending can reasonably go to support the growth of this business."

REUTERS: After Green Mountain announced earnings, there were a raft of insider purchases. Is this a bullish signal for the stock?

EINHORN: "This is something that we see in a number of these types of positions, where when there is an effort by a management team to promote the stock they go and get a large number of insiders to make what we call nominal purchases or to use a term of art to 'paint the tape.' But what's interesting here is that you have a team where they've literally sold stock in the hundreds of millions of dollars -- and are buying back stock in the hundreds of thousands of dollars.

"In the more clear example of this, Michael Mardy (Director) sold 20,000 shares for $97.48 on August 5, 2011. He purchased 1,000 shares for $43.36 on November 14, 2011. David Moran (Director) sold 10,000 shares for $98.50 on August 5, 2011. He purchased 1,180 shares for $42.17 on November 14, 2011." (A Green Mountain spokeswoman said the August insider sales were part of a previously arranged share selling program.)

REUTERS: What's fair value on Green Mountain stock?

EINHORN: "I don't think there's any way to know for sure what the fair value is. When I think about this company, I think about the cash flow that it generates. And right now, the company should be in a fantastic position because it still has the monopoly on the ability to make K-cups. And despite that, the company has no cash flow from operations and has substantial capital spending. So it seems to me that a business that doesn't generate any cash -- and this is before the monopoly position on the K-cups disappears next September -- if you don't generate very much cash, it's hard to understand why there is a large value."

Thursday, December 15, 2011

Michael Platt of BlueCrest Capital on Bloomberg

Michael Platt the founder of the $30B hedge fund BlueCrest was on Bloomberg today. It was a very interesting interview. He talks about the potential for a Euro zone breakup. They dont see anything at the policy level that gives them confidence that the overleveraged nations won't default. According to him, if Italy has to pay rates between 5% - 7% the situation is unsustainable. He thinks the market is steadily increasing the odds of a Euro zone breakup and going forward it will only get worse. He thinks most of the banks in Europe are insolvent if they took on mark-to-market practices simliar to what hedge funds are forced to do. He advocates buying US Treasuries and German Bunds. He is sticking with the short end of the maturity curve. He thinks we are on the eve of a potential crash that could be worse than 2008. Overall it is very interesting and worth watching the 14 minute interview.

December Letter from Kyle Bass

Below please find the December letter from Kyle Bass. For those who have followed the site, this is the letter that Marc Faber was referring to yesterday.

The letter takes a fascinating look into collateral chains and how it will lead to the restructuring of sovering debt.


Hayman Capital Letter Dec 14

Wednesday, December 14, 2011

Kyle Bass on CNBC

Kyle Bass was on CNBC recently. In the interview he discusses his views on the EU and echos many of the sentiments that he talked about in his Q3 letter (can be found here). Enjoy.

Dan Loeb / Third Point letter to Yahoo!

Dan Loeb and Third Point are out with their latest letter to Yahoo!'s board opposing any notion of a minority investment. Below is the full letter. Enjoy.

Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
Attention: Mr. Roy Bostock, Chairman

Dear Directors:

Third Point LLC, as the beneficial owner of 5.2% of Yahoo! Inc.’s (“Yahoo”) outstanding shares, remains extremely troubled by news reports regarding the dysfunction and inequity being exhibited in the process of maximizing stockholder value that the Board is allegedly “managing”. We are disturbed but not surprised by this mismanagement given the history of strategic bungling by Yahoo Board Chairman Roy Bostock and Founder Jerry Yang, which has been chronicled in our previous letters and in numerous critical media and analyst reports. As significant shareholders with our own fiduciary duties to investors to uphold, we cannot stand by silently if such reports are accurate and Yahoo, a company in no need of cash, plans to engage in a sweetheart PIPE deal which will serve only to entrench Mr. Yang and the current board while massively disenfranchising public shareholders and permanently robbing us of the opportunity to obtain a control premium.

We are not alone in our concerns. Shareholders, analysts, and the media are questioning the integrity of the process currently underway. As stewards of our assets you are charged with a duty to place stockholder interests above personal gain or other motives. In order to allay the concerns and uncertainty permeating the marketplace and provide much needed transparency on the supposed “process” that Yahoo is undertaking, we ask that you immediately make public the letter(s) in which Yahoo invited third parties to make proposals for the Company (the “Process Letters”). We assume that Yahoo’s Process Letters did not place any artificial restrictions on the proposals that the Yahoo board was willing to consider in its search for strategic alternatives, such as discouraging, or even prohibiting, bids to purchase Yahoo in its entirety.

Of course, we appreciate the need for confidential negotiations, and therefore stockholders need not know at this stage who received the Process Letters. Rather, stockholders should simply be allowed to see if the Process Letters, which may be published in redacted form, are consistent with the Board’s paramount duty to maximize stockholder value. Additionally, Third Point does not seek and does not expect to receive material non-public information and thus requests that you file such letters publicly with the Securities and Exchange Commission via Form 8-K with all deliberate speed.

In light of the serious, timely concerns expressed by nearly all Yahoo stakeholders and interested parties, undertaking this action is the only fair and reasonable thing to do.

Very truly yours,

Daniel S. Loeb
Chief Executive Officer
Third Point LLC
390 Park Avenue
New York, New York 10022

Thursday, December 8, 2011

Marc Faber on Bloomberg

Marc Faber was recently on Bloomberg where he discussed his views on the Euro and the global economy. Needless to say he reiterates his bearish views and stresses the importance of holding some gold.


Wednesday, December 7, 2011

Pauslon & Co Q3 2011 Letter

Below please find John Paulson (aka Paulson & Co) Q3 2011 letter. The quality is not what I would like but its bettter than no letter at all. In the letter they touch on their YTD miserable performance. They walk through a couple of positions. I found the discussion on the upside at Hartford Financial particularly interesting - they have a price target of $45.

It also has a nice chart at the end that walks through the historical performance of all their funds. Pretty interesting stuff.


Paulson q3 11 Report: Downloads Disabled for legal reasons

Monday, December 5, 2011

GMO - Jeremy Grantham Q3 2011 Letter

After much delay, Jeremy Grantham of GMO Capital is out with his Q3 2011 letter. As usual her currently has a rather bearish bent and continues to advocate purchasing quality companies and has interest in the natural resources sector. He also provides some dramatic data on the potential for disapointing future performance in the S&P 500 based upon past bubbles performance.

Grantham Qtrly Letter

Thursday, December 1, 2011

Kyle Bass - Hayman Capital Q3'11 Letter

Below please find Kyle Bass (Hayman Capital) Q3'11 letter. He talks about the global debt situation and the immenient impending defaults. He reiterates his conviction on his Japan play.

Overall its a very interesting read. Enjoy.


Monday, November 28, 2011

Seth Klarman interview with Charlie Rose

Seth Klarman was recently interviewed by Charlie Rose. Needless to say it is a fascinating interview. The interview is around 46 mins long but I highly recommend watching. Seth Klarman is easily one of the top if not the top value investor in the world.


An Interview with Seth Klarman and Charlie Rose from Facing History and Ourselves on Vimeo.

Friday, November 25, 2011

Pershing Square - Q3 2011 Letter

Pershing Square is out with their Q3 2011 Letter. In it Bill Ackman & Co discuss their portfolio in great detail. He gives updates on JC Penny (JCP), Fortune Brands which is now Beam and Fortune Brands Home Security, Family Dollar, General Growth Properties, Citigroup, and Canadian Pacific Railway. YTD Pershing Square I is down 15.6% net of fees and Pershing Square II is down 15.9% net of fees.

Overall its a decent letter and is nice to get updates on the portfolio companies. Enjoy.

Pershing Square 3Q2011 Letter to Investors

Monday, November 21, 2011

Kyle Bass on BBC Hard Talk

Kyle Bass was recently on BBC Hard Talk discussing a number of his positions. In the 24 min interview he discusses what he saw back in 2006 that clued him in on the impending US crisis. He goes into detail on how they started to look for asymmetric hedges. Overall its pretty interesting.


Carson Block / Muddy Waters - on Focus Media

Carson Block / Muddy Waters is out with their latest short thesis on Focus Media (NASDAQ: FMCN). It is worth noting that after they took down Sino Forrest the independent audit committee came out with a report saying they found no wrong doing (trading is still halted on this name - as they are still sorting through the mess).

Muddy Waters research centers around a significant overstatement of the number of screens in Focus Media's LCD network and acquisition overpayments. The $1.1 billion in write-downs from its acquisitions exceed one-third of FMCN’s enterprise value. FMCN insiders have sold at least $1.7 billion worth of stock (two-thirds of FMCN’s enterprise value) since FMCN’s IPO. At the same time, the insiders and their business associates further enrich themselves by trading in FMCN assets, while costing FMCN shareholders substantial sums of money.

Pretty interesting read - already has driven FMCN down 30% in the first couple hours of trading. Enjoy.

FMCN Strong Sell

Friday, November 18, 2011

Latest from Howard Marks - It's All Very Taxing

Below is the latest memo from Howard Marks of Oaktree. The memo discusses the debt issue, the recent efforts to stem the bleeding by taxing the rich, and a deeper discussion on potential solutions.


HM_OakTree_All Very Taxing

Thursday, November 17, 2011

Graham and Doddsville Fall 2011

Columbia Business School is out with their latest installment of the Graham and Doddsville newsletter. In this issue they have interviews with Leon Cooperman (Omega Capital), Mario Gabelli (GAMCO), and Marty Whitman (Third Avenue).

They also go in to two student writeups on Madison Square Garden (MSG) and Great Lakes Dredge and Dock (GLDD).


Graham Doddsville - Issue 14 - Fall 2011

Monday, November 14, 2011

Kyle Bass on Japan

Kyle Bass was at the University of Virginia investing conference on Friday, where he updated his thoughts on Japan and his short thesis. While it is a bit of a rehash of his thesis from the past it does a good job of summarizing it. He then goes on to discuss the current issues in Europe and how he foresees it playing out.


Sunday, November 13, 2011

T2 Partners Letter on why they are long NFLX and short GMCR

Below please find T2 Partners latest piece on why they are long NFLX and are short GMCR. For those of us with memories it was not too long ago that T2 was short NFLX, but after they got hosed on the run up and watched the stock crater from the sidelines they have found a reason to be bullish.


T2 Partners - Why Wer'Re Long NFLX and Short GMCR - 2011.11.13

Friday, November 11, 2011

Bill Ackman and Pershing Square's latest - Lowes

Bill Ackman of Pershing Square capital is out with his latest advocacy piece. This time Pershing Square is presenting on Lowe's. This presentation is shorter than many of his others, but in this case the story is pretty simple. Basically he thinks Lowe's can be worth a midpoint valuation of $36 in 2014 which is a 65% return or an 18% IRR.


Pershing Square - Waiting for a Bounce - 2011.11.08

Jim Grant on Bloomberg

Jim Grant was on Bloomberg recently discussing a number of interestic topics. He discussed the potential for a bubble in farm land, and how the ECB recently put on the MF Global trade (ECB is levered 14 to 1).

Thursday, November 10, 2011

East Coast Asset Management Q3 2011 Letter

East Coast Asset Management is out with their Q3 2011 Letter (hat tip to Marketfolly for posting).


Tuesday, November 8, 2011

T2 Partners discussing position in SanDisk

Below please find a link to an audio clip of T2 Partners discussing their position in SanDisk. Unfortunately I was unable to embed it so the link will have to do.


T2 Discussing SanDisk

Greenlight Capital Q3 2011 Letter

Below please find Greenlight Capital's (David Einhorn) Q3 2011 letter to investors - hat tip to marketfolly for posting. In the letter he discusses some new positions - CBS, GM, and MRVL. GM is particularly interesting as I have heard Bill Ackman of Pershing Square discussing his small position in the automaker and its interesting to see Greenlight follow suit. Basically David Einhorn's contention is that GM is being priced by the market as a cyclical company trading at less than 6x this year's earnings. While some may see it as normal to value cyclicals at low multiples of peak earnings, we believe that 2011 is not a peak and, in fact, is below mid-cycle. They purchased GM at $25.78 and it closed yesterday at $24.01.

The letter also spends some time walking through the Green Mountain (GMCR) position and their thoughts on Sprint (S) and Delta Lloyd (Netherlands: DL).



Friday, November 4, 2011

Third Point / Dan Loeb new letter to Yahoo's Board

Below please find the latest letter to Yahoo's board from Dan Loeb / Third Point Capital. Basically he demands not one but two board seats. I look forward to seeing how his tone changes going forward as Yahoo will likely not respond favorably - especially since Dan Loeb has quite the acerbic wit and is known to lambast CEOs / Board's publicly.


Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089

Dear Members of the Board of Directors:

As you are aware, Third Point LLC (“Third Point”) manages investment funds that are, collectively, the second largest shareholder of Yahoo! Inc. (“Yahoo” or the “Company”).

We are deeply concerned by news reports that you are considering a leveraged recapitalization that will allow private equity firms to gain substantial equity positions that will, when combined with Jerry Yang’s and David Filo’s ownership, effectively establish a controlling position in Yahoo. More troubling are reports that Mr. Yang is engaging in one-off discussions with private equity firms, presumably because it is in his best personal interests to do so. The Board and the Strategic Committee should not have permitted Mr. Yang to engage in these discussions, particularly given his ineptitude in dealing with the Microsoft negotiations to purchase the Company in 2008; it is now clear that he is simply not aligned with shareholders. At a bare minimum, Mr. Yang must declare whether he is a buyer or a seller – he cannot be both. If we are correct and he is effectively a buyer, corporate ethics require him to recuse himself from any further discussions on behalf of the Company. He should also be requested by the Company to promptly leave the Board and join Mr. Filo in solely an operating capacity.

In our view, a leveraged recapitalization makes no sense and its only purpose would be to put substantial equity stakes into friendly hands to entrench management and transfer effective control without payment of a premium or even, it appears, a shareholder vote. Nothing can excuse such an action, and shareholders will not be bought off with a dividend of our own money while value is destroyed.

Moreover, such a transaction would undermine the basic tenets of free markets, including democratic voting, accountability and fairness. We do not blame our friends at the private equity firms rumored to be involved for trying to get the best deal possible for their investors; we have great respect for these firms and their leaders - Jim Coulter of Texas Pacific Group, Jonathan Nelson of Providence Equity Partners, Glenn Hutchins of Silver Lake, Henry Kravis of KKR and Stephen Schwarzman of Blackstone. However, we at Third Point are also in the value-maximizing business. We will not tolerate any transaction which appropriates for insiders opportunities that duly belong to current Yahoo shareholders. However, we would welcome the prospect of any of these firms’ presence on a reconstituted Yahoo Board of Directors and work on a long-term strategy for the Company should it be necessary for us to pursue a proxy contest next year.

If you, as board members, undertake the current course of action, Third Point will hold you personally responsible for such a flagrant violation of your duty of loyalty. Any transaction with a third party who assists members of management and the board in protecting their jobs, and/or involves the effective sale or transfer of control without payment of a control premium, will likewise be subject to scrutiny.

Given the Board’s inability – or perhaps unwillingness- to properly solicit true strategic alternative bids, let alone to negotiate them, Third Point demands that we be awarded two board seats – those created by the vacancies of Chairman Bostock and Mr. Yang, or two newly-created ones. We are prepared to assume these positions immediately.


/s/ Daniel S. Loeb

Daniel S. Loeb
Chief Executive Officer
Third Point LLC
390 Park Avenue
New York, New York 10022

Thursday, November 3, 2011

OSS (Oscar Schafer) Closes Fund and Opens a Spin-Off

OSS Capital, aka Oscar Schafer, today announced that they would be closing their fund at that a new fund would be opening run by two of Oscar's co-portfolio managers. OSS states that since opening they have beaten the S&P 500 by 600bps which would put their IRR at around somewhere around 5% - 7% since their fund launched in 2001 and over this time the S&P has gone down about 5% or -0.48% per annum. I have a feeling I may be off on this since I assumed they launched at the begining of the year when in all likelihood they launched at some point during making their actual performance likely in the 7% - 10% range.

Oscar has been a staple of the Barron's Investing Round Table for ever. His ideas are normally well thought out and very interesting. He was recently at the Barron's conference in NYC discussing how Hertz Global and Xerox.

His Hertz investment centers around five key points:
No. 1, the industry is consolidating. There are now four big players. There might be three if Dollar Thrifty Automotive [DTG] gets absorbed by Hertz. No. 2, historically this business was characterized by lots of excess fleet, driven by the automobile manufacturers' persistent overproduction and need to dump these cars into the car-rental channel. Following bankruptcy and management changes, the Big Three have stopped dumping cars into the rental channels, leading to improved profitability for the car-rental companies.
No. 3, strength in the used-car market has been driven by a dearth of leasing during the recession that has significantly lowered car-rental depreciation costs.
No. 4, Hertz owns a good equipment-rental company.
No. 5, it is going in a new area.

He thinks the Company has a big opportunity to gain share in teh off-ariport/insurance-replacement market. He thinks the stock could be worth mid-to high teens.

On Xerox, he thinks they can rebound to $12 to $15 a share (upfrom around $7) as operating income rises to the high single digits this year, and the company is repurchases 20% of its shares. He thinks the copier business will continue to decline but the outsourced goverment services can do well going forward (although they are cyclical).

Here is his letters to investors announcing the closing of the fund and spin-off of the new fund:

OSS Capital Management

Wednesday, November 2, 2011

Thid Point Capital's Q3'11 Letter

Daniel Loeb of Third Point Capital is out with his Q3 2011 letter. In the third quarter they were down 6% bringing them to a YTD result of 0.2%. In the letter he talks about a number of fat tail hedges / black swan trades that they have put on that can return 10x-20x should the worst case come to pass. These trades include depegging of middle eastern currencies or a spike in the demand for delivery of physical commodities. The first trade is rather common but the second one is particularly interesting as that is the first I have heard along that line.

The letter goes on to discuss their activist position in Yahoo!, their moves in corporate credit, and some of their ABS positions.


ThirdPoint - 2011.11.01

Thursday, October 27, 2011

Hugh Hendry at LSE Alternative Investment Conference

Earlier in the year Hugh Hendry presented at the LSE Alternative Investment Conference. Luckily someone was there to capture it all on film. Enjoy the following videos. In it he discusses global leverage, China bubble, currency wars, Japan short, and much more.


Part 1:

Part 2:

Part 3:

Part 4:

Part 5:

GMO Paper Analyzing European Bail Out

Below is a paper from GMO analyzing the European bailout. Here are the key takeaways:
1. In low growth world, it would take a miracle for Greece to escape without negotiating a large cut in the principal of its debt;
2. Defaults can be limited to a few small countries, and perhaps only to Greece, while the rest can string things along until a somewhat more normal global economic growth pattern resumes later this decade;
3. The probable need to recapitalize commercial banks to cover defaults casts a long shadow on the process; and,
4. The eurozone is likely to need more resources than it has gathered so far (i.e. more money printing on the case of the ECB).


GMO Eurocrisis

Whitney Tilson on CNBC

Whitney Tilson was recently on CNBC and described why he likes Sandisk, Netflix, Microsoft, and a couple of other companies. Netflix is particularly interesting as he recently announced given the big selloff that he was going long Netflix. For those with a longer-term memory remember that T2 Partners had a big short on Netflix for sometime and got burned before covering. He then goes on to discuss why he is long Microsoft and how he thinks they need to further leverage their balance sheet (buybacks, etc.).

Tuesday, October 25, 2011

Ray Dalio was on Charlie Rose

Ray Dalio was recently on Charlie Rose. He talks about his views on the market, what it takes to found and run a macro fund like Bridgewater, and other interesting tidbits. Enjoy:

The full interview can be seen here at Charlie Rose's website.

The complete interview can be seen here

Thursday, October 20, 2011

Notes from the 2nd Annual Ira Sohn Investing Conference - West

Below please find notes from the 2nd annual Ira Sohn Investing Conference - West. The event had speakers such as, Matthew Berler - who discussed Spirit Aerosystems, Brian Zied who discussed Cabelas, Joe Jolson who discussed Move Inc, Mark Lambert who discussed Ligand Pharmaceuticals, Jeff Ubben who discussed CB Richard Ellis and Adobe, and a number of other noteable speakers. There were a number of interesting ideas, I highly recommend reading the notes below. Enjoy:

Matthew Berler, Osterweiss Capital Management - Spirit Aerosystems (SPR)

Osterweiss is a value investor that places a high emphasis on companies that can generate highs levels of free cash flow. They are attracted to “Toll Booth” type businesses that do not required robust GDP growth. Matthew likes an out of favor aerospace company called Spirit Aerosystems (SPR), a spin off from Boeing several years back. Spirit is undergoing several events that will drive improved free cash flow. They have increased and diversified their backlog to a new record level of long term projects. The average life of a project lasts 15-20 years. Backlog has gone from 100% Boeing to business being won at Boeing, Airbus, Gulf Stream and Bombardier.

SPR has been suffering cost overruns and push outs do to the Boeing 787 delays to the tune of $283 million in charges. Several secular trends are in Spirits favor, including the aging of America’s airline fleet, emerging markets increased purchases of planes and continued outsourcing trends by the major manufactures. At 10x earnings, Spirit trades at a discount to the group at 15x, which Matthew believes can reach 12x in 2012 placing the stock in the range of $32-$36.

Brian Zied, Charter Bridge Capital Management - Cabela’s (CAB)

Brian has been following the retail industry for the past 16 years. Brian’s stock pick was Cabela’s (CAB), the hunting and fishing retailer. Being from NYC, Brian admittedly was not at a big hunting enthusiast, but he was intrigued by the high quality customer experience that Cabela’s was able to create for its shoppers. Beyond the destination experience that their stores generate via large store footprints in small markets, Brian looked at internet comp scores and realized that the average person spends 9 minutes on their site vs. the industry average of 3-4 minutes.

Brian felt CAB’s credit business was the most misunderstood part of their revenue stream and an area that the shorts underlined as a big problem. Cabela’s brand loyalty program, through their Visa/Cabela’s credit, offers 5% incentives vs. the industry average of 1%. Cabela’s has $2.6 billion in receivables, which short sellers suspected was mostly low quality and a driver to pushing new sales. Upon investigation, Brian realized that 40% of their credit card holders pay down the entire balance each month. In fact, 75% of Cabela’s credit card customers had a FICA score of 720 and above vs. Nordstrom which is approximately 50%. Brian felt their receivables should be valued in line with an American Express vs. Discovery or Capital One. Cabela’s currently has 33 stores. Brian believes new management can grow to 100 within rational store footprints . Hibbett Sports & Dicks Sporting Goods trade at 15x earnings vs. Cabela’s at 10x. Through 5% earnings growth on 10% revenue improvement, Brian felt Cabela’s could trade in line with its peers.

Joe Jolson, JMP Securities and Harvest Opportunities Funds - Move, Inc. (MOVE)

Joe made a modestly bullish call on an improving housing market. After reviewing the current market conditions for the housing market overall, he believes we will see a stabilization of prices in 2012. He pointed to the election year and the opportunities Obama could push through to stabilize the industry. Historically he points out that home builders have been the best way to play an improving cycle. This time he is betting on a technology company called Move Inc (MOVE) which provides an online network of websites for real estate search, financing and moving. Websites include,, and Move predominately benefits from new listings and ad spending. They are benefitting from a trend of people switching to digital ads vs. print spending. They have also spent the last several years improving their technology offerings and mobile apps. Move is the exclusive license of National Association of Realtors website through With the housing industry stabilizing, Joe contrasted Move’s big discount to the recent IPO of and believes the stock can trade up to $5.50/share.

Mark Lambert, Biotechnology Value Fund - Ligand Pharmaceuticals (LGND)

Mark’s favorite stock is Ligand Pharmaceuticals (LGND). Mark laughed when he pointed out that Ligand has been around for 25 years and has never made a dime, but he loves the stock. Before reviewing Ligand he outlined BVF’s investment process to discover value-oriented opportunities with outlier biotech return potential. They look for companies with embedded options hidden in low valuations such a company called Vanda Pharmaceutical that traded for half the price of cash and went up 15 fold after getting an underestimated drug approval. After a long history of poor management discipline and excessive spending, Ligand’s new CEO John Higgins dramatically cut the fat out while maintaining their portfolio of over 60 royalty bearing patents. He cut the staff from 270 employees down to 30. Expenses went down from $200m to $25m and the company will go cash flow positive this year.

Their key drug, Promatca, which helps increase blood platelets, (thrombopoietin) is showing stable royalty growth and could be a large contributor to revenue growth going forward. Mark replayed a quarterly earnings call of Glaxo’s CEO highlighting recent phase II data for Ligand’s Hepatitis C product where he was extremely excited by the opportunity. In addition to slashing and burning Ligand’s operating expenses, Higgins has looked for and bought other bloated biotechnology companies and proceeded to do the same thing. Overall, Mark believes Ligand represents very low risk with biotechnology like returns and can survive further drug failures through it large and diversified portfolio of new drug candidates.

Jeff Ubben, ValueAct Capital - CB Richard Ellis (CBG) and Adobe Systems (ADBE)

Jeff presented two ideas: CB Richard Ellis (CBG) and Adobe Systems (ADBE). These were the only two stocks they were buying in October. CB Richard Ellis’ fundamentals are much more stable than the market would suggest. He agreed with Jolson’s premise that commercial real estate prices have been stabilizing. Their cost reductions have been impressive, and Jeff was excited by managements move to a recurring revenue business model. CB Richard Ellis has been very public about targeting 20% operating margins. The global outsourcing of real estate is in early stages, and it’s a two player market between CBG & JLL. Both have achieved regional density on a global scale. Jeff believes there is limited risk to management making poor capital allocation through covenant protection and there is no debt coming due until 2015. Even in a double dip recession, Jeff felt CBG’s high free cash protected them on the downside.

Jeff’s second idea was Adobe Systems (ADBE). Jeff anticipates two software industry trends: continuation of desktop apps to sell more suites vs. one unit, and collaboration of the workflow through access of the cloud. Mobile devices and multiple platforms will continue to fuel the growth which is causing a change on how content is created. Change rewards innovation, and Adobe is adapting to and creating products to compete, specifically in the collaboration trend afforded by the growth of work flow residing on the cloud. Jeff felt the acquisition of Macromedia was brilliant and will continue to generate new product innovation. He believes Adobe is a double digit grower and thinks the market views Adobe as a non-innovator. Though he would not compare valuation to the faster growing SAAS players, he believes valuation should be somewhere in between.

Meridee Moore, Watershed Asset Management - WR Grace (GRA)

Meridee recommended the purchase of WR Grace (GRA). Meridee’s origins are with Farallon Capital and Lehman Brothers investment banking. Grace is a cyclical chemical stock that has been in bankruptcy for the past 10 years. The company has used bankruptcy to streamline its businesses and the company is levered to a global recovery in construction and infrastructure spending. The company has finally settled all of its claims, and the plan was confirmed with a few hurdles left. After bankruptcy, Grace will be a global, under-levered chemicals company with a high return on investments. Many of the markets that it competes in are oligopolies. Free cash flow is approximately 13%.

Grace has little coverage on the street with over 1 billion in NOLs. The CEO has been around since 2003, is a very good communicator and has dramatically improved ROIC while in command. Meridee outlined Grace’s discount to its peers and believes the stock could go up 60% if you apply an average historical chemical company multiple. A district court judge must affirm the final plan; it is currently under review. If the judge does affirm, Grace’s lawyer believes claimants will continue to litigate, but this does not impact Meridee’s valuation opinion. She believes that Grace can earn over $5/ share in 2012.

Bob Peck, FPR partners - Arch Capital group (ACGL)

Bob recommended a very boring but well managed reinsurance company called Arch Capital group (ACGL). FPR looks for stable industry fundamentals, high barriers to entry, solid management teams and low price/book. ACGL trades under tangible book value and is a specialty commercial insurance company that writes only company insurance. Its risk is individually written, with no standardized policy. The industry valuation is at an all time low and insurance rates are at all time low as well. Management has done a good job of not writing excessive policies during the low insurance rate cycle. If you are patient, with current low valuation to book, Arch Capital can continue to grow book value by 20% per year in a backdrop of the low GDP growth.

Scott Clark, Darlington Partners - Seaspan (SSW)

Scott recommended a shipping company called Seaspan (SSW). Darlington takes concentrated positions and has only made 27 investments in the last nine years. Scott is not a big fan of the shipping industry, but believes Seaspan is a low risk floating REIT with potential for a large dividend payout shortly. He calls it a “not if but when” idea. Seaspan is an underfollowed, under the radar company that he views as more of a real estate finance business play. Scott believes the dividend will double in the next 6-12 months. Seaspan owns 65 shipping vessels that it leases to high quality counter parties. Contracts are long term and iron clad. Seaspan follows the same blue print each time it builds a new ship by locking in long term contracts for the vessel when completed. An average lease is eight years with the leading shipping companies in the world. Seaspan gives a five year of EBITDA guidance and has delivered on their projections. Management has been very transparent and he believes their progressive dividend policy will be the catalyst to valuation. Management has financial incentives to get the dividend above $1.90.

Jerome Simon, Lonestar Capital Management - Surgutneftegas Pref. (SNGSP RX) and Graphic Packaging Intl. (GPK)

Jerome had two picks. His first idea is the fourth largest energy company in Russia, Surgutneftegas Pref. (SNGSP RX). Jerome runs a very diversified portfolio and has been viewing this company since 2003. SNGSP.RX trades at a 40% discount to the common and the company generates a lot of free cash flow. The risks are integrity of the numbers. SNGPS has the ability to generate $8-10 billion in EBITDA. There are no clear signs of a corporate restructuring. Jerome invests in Russia as a passive investor and believes there is very little interest from the investment community to invest there. On occasion extraordinary investment opportunities exist. Jerome highlighted the brown field development trend, extracting oil from old depleted fields, which he believes is a huge opportunity in Russia.

Jerome’s second idea is Graphic Packaging Intl. (GPK), a relatively stable packaging company in very stable market. The bottom line is GPK is a deleveraging story that if given time to generate will achieve an investment grade rating. Though he has not met the CEO, he’s committed to the story. Jerome has been buying this company since 2009. He believes management is very conservative and does not anticipate any future dilutive acquisitions. One risk he highlighted was their underfunded pension liability. The ownership is primarily legacy private equity investors. He does not have good visibility as to what their intentions are. Jerome thinks the 9% notes will eventually get refinanced again, driving further valuation improvement.

Bill Duhamel, Route One Investment Co. - News Corp (NWS)

For large cap media, News Corp is very cheap. He thinks investors view News Corp as having a high exposure to newspapers, but actually is a small part of the EBIT. Cable Assets are the large driver to valuation. News Corp cable assets are high quality global assets that have not been fully monetized. He is a little uncomfortable with News Corp’s exposure to regional sports networks. Historically, media has been a cyclical business but 70% of their business comes from subscriber fees. Bill was very excited by the retransmission fees opportunity which he views as having a 10 year run rate. 22% of EBIT is from the film studios. These are very stable assets. They don’t grow, but are very good hedges due to the ownership of content. All in, News Corp generates around $1.30 of free cash flow which includes $6 of unconsolidated good assets.

Arthur Young, Blum Capital - Advanced Auto Parts (AAP)

Arthur Young of Blum Capital Partners presented his positive thesis on the auto parts industry and why Advanced Auto Parts (AAP) is his number one pick in the group. Advanced Auto Parts has created a large defensive moat and trades at a 30% discount to the group. He favors the exposure to non-discretionary spending and the fact that AAP has not overstored the market place. Advance Auto Parts has been able to increase operating margins from 27% to 37% with a high increase in customer satisfaction during the last five years. At a 6x forward EBITDA and 11% top line growth, Arthur thinks AAP should trade closer to the top three in peer valuation.

Bill Ackman's Presentation from VIC

Below please find Bill Ackman's presentation from the most recent Value Investing Congress. The presentation focuses on his thesis around the recent Fortune Brands spinoff, Fortune Brands Home Security (FBHS). Basically its his low risk way to play a rebound in housing. Fairly interesting stuff.



Jim Chanos Presentation

Attached please find Jim Chanos' presentation from the Value Investing Congress. Hat tip again to Marketfolly.



Ricky Sandler's Presentation on CME from VIC

Below please find Ricky Sandler's (of Eminence Capital) presentation on CME. For avid readers of Value Investor's Insight they will remember that this thesis was spelled out by Ricky in the August Issue (I think thats right). Anyways enjoy:


David Einhorn's Presentation on GMCR

Attached please find David Einhorn's detailed presentation on Green Mountain Coffee Roasters (GMCR) from the Value Investing Congress. Hat tip to Marketfolly for doing a great job covering the event.


Tuesday, October 18, 2011

Bernard Horn of Polaris Capital Management's presentation from the VIC

Below please find Brenard Horn's presentation from the Value Investing Congress. Hat tip to Marketfolly for finding it as well as posting notes of the event, they can be found here.



Leon Cooperman's Presentation from the Value Investing Congress

Below please find Leon Cooperman's presentation from the Value Investing Congress. In the presentation he talks about the state of the economy, why we are unlikel to experience a double dip, why the market is presently attractive, and why he likes Apple, Boston Scientific, eTrade, etc.



Thursday, October 13, 2011

Jeff Gundlach on CNBC

Jeff Gundlach was on CNBC today where he shared some of his thoughts on the market. He also shared his potential Halloween costume choices - Jim Cramer or Burl Ives. He talks about the weakness in the ABX market and the PrimeX market, and how that is disjointed from the overall credit market.

He then goes on to describe the technical and fundamental reasons why it has sold off and where its going.

Pretty interesting considering he probably understands mortgages better than anyone else.

Wednesday, October 12, 2011

Eddie Lampert on Long-term Investing

Eddie Lampert, Eric Schmidt, and Larry Summers were recently featured on a panel debating the merits of long-term vs short-term investing. While its nothign earth shattering it is interesting and a very rare media appearance for Eddie Lampert.

Tuesday, October 11, 2011

Marc Faber on CNBC discussing Economic Policy

Marc Faber was on CNBC today discussing his thoughts on economic policy and how the Keynesian mentaility is hurting the U.S.


Jeff Gundlach - Doubleline - Are Risky Assets Cheap Enough?

Jeff Gundlach gave a presentation today on risky assets and debated whether investors are being paid enough for the risks associated with high risk (read high volatility) assets. It was pretty interesting. A replay of the call can be found here:

Risky Assets Cheap Enough

Thursday, October 6, 2011

Update - Full Interview with Bill Ackman

Yesterday I posted a brief video interview with Bill Ackman. Bloomberg finally got around to posting the full video. Warning it is 53 minutes, but its well worth listening to in the background.


Wednesday, October 5, 2011

Bill Ackman on Bloomberg TV

Bill Ackman of Pershing Square capital was recently on Bloomberg TV discussing his view on Hewlett Packard (NYSE: HPQ). Basically he says HP looks cheap but the future of the PC industry is difficult to handicap and there announcement to potentially spin the PC division off has irreparably hurt that brand. He basically said they internally have brain damage and need to do a bunch to right the ship.

T2 Partners Q3 Letter

Below please find T2 Partners Q3 Letter. T2's fund declined 9.5% in September vs. a loss of 7% for the S&P 500 and a loss of 5.9% for the Dow. For the year T2 is down 29.6% vs. a loss of 8.7% for the S&P 500 and a loss of 3.9% for the Dow.

The letter does a nice job walkin through their losers and some of their current thinking. They compare this recent down performance tho the Oct 2008 period and think they can bounce back just like before.

They go on to do a nice job of walking through their thoughts on Berkshire Hathaway, Howard Hughes, Iridium, Grupo Prisa, Goldman Sachs, Citigroup, and MRV Communications.


T2 Partners - Q3 2011 Letter

Thursday, September 29, 2011

Latest from Robert Rodriguez of FPA

Below please find the latest from Robert Rodriguez the legendary manager of FPA. Now that he is back from his sabbatical he is as nervous as ever. Basically saying more of the same policies can only result in another crisis. Pretty spooky stuff, especially considering this guy has nailed the last two stock market downturns and has a very enviable track record in both the bond and equity worlds (not many if anyone can lay claim to that).


Robert Rodriguez More of the Same 2011

Wednesday, September 28, 2011

David Cui of BofA ML on China Hard Lading

David Cui, BoofA ML's top rated China analyst is out with a presentation on China's systemic risk in the event of a hard landing. He thinks there is still some downside risk but in the near term they appear oversold. He highlights the risks with a hard landing - which he believes won't happen until 2013. Given China's importance to the global economy I thought this research was particularly interesting.

China the Systematic Risks 11090934[1]

Monday, September 26, 2011

Whitney Tilson's Presentation from the Hedge Fund Roundtable

Below please find Whitney Tilson's (of T2 Partners) presentation at the Hedge Fund Roundtable. In it he describes what concerns him about the economy. Where he is currently seeing value - Dell, Microsoft, Berkshire Hathaway, InBev, etc.

He also went on to describe how he is picking up cheap options and jumped on Bill Ackman's HKD trade (presentation can be seen here). He also went on to mention how he was looking at Kyle Bass' Japan trade and looking for other areas of cheap options.


Whitney Tilson New York Hedge Fund Roundtable Presentation

Marc Faber on CNBC discussing the recession and gold's drop

Marc Faber was recently on CNBC discussing his portfolio along with an update on his opinion of the market and the current selloff in Gold. This is particularly interesting given the sell off and subsequent rally from the lows that Gold and Silver have experienced this morning. He then goes on to discuss he potential slowdown in Asia and what that could mean.


Thursday, September 22, 2011

Soros on CNBC

George Soros was on CNBC discussing the Euro crisis. He said he expects some of the countries to defualt and leave the EU. He thinks we will likely see defaults from smaller countries but they will not impact the Euro. He also thinks the US is in a double dip recession and that we will start to see that data.


Third Point's Presentation on Yahoo!

Below please find a copy of the presentation that Daniel Loeb and Third Point gave on Yahoo!. One particular slide does a nice job walking you through their value attribution analysis and why they think its worth around $25 per share up from about $13.90 today ($14.26 at the time of the presentation).


Third Point - Yahoo! - 2011.09.14

Wednesday, September 21, 2011

Bill Browder of Hermitage Capital interview with L'Echo

Bill Browder of Hermitage Capital was recently interviewed with L'Echo and gave his opinion on the markets and how he is positioning himself. For those unfamiliar with Bill Browder he is probably one of the best emerging market ivnestors of all time. See my prior post (highly reccomended) on his interview with Stanford, here.

The interview is translated and pasted below, however for my francophiles out there here is a link to the original french interview.

Bill Browder "The markets should be much lower than they are today"

The founder of hedge fund Hermitage Capital Management told us: he is afraid of the markets. And completely changed his management style. Here's why.

William Browder, founder of hedge fund Hermitage Capital Management, a manager is not like the others. We met in Paris just before the start of a hearing of the Council of Europe on the matter Magnitsky. Sergei Magnistky was the lawyer's business Browder, before it is ejected from Russia and declared persona non grata in 2005. Magnitsky himself has been imprisoned and died shortly after. With the exception of Russia, Browder has not yet lost his faith in emerging markets, where its money is invested. But we said it had completely changed his management style since the beginning of this year. A meeting with the politicians present at the summit in Davos was enough to become pessimistic about the markets. He explained why.

Market volatility shows how much investors are afraid right now. How do you explain this?

Investors have good reason to be afraid right now. There is an unraveling of the crisis of sovereign debt in Europe, a deficit out of control in the United States and a revolution in six Middle Eastern countries close to major oil producers. And most economic indicators suggest that the global economy is close to falling into recession. All these reasons, taken individually, are sufficient to make the markets down. Together, they should send the market much lower than they are now.

What prevents the stock market to collapse?

Market support based solely on government intervention. Central banks print money. The official name of this operation is the quantitative easing. The other market support based on low interest rates. They should be 3-5% higher than they are now, due to manipulation by central banks. This gives a terrifying combination for any holder of an asset, because the price of it is contingent of forces unrelated to the markets.

The search for the intrinsic value of an action is therefore no longer possible?

I prefer to speak of market value than intrinsic value. If interest rates are allowed to rise to the level of rates without government intervention, this would change everything. For example, real interest rates in the United States should be 5% instead of 0.25%. If they were to rise by 0-5%, the 30-year Treasuries to fall by 50%. The Apple stock is expected to lose 38%. Like other similar assets. Asset prices are completely all artificial.

The price of gold do they meet the same logic?

Gold occurs in a particular situation. Any asset class goes up 100% in a short period of time has a significant downside risk. On the other hand, gold prices are high because they compensate for the weakness of all major currencies. Gold has become an alternative currency to other currencies to depreciate. And if Greece out of the euro area or if there is an additional problem with the debt of other Western countries, the price of gold may go higher. The strength of gold is based on the lack of confidence in the inability of governments to protect the purchasing power of their currency. I have always gold. I bought 1,000 dollars an ounce. And I do not sell it soon.

But gold prices flirt with the 2,000 dollars an ounce. Is there still time to buy?

I would not advise anyone to buy whatever the price. I had myself reluctant to purchase gold at 1000 dollars.

Gold has no use yet, unlike all other commodities.

Well, that's an advantage for the gold. The raw materials are used for industry. In a recession, they undergo a correction. Just look at oil prices recently to be convinced. Gold as currency retains its value, unlike other commodities.

In August, hedge funds have experienced particularly difficult one months.
Was this your case too?

My money is fully "market neutral", meaning that each position corresponds to a higher position down. When the markets suffered a sharp correction in August, I had no directional exposure to them. Result, when markets lost 20%, we limited our losses to 3%. Since the beginning of the year, our performance is 2%, against 13% for emerging markets.

Your client did fear and threat does to withdraw money?

They emes calm, but I was afraid and I have reduced the net exposure of my portfolio from 100 to 0%. We were able to avoid the chaos of the markets. At the World Economic Forum in Davos in January, I spoke to different people and I realized that most of the politicians present there was optimism, but they had just seen all the major problems of the world economy. Markets reflect the same feeling that politicians who govern us. They ignore the problems. When I returned from Davos, I asked my team to reduce the net exposure of our portfolio. This has avoided being in the red since the beginning of the year.

In China, a wave of scandals involving listed companies. Some hedge funds have left their feathers. Your funds specializing in emerging markets, he was touched by these scandals?

I am invested in China on the rise and fall (he plays down BYD, the company car which is a shareholder Warren Buffett, ed.) The scandals we were not affected. But this shows that emerging markets should be treated more cheaply than Western stock exchanges.

The current situation is comparable with 2008?

You can not compare the current situation with that in the aftermath of the collapse of Lehman Brothers. For two reasons. The first is based on the completely unexpected nature of the bankruptcy of the bank in 2008. On the other hand, the scenario is worse this time because they are more companies that are likely to fail, but the States. The crisis of 2008 has been delayed by the intervention of governments that have injected massive amounts of money. We are in the second stage of the financial crisis that began in 2008.

The output of this crisis will she slow and painful, like the Japanese situation?

Each country has its own characteristics. But the problems of economies and markets in the U.S. and Europe make it difficult for any investment strategy to increase market long term. We must remember that over 20 years, the Nikkei lost 80% of its value.

But institutional investors like pension funds, insurance, and even mutual funds have the possibility to play down the markets. Their mandate requires them to be on the rise on them long term. How will they manage these market conditions?

We will witness the failures of pension funds and insurance companies. Companies with long-term commitments will have problems. Pensioners will be affected by these inevitable problems. The next decade will be difficult for everyone because of the accumulation of debt by governments and by individuals.

Tuesday, September 20, 2011

Bruce Berkowitz on Wealthtrack

Bruce Berkowitz was recently interviewed on Wealthtrack. In the interview he discusses his concentrated investing style, his view on financials as a whole, and his view on Bank of America (BAC). He thinks BAC could earn $3 per share in a normalized environment making the stock very undervalued at today's pricing. He goes on to discuss AIG, he thinks their tangible book value (which is a proxy for liquidation value for an insurnace company) is now at about $0.50 on the dollar, so in his opinion there is a significant margin of safety. He then goes onto say that his single best idea is to invest in BAC.


Alta Rock 1H 2011 Letter

Below please find Alta Rock's 1H 2011 letter (hat tip to Marketfolly for posting). Alta Rock has compounded at 11.9% since opening in 1989. In the letter they walk through their rationale on their positions in Domino's Pizza (DPZ), Mohawk Industries (MHK), and Carter's (CRI).



Monday, September 19, 2011

Ray Dalio at Bloomberg Markets 50 Summit

Ray Dalio of Bridgewater Associates was recently interviewed at the Bloomberg Markets 50 Summit. In the interview they talk about Ray Dalio's philosophy as well as some of his views. Enjoy:

Here is the transcript:

Best Ideas Panel and Presentations from the Delivering Alpha Conference

As frequent readers know last week CNBC and Institutional Investor hosted the Delivering Alpha conference. There were a number of good panels and presentations at this conference much of which I have previously posted.

The final panel of the day was the best ideas panel where Kyle Bass of Hayman Advisors; Leon G. Cooperman of Omega Advisors; Philip Falcone of Harbinger Capital Investments; J. Tomilson Hill of Blackstone Marketable Alternative Asset Management; Daniel S. Loeb of Third Point LLC; and Anne B. Popkin of Symphony Asset Management, all presented their best investment ideas.

It was a pretty start studded panel to say the least. Pay particular attention to Kyle Bass' presentation. The presentations and content is well worth reviewing. Below please find some of the presentations along with the video of the panel.




Omega Advisors:
110914 Omega Lgc Da

Symphony Asset Management:
110914 Symphony DA