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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