Pershing Square Letter to Investors

Bill Ackman's Pershing Square Capital is out with a letter to investors describing their efforts with Herbalife (HLF) and their current positioning.  They also allude to a new position that the fund is taking and will be disclosed shortly.  Enjoy:

  193325846 Pershing Square December 2013 Investor Letter by ValueWalk.com

Contrarian - John Templeton Documentary

Bloomberg recently aired the documentary - Contrarian which is about the life of John Templeton.  Enjoy:

Jim Chanos on CNBC talking about new short opportunities

Jim Chanos was recently on CNBC talking about the new opportunities he sees in the market for meaningful downside.  He thinks serial acquirers who aren't growing organically are a good target for shorting.  He wouldn't name names bud alluded that the biotech industry was particularly rife with this problem - makes me wonder if he is short Endo Health Solutions (ENDP) or Valeant Pharmaceuticals (VRX) which would be bold since that is a favorite among many hedge fund managers. Enjoy:

Jim Chanos on CNBC

Jim Chanos was on CNBC talking about why he is still short China and thinks that CAT will be impacted along with hard commodities by poor Chinese demand:

James Dinan on CNBC Part 5

Jamie Dinan of York Capital was on CNBC talking why he is long shippers and has even gone so far as to purchase ships and the equity of the publicly traded shippers for his fund.  The Baltic Dry was up over 100% last month and he thinks ships will follow rates.

James Dinan on CNBC Part 4

Jamie Dinan of York Capital was on CNBC discussing his bullish view on the airline market.  Most of the airlines still trade at something like 5x EBITDA which he thinks is too low.  Post bankruptcy the companies have learned to make money at $95 oil and he thinks the sector looks attractive going forward. He thinks its a continuing show-me story as they execute and the multiple slowly expands:

James Dinan on CNBC Part 3

Jamie Dinan was on CNBC talking about how the corporate M&A environment will stay active in 2014 and beyond and thinks that the low rate environment will continue to add fuel to the fire.

James Dinan on CNBC Part 2

Jamie Dinan was on CNBC talking about why he liked Hertz (HTZ) and thinks it can earn $2.20 and thinks they could spin off the equipment rental business in 2014 to unlock additional value.  He thinks the consolidation in the space has really helped them along with the other large players as pricing has improved.  This is basically the thesis layed out by some Columbia Business School students at the Pershing Square Challenge in 2013  - if you haven't seen it take a look: here.

Enjoy:

James Dinan on CNBC part 1

Jamie Dinan the founder and head of York Capital was on CNBC talking about how he views the market.  He thinks the normalization policy is healthy for confidence and as a result has a good chance going forward of seeing further multiple expansion.  Jamie thinks rates will stay low and corporate events will still run high making it a great future for an event driven fund like York.

Hugh Hendry's Latest Letter

Hugh Hendry's Eclectica Fund is out with their December letter.  It is classic Hugh Hendry and in the letter he describes why he turned bullish on the market.  Enjoy:

  The Eclectica Fund - Manager Commentary - December 2013 by ValueWalk.com

Peter Lynch on Charlie Rose

Peter Lynch was recently on Charlie Rose talking about his life since retiring from Fidelity and his philanthropic activities.  Enjoy:

James Pan talk at George Washington University

James Pan - who is a lesser known money manager that has a fantastic track record (over the last 15 years he has compounded at 18.94% gross and 15.7% net assuming 20% carry).  He gave a talk at George Washington talking about his investment style, what he looks for, etc.

Well worth watching:

Barrington Capital's Presentation on Darden

Barrington Capital is out today with a lengthy slide deck on why they think Darden is undervalued.  They make the case that it is worth $71 - $80 per share versus the recent price of $52.50.

Enjoy:

  Barington Capital Group's Presentation on Darden

Robert Shiller talking about Market Valuations

Robert Shiller was recently on PBS sharing his opinions on market valuations and where he thinks we are in terms of historical over vs. under valued territory.  Enjoy:

Stan Druckenmiller on Charlie Rose

Stan Druckenmiller was recently on Charlie Rose talking about his investment style, background, his views on the economy and the government's entitlement spending.  Nothing earth shattering but quite enjoyable:

Mohnish Pabrai presentation to Boston College

Mohnish Pabrai recently gave a presentation to Boston College on his investing style, views on the market, etc.  Enjoy:

Whitney Tilson Presentation to HBS Club on Lessons Learned from Short Selling

Whitney Tilson recently gave a presentation to the HBS Club of NYC on the dozen lessons he learned from shorting during his career.  He then went on to share his pitch on Lumber Liquidators (LL) and why he thinks its worth $35 vs a recent close of $96.88.  Enjoy:

  Lessons From a Dozen Years of Short Selling-Whitney Tilson-12!4!13

Full Kyle Bass Interview on Bloomberg

Here is the full lengthy interview from when Kyle Bass was recently on Bloomberg discussing: GM, JCP, and HLF.

Enjoy:

SumZero and Institutional Investor Pitch Event

Here is a link to the video recording and writeups from the recent SumZero an Institutional Investor stock pitching event at Columbia Business School:

http://www.institutionalinvestor.com/podcast.aspx?StubID=24080

Worth looking through the videos and the pitches.

Kyle Bass on Bloomberg TV

Kyle Bass was on Bloomberg TV earlier today discussing Herbalife, activist investors, and his own investing style.  He recently announced that he was long GM and thought it could rally 40% in the next 12-18 months.  Enjoy:

Mohnish Pabrai video on Compounding

Mohnish Pabrai is out with another video.  This time it was at a presentation given at a Indian Business School.  He discloses that he has compounded at 26% net since the inception of his funds.  Enjoy:

Mohnish Pabrai Indian School of Business Compounding Presentation from mohnish pabrai on Vimeo.

Bill Ackman's Presentation from the Robin Hood Investors Conference on HLF

Bill Ackman and his Pershing Square Capital published the presentation he recently gave at the Robin Hood Investor Conference updating the market with his thoughts on Herbalife (HLF).  Enjoy:

  Pershing Square Capital - Robin Hood In Reverse

Kyle Bass at University of Virginia Investing Conference talking Energy

Kyle Bass was the moderator of the energy panel at the recent University of Virginia Investing Conference.  He talks about oil & gas, infrastructure, supply & demand, and future growth with Wil VanLoh, Jody LaNasa and Michael Watzky. Enjoy:

Whitney Tilson - Kase Capital Presentation on Lumber Liquidators (LL)

Below please find Whitney Tilson's presentation he gave at the recent Robin Hood Investor conference on shorting Lumber Liquidators (LL).  Enjoy:

  Lumber Liquidators Presentation-Whitney Tilson-11!22!13

Stanley Druckenmiller on Bloomberg

Stanley Druckemiller was recently on Bloomberg tv discussing his presentation at the Robin Hood Investor Conference.  He talks about why he is short IBM and how he thinks its one of the most compelling shorts out there right now.

Larry Robbins on CNBC

Larry Robbins on CNBC and why he thinks the multiples in the market will continue to expand and won't decline until real inflation is in excess of 4% which is way-way off.

Larry Robbins on why he is long Hospitals

Larry Robbins was on CNBC today discussing why he is long Hospitals:

Alex Sacerdote of Whale Rock Capital Capital Management on Why he is long Softbank

Alex Sacerdote of Whale Rock Capital on why is long Softbank and how he thinks their stake in Alibaba is worth more than the entire market cap of the company.

Nehal Chopra of Tiger Ratan on CNBC

Nehal Chopra of Tiger Ratan was on CNBC today sharing her investment philosophy and her favorite idea, which is Post Holdings (POST).  She thinks its under managed and will now be Ralston 2.0.  She also shares her thoughts on Time Warner Cable and Charter Communications.

Enjoy:

Bill Ackman on Bloomberg talking HLF and JCP

Bill Ackman was on Bloomberg today after his presentation at the Robin Hood Investor conference.  He shared his thoughts on JCP, HLF, and other positions.  Quite a lengthy and enjoyable interview.

Philippe Laffont of Coatue Management talking about Internet Valuations

Philippe Laffont of Coatue was on CNBC today talking about tech stocks.  He does not think they are in a bubble.  There arent that many mega-cap internet companies despite the fact that the space is huge.  There is only 7 large internet companies (Alibaba will be the 8th).  There are few companies and its winner take all.

Richard Chilton on why he is long W.R. Grace

Richard Chilton was on Bloomberg today and shared his thoughts on why he is long W.R. Grace (GRA).  He bought in at $45 and thinks its worth betweeen $175 and $200.  He thinks the market could pull back in the near term but would be a buyer on the pullback since he thinks multiples will expand going forward.

David Tepper on Bloomberg

David Tepper was on Bloomberg today.  He shared his thoughts on the market, which he believes is not in a bubble and has room to run.  He also talked about why he sold Apple.  He then goes on to talk about why he went long airlines and why he has done well with them.  He discloses they are up 40%+ gross in 2013.  He also disclosed they recently put on a treasury short to protect against a pull back in the equity markets.  He also talked about why they were long JCP and viewed it as a good trade (they are no longer in this position).

Really great interview - well worth listening to.

David Einhorn announces Greenlight Capital is Long Micron

David Einhorn was on CNBC today talking about why they are now long Micron (MU) and how they think it can get to $4 in EPS vs. a current price of approximately $20.

Cartoon Describing John Law's Mississippi Bubble

Worth the watch.

Enjoy:

John Law and the Mississippi Bubble by Richard Condie, National Film Board of Canada

GMO Capital Q3 2013 Letter to Investors

Jeremy Grantham and GMO Capital is out with their Q3 2013 Letter to Investors.  In the letter they make the case that the market is overvalued and is apt to revert to the mean in the not too distant future.  Jeremy Grantham then goes on to share his thoughts on the recent Nobel prize winners, Janet Yellen, and potential forward GDP growth given presidential cycles.  Overall its enjoyable stuff.

  GMO Capital Q3 2013 Letter to Investors

Ray Dalio at DealBook Conference

Ray Dalio of Bridgewater Associates was recently at the DealBook Conference where he was discussing the economic machine, and his views on the global economy and what the future will hold.  Enjoy:

Watch live streaming video from dealbook at livestream.com

Dan Loeb at DealBook Conference

Dan Loeb was recently at the DealBook conference where he spoke about activism, Bill Ackman, Sony, Japan, his opinion on the markets, etc.

Good stuff.  Enjoy:

dealbook on livestream.com. Broadcast Live Free

Bruce Berkowitz Letter to Government on Fannie and Freddie Plan

Bruce Berkowitz sent a letter to the US government on re-equitizing Fannie and Freddie.  It is actually a pretty interesting read.  Enjoy:

  FAIRHOLME+CAPITAL+MANAGEMENT+ANNOUNCES+PROPOSAL+FOR+PURCHASE+OF+INSURANCE+BUSINESSES+FROM+FANNIE+MAE+AND+FR...

Meson Capital on OMEX

Meson Capital recently came out with an update to their October 31st report on OMEX based on the company's response.  Enjoy:

  Meson Capital: OMEX

Bruce Berkowitz on CNBC talking about position in Fannie and Freddie

Bruce Berkowitz of the Fairholme Fund made some news this week arguing to re-equitize the preferred securities of Fannie and Freddie.  He was on CNBC explaining this position.   Enjoy.

Leon Cooperman on how to get a job at Omega

Leon Cooperman on how to get a job at Omega:

Howard Marks on Bloomberg TV

Howard Marks was recently on Bloomberg TV sharing his views on the economy and interestingly enough on the recent Twitter IPO.  Enjoy:

Bill Ackman speaking at Oxford Said Business School

Bill Ackman the founder of Pershing Square Capital Management recently gave a speech at Oxford Said Business School to talk about his opinions on the market as well as other views.  In the video he is talking about activist investing and philanthropy.  He also talks about his days at HBS and what it was like setting up his first hedge fund Gotham Partners in his mid 20s.  Pretty good stuff.  Enjoy:

Barry Sternlicht of Starwood Capital on CNBC

Barry Sternlicht of Starwood Capital was on CNBC today talking about how the Fed needs to immediately stop printing since they are doing more harm than good to the economy.  Enjoy:

Stanley Druckenmiller at TedX Wall Street

Below please find the video of Stanley Druckenmiller's recent speech at TedX Wall Street.  In the video he talks about the current sad stat of our entitlement economy and how that will have severe ramifications on the long-term US economy and fiscal situation.  Powerful stuff.  Enjoy:

Marc Lasry on Bloomberg TV

Marc Lasry was on Bloomberg TV today talking about his opinion on the economy and European Central Banking policy.

Enjoy:

Marty Whitman interview with Conseulo Mack

Marty Whitman was recently on Wealth Track where he talked about his investing style and discusses his long term mantra of buy "safe and cheap" stocks.  He defines safe as a financially strong company and cheap as buying at a 30% discount to NAV.  In the interview he recommends buying Brookfield Asset Management (BAM).

Enjoy:


Here is a follow on web extra where he discusses his background growing up and how that influenced him.

Marcato Capital Presentation on Sotheby's

Below please find Marcato Capital's presentation on Sotheby's (NYSE:BID).  Enjoy:

  Value Investing.pdf

Notes from 2013 Excellence in Investing Conference

BTIG was good enough to summarize the presentations from: Michael Moe, Malcolm Fairbairn, Christopher Lord, Christopher Balding, Kurt Billick, Christopher James, Mick McGuire, David Herro, Brian Zied, John Burbank III, Carl Kawaja, and G. Mason Morfit.

Enjoy:

Michael Moe, Chief Investment Officer of GSV Capital

Trade Idea: Buy Twitter (TWTR)

Price Target: Given a $15.5B assumed IPO valuation and a 620mm share count, TWTR is worth $41.16 now, $53.23 in 12 months and $163.68 in 36 months

Valuation: Comparable valuation to Facebook (FB) and LinkedIn (LNKD) with a smaller user base currently but with a revenue growth pace of 105% vs. FB at 53% and LNKD at 59%.

Themes: IPOs have changed since the 1990s. There are fewer of them, the companies going public have been incubating longer and therefore accruing more value for private investors than public, since private investors are capturing more of the initial growth. TWTR is arguably more like an older IPO, with more growth ahead for public investors than has been the trend.

TWTR is at the forefront of numerous value-creating changes. As computing shifts to mobile usage (there are 6.5B total mobile phones  vs. 1.5B smartphones), TWTR has usage that is already 77% mobile. As video increases as a percentage of data, TWTR has a popular app in Vine. As the second screen becomes a core feature of media usage, 67% of the 18-34 demographic tweets while watching television. As wearable devices develop, TWTR’s mobility and brevity will capture share.

How will this be monetized?  In various ways – one powerful example: a 1% shift in current ad spending from TV to mobile implies $2B in new value for social media.  The acquisition of MoPub gives TWTR an early edge.

Catalysts: Steady growth at the current trajectory in users, views and tweets will translate into free cash flow – TWTR only needs to achieve half of FB’s users and match its ARPU to achieve valuation targets.

Malcolm Fairbairn, Chief Investment Officer of Ascend Capital

Trade Idea: Buy CF Industries Holdings Inc. (CF), avoid potash companies in general

Price Target: Current asset replacement cost is $280/share and will be $353/share by 2016  millions?  Billions?

Valuation: CF is the low-cost producer in the global marketplace and deserves to be valued, at minimum, at replacement cost. It is currently valued at 5x adjusted EBITDA and deserves the 6.5x EBITDA valuation that Lyondell and other cost-advantaged commodity producers receive.

Themes: Despite the shale gas revolution making the US the lowest-cost region for nitrogen fertilizer (feedstock is 70% of costs), the US is still a net importer. 10 world class plants would need to be built to make the US a net exporter. CF has the best cost structure, is the largest US player, second global player and has excellent locations in the mid-continent.

At current trough levels of pricing ($300/ton) CF can earn more than $16/share. At a reasonable recovery in pricing (say $400/ton vs. $4 in natural gas prices as input) CF can earn between $28 and $35/share.  It will be able to increase capacity by 25% by 2016.

Catalysts: Holders are getting paid a dividend to wait while the world fertilizer market sorts itself out. In the meantime, CF has $1.9B of share repurchase capacity, can borrow at 4% and buy back shares at 15%, could avail itself of an MLP structure to unlock value (as RNF and UAN) and could also increase its dividend which is now less than 20% of EPS.

Christopher Lord, Managing Partner of Criterion Capital Management

Trade Idea: Buy tower companies – Crown Castle International (CCI), American Tower (AMT), SBA Communications (SBAC).

Sell 3D printers (XONE, DDD, VJET), CREE, “communications box companies” (CSCO, EMC, VMW) and certain “second and third tier” CRM cloud firms trading at 20x to 30x revenue multiples.

Price Target: $100 (CCI), $110 (AMT), $110 (SBAC)

Valuation: Towers currently receive a REIT discount because of rate concerns. But even factoring this out, towers get a 16x multiple vs. 20x for the better REITs and this despite 15% free cash flow growth vs. 8% for REITs.

Themes: Mobile data has increased 35x in 6 years and will increase 430x over the next ten years to 11.2 exabytes per month. Who wins in data growth? Towers do. It is a real estate business that is neutral to winners and losers among service providers, enjoys 5-10 year leases with price escalators, has nearly insuperable barriers to entry, and has ~100% incremental EBITDA margins and 60% incremental free cash flow margins.

US nationwide service providers are moving from a duopoly of players with fast data capability to 3 or 4 players. Softbank is committed to building a superior data network at Sprint. This is how Softbank won share in Japan: they believe in the strategy.  This means more customers per tower and also densification: more cell splitting and redundancy in networks to enhance them. This means a lot more capital expenditures being directed to towers.

Catalysts: Earnings and cash flow will grow as the market ramps up to 3 and possibly four national rich data players, and the management teams of the tower companies are committed to returning capital to shareholders and will take steps to do so.

Short Idea Theses: 3D printing companies are in an easily commoditized business and trade at 10x revs, DDD is the easiest short. Major data players like GOOG, FB and AMZN have moved beyond box solutions like CSCO for their needs and will not give these companies 70% margins ever again. CREE’s business can be replicated more cheaply in China and this is happening already. Also-ran cloud CRM firms are overvalued and have no competitive advantage.

Christopher Balding, Finance Professor at HSBC Business School of Peking University

Trade Idea: Buy and flip certain kinds of Hong Kong secondary offerings

Sell the higher quality Chinese companies, sell commodities linked to China, sell shares of commodity related companies in linked markets like Australia, sell AUD

Price Target: no specifics

Valuation: Valuations in the marketplace right now are skewed, while 65% of Chinese shares are below HK share historical averages (P/Es are 12x, P/Es of state owned enterprises are closer to 4-6x) these shares are not cheap. There has been a “flight to quality” with the market shifting to more verifiably profitable companies, but these now trade at sky-high multiples (Byd Co – 1211 HK)  now has an 1100x P/E.

Themes: All financial data from China is false and manipulated. The provinces report 10.8% GDP growth, China reports 7.8% GDP growth. These are all official numbers, but there is no official explanation for the missing 3% in GDP growth. There has been a 111% appreciation in real estate pricing in recent years while the state reports 14% inflation in housing CPI. The manipulation is willful – on June 4^th the Shanghai index was down 3% or 64.89 points. This was a manufactured “omen” – a numerical representation of the date of the Tiananmen Square revolt (“the June 4^th Incident”).

China is the largest bubble in human history. The steel industry has $500B in debt and $300mm in earnings – these are official numbers. Chinese solar capacity is 1.6x global demand – the entire industry can only operate at a loss. Housing prices to household income in San Francisco are 9.4x.  In Shenzhen the ratio is 32x. Real estate costs in China are 25% higher than San Francisco in a country with incomes lower than rural Alabama.

Right now banks are pricing secondaries at a discount of as much as 18% to HK prices – this desperation for capital creates an arbitrage in buying and flipping the shares. However, the fine print must be read closely – there are lockups and windows.  This goes in tandem with shorting radically overvalued “real business” stocks.

Catalysts: No one can predict when exactly a bubble will burst. What is true is that when the bubble bursts, there will be capital controls and a lack of liquidity.  This is why the linked trade recommendations were given. China is the marginal buyer of iron ore, copper, coking coal and other commodities, creating a short opportunity in those liquid and internationally traded commodities that is harder for Chinese regulators to stymie. The same goes for the AUD and Australian mining companies.

Kurt Billick, Chief Investment Officer of Bocage Capital

Trade Idea: Buy US refiners in general, and specifically TSO and MPC

Price Target: no specific targets

Valuation: Valuations have been kept artificially low, in the neighborhood of 4x EBITDA, because of legacy assumptions. These are businesses that should trade at 8x EBITDA.

Themes: Until recently, the US was considered a mature oil province in structural decline. The shale revolution has obviously changed that dynamic going forward, but refinery logistics are still configured on the old model and are just getting adjusted to the new reality.

The old model was that the US had to import crudes, and given the producing geographies, the imported crudes were heavier and more sour. This has lead to refining capacity biased toward heavy crudes and less optimized for light, sweet crudes.  This has also lead to a pricing deck that made more expensive Brent a driver of input costs, compressing refiner margins.  Long-term supply contracts keep volumes of imported crudes running through US refineries.

This is changing. With contracts rolling off, refineries can switch to LLS and get a positive $5 or better differential in costs.  The current margin for Singapore refineries is $3.90. US refineries’ differential benefit is already larger than foreign refineries’ margins.  In 2014 capacity utilization in the US Gulf Coast will soar.

Besides the differential arbitrage and the transport cost savings (mid-Continent vs. overseas), there are also process heat savings: cheap and abundant natural gas eliminates the need to burn more expensive feedstock oil as fuel.  There is also financial arbitrage, with the potential to use MLP structures.

TSO has excellent refining assets.  It will realize a $16 differential in moving from Alaskan North Slope oil to Bakken.  Its Carson acquisition – and its use of its MLP to drop the asset down – created $500mm of synergies, passed the asset cost through to the MLP and freed up cash flow which can be used to delever or repurchase shares.

MPC had been the biggest user of international crudes and will get the most leverage out of the sourcing shift. It was also a disregarded appendage of an IOC before and now has the benefit of new management focus as a standalone. It has $4B of assets it can drop into MPLX and can use the cash for buybacks or other accretive measures.

Catalysts: All of the thematic developments are already in process. Drop downs and margin improvements will drive improving market valuations.

Christopher James, Managing Partner of Partner Fund Management

Trade Idea: Buy Adobe (ADBE)

Price Target: no specific target

Valuation: 2012 free cash flow was $2.45. 2016 FCF could be $4.00 – and the multiple should expand from the 2012 multiple because of business model improvements.

Themes: 80% of people who access the internet now do so using mobile devices vs. desktops. Social media is changing how business is done. The old model was aggressively selling to hard-to-reach multitudes using large advertising campaigns with controlled messages. The new model is connecting personally using small gestures and transparent messaging.

The ground is shifting quickly. Social media has a 26% CAGR and mobile applications have a 38% CAGR. ADBE, by transitioning to a service model, is taking short term pain but adopting a value proposition that helps it compete in the long term. Software in the marketing cloud was an $11B business in 2012 and will be a $17B by 2015. Two companies now reach across most of the range of the highly fragmented cloud marketing sector: ADBE and CRM.

This enables them to engage in closed-loop marketing.  They will know the customer, learn what the customer’s interests and desires are from social media, and provide tailored, location-based offerings in real time. Chief marketing officers at Fortune 500 firms will spend more money on technology than CIOs do by 2017.  ADBE is ahead of this trend.

Catalysts: ADBE has already implemented its shift in business model and the metrics are proving this out. While FCF numbers have experienced near term declines, that situation will reverse in line with the metrics and grow 60%+ by 2016.

Mick McGuire, Managing Member of Marcato Capital Management

Trade Idea: Buy Sotheby’s (BID)

Price Target: from $58.52 (sum of the parts) to $68.02 (success in activist agenda)

Valuation: Current market valuation reflects $1.3B of trapped equity value.

Themes: Sotheby’s core auction business is a brokerage business.  BID has poorly allocated capital into low-return, extraneous businesses and investments and should reallocate it. No company should invest in projects below its cost of capital.

BID enjoys a 250 year old duopoly with Christie’s in auctions. There are ways to improve the performance of the core business, but there are three other businesses which should be exited.  The first is $875mm of real estate holdings – the US and London headquarters plus other London properties. The valuation is reasonable, based on market data. The second is the $441mm “banking” business, in which BID gives customers advances on auction proceeds and even lends them term loans to finance their collections using BID’s balance sheet.  This is an attractive, low-risk (0.3% losses over 20 years) portfolio for banks – its 5% return is a bad investment for BID, but would be a good securitization.  Much smaller is the $61mm loss- making art dealership – but it is a symbol of poor capital discipline and needs to go.

Catalysts: Marcato will go into greater detail in their 13D filing, but the catalysts are BID following the advice of shareholder activists and divesting these businesses.

David Herro, Chief Investment Officer-International Equities at Harris Associates LP

Trade Idea: Buy Credit Suisse (CS), Diageo (DEO), BMW (BMW GY)

Price Target: no specifics

Valuation: These firms are trading at discounted multiples due to geography -  as Europe recovers, these firms will grow and return to previous P/E multiples from before the European crisis even as they grow cash flow

Themes: While the European debt crisis dominated the headlines for 18 months or more, high value firms with good balance sheets and durable businesses weathered the storm without damage.

The European crisis was a political crisis that did not impair fundamentals.  Effectively the Euro is a device that fixes the prices of exchange rates even as the different nations in the currency union pursued radically different microeconomic policies.  The monetary inflexibility coupled with regional inconsistency extended the dislocation and created value bottlenecks.

MSCI US and MSCI Europe are still divergent, European prices to book, cash earnings multiples and dividend yields are all lagging the US even though these firms have comparable ROE.  This divergence is unjustified and will close, even as Greek and Irish yields have narrowed.

CS now has minimal sovereign exposure, a profitable private bank with 7% growth, is trading less than 10x earnings and has adequate capital. Management has been reducing risks while increasing book equity and is in a position pursue growth or return capital.

BMW is a symbol of Europe’s strength in luxury brands. Although 20% of revenues come from China, BMW has a better than 15% return on capital, trades less than 6x EBITDA and is well positioned for growth in the US and Europe.

DEO is the world’s leading spirits company, trades at only 13x cash flow despite growing 7-8% per year, has durable businesses that resisted the downward cycle and has a management team that focuses on the balance sheet.

Catalysts: Investors are getting paid to wait as European asset pricing catches up to US valuations.

Brian Zied, Portfolio Manager of Charter Bridge Capital Management  LP

Trade Idea: Buy Brunswick Corporation (BC)

Price Target: 50% to 80% improvement from current $44 share price ($66-$80)

Valuation: Currently valued at 7.4x EBITDA and 15x P/E – these metrics do not need to shift as long as they follow the cash flow improvements that BC can achieve.

Themes: BC’s business is 50% marine by revenue and 70% by EBIT. It has a solid defensible business in marine engines – BC and Yamaha have 70% of the global market and BC is first in the US and second globally. BC’s engines are superior – lighter, more efficient, fewer moving parts. This is a good and improving business.

The real key to unlocking value for BC is the other piece of the marine business: the vessels themselves. Boats are 25% of revenues, but just 2.6% of profits. The boat market has been depressed to a greater extent than has historically been the case – before the recession, annual demand had been 300,000 units. It is now only 150,000 – up from a trough of 120,000. In the meantime, other indicators of boating enthusiasm have remained intact (new licenses, etc.). The recession created a broad market for used, over-mortgaged boats that stifled the newbuild market.

Since the business is breakeven so close to the nadir, if the market rebounds to $2.6B in size from $1B then the segment could see excellent cash flow.  The indicators are already evident in firming used boat prices.

Catalysts: Increasing strength in used boat prices will be followed by improved earnings and the stock will rerate.

John Burbank III, Chief Investment Officer of Passport Capital

Trade Idea: Buy Digital Garage (4819 JP), with potential hedging out of Kakaku (2371 JP) exposure

Price Target: Y3527

Valuation: Target assumes a straightforward sum of the parts valuation – but this is a starting point for a more difficult to quantify innovation premium that should eventually be recognized. Its Kakaku holding alone accounts for 70% of its value.

Themes: The past decade of the global economy has been dominated by monetary and fiscal policy adjustments.  Cheap credit initiatives were followed by China’s entry into the WTO and then by quantitative easing. In the 1990s the economy was driven by innovation.  It is a bad idea to invest solely based on themes that are derivative of policy.

The TOPIX tells a different story than the European and US charts.  While Abenomics will likely have a strong impact on Japanese equities, which are underinvested and which may get renewed liquidity from new initiatives at GPIF and elsewhere, the right Japanese equities to identify are innovation stocks that create actual value.

The US leads in innovation and its share prices reflect that. China has a “Great Firewall” of isolationism that prevents access to innovative value in that market. Japan has been culturally closed – but Digital Garage is a company that shares the incubator mentality of the old Softbank: it not only owns 20.6% of Kakaku and a sliver of TWTR, it offers exposure to a broad range of ecommerce businesses in Japan (“ecommerce is GDP independent”).

Catalysts: Market recognition of Digital Garage’s innate asset value.

Carl Kawaja, Senior Vice President of Capital Research Company

Trade Idea: Buy EADS

Price Target: $116 long term

Valuation: Currently valued at a discount of two turns of EBITDA to BA, based on trailing margins of 6.7% vs. 11% for BA – should be valued on the margin of its future backlog. The $51B of market capitalization represents 10% margins on $800B in backlog at a 35% discount.  Assuming a fair share for EADS of future backlog growing at 3% a year discounted by 8% yields the long term target.

Themes: “Airplanes are amazing.” More specifically, there is a reason why there are only two major global commercial aircraft companies – this is extremely complicated technology that adds tremendous value and which is very difficult to replicate. So there are barriers to entry.

There is also an enormous addressable market – China and India are just beginning as markets for air travel. Mobile phones were once thought prohibitive in these geographies and now they are becoming ubiquitous and indispensable.  That is a path for air travel – it is a technology that solves problems efficiently.

EADS has 8 years of backlog right now. The industry as a whole has 29,000 in real backlog through 2020. Two things make long term growth in aircraft deliveries feasible.  The first is fuel efficiency. If EADS can provide the low end of fuel savings its promises (25%) it will boost its customers’ operating profit by a factor of three, creating more capital to spend on more planes.

In the meantime, aircraft deliveries may be at an all-time high – but so is scrapping, due to underinvestment during the recession and the fuel inefficiencies in the current crude environment. This supports increased volumes.

Catalysts: No specific near term catalysts – this is a matter of valuations catching up to end market conditions.

G. Mason Morfit, President of ValueAct Capital

Trade Idea: A strongly implied buy recommendation on COL, MCRS, MSCI and CF

Price Target: none given, reference was made to past successes at VRX, BCR and ADBE

Valuation: no specifics

Themes: ValueAct is an activist fund that focuses on executive compensation plans that create long term value in the form of total shareholder return, rather than simply management of metrics. There are three main barriers to successful executive compensation incentives.  The first is the media, which focuses on dollar figures with little attention to value creation or destruction, “say on pay” votes which are not conducive to long term incentives and proxy advisory firms which are more focused on corporate governance rather than creating value for owners.

Managing for EPS and other goal posts can destroy value by emphasizing “box checking” over the wise use of capital for reinvesting in the business, acquiring quality assets that may not be immediately accretive, etc. Companies that link pay to EPS wind up compensating managers handsomely “just for showing up” while the market – smarter than the media or proxy advisors – justly rewards this lack of initiative with lower P/E ratios.

Firms that adopt total shareholder return as a goal that aligns management with owners will outperform.

Catalysts: Presumably incipient activism along the ValueAct model.

Carl Icahn on CNBC Discussing Apple and Netflix

Carl Icahn was on CNBC today disclosing that he increased his stake in Apple (NASDAQ:AAPL) to 4.7m shares with an average cost basis of $440 and is still thinking about buying more.  Carl I cahn goes on to discuss his recent letter to Tim Cook discussing his idea that Apple should conduct a $150B buyback.

The interview is pretty good and wide ranging.

Enjoy:

Cliff Asness on WealthTrack

Cliff Asness the founder and leader of AQR Capital Management was interviewed on WealthTrack this week.  The interview covers: asset allocation, the Shiller P/E, Ben Graham, leverage, shorting, derivatives, etc.  Enjoy:

Jim Grant Presentation - The Monetary Evolution

Jim Grant recently gave a presentation on The Monetary Evolution at the CFA Institute.  Enjoy:

Third Point Capital Q3 2013 Letter to Investors

Daniel Loeb's Third Point Capital is out with its Q3 2013 Letter to investors.  In the letter they disclose that they were up 4.8% in Q3 and are up 18% YTD (which is strikingly close to their 17.9% annualized return since inception).  In the letter they talk about their new position in Nokia and a new position in a credit master vehicle.  Third Point also shares its current views on the economy.  Good stuff as always.

Enjoy:

  Third Point Capital Q3 2013 Letter to Investors

Corsair Capital Thesis on Newscorp (NWSA)

Corsair Capital is out with their Q3 letter to investors.  In the letter they include their thesis on Newscorp.  Hat tip to Marketfolly for posting.

Enjoy:
Corsair-Q3-NWSA-Thesis

Jeff Gundlach on CNBC

Jeff Gundlach was on CNBC today  sharing his thoughts on the recent moves by the U.S. government and how he thinks that the faith in the U.S. credit quality is slowly eroding.  Enjoy:

Greenlight Capital Q3 2013 Letter to Investors

David Einhorn's Greenlight Capital is out with their latest letter to investors.  In the letter he discloses they are up 11.8% YTD (4.3% in Q3).  During the quarter virtually every long position in their portfolio was profitable (QE anyone?).  He then goes on to walk through their short thesis on Chipotle (CMG) and Green Mountain Coffee Roasters (GMCR).  He closes the letter by disclosing they initiated a new long position in Osram Licht AG (Germany: OSR). Which they think can get to €3 in EPS while ending the quarter at €34.70.

At quarter end, the largest disclosed long positions in the Partnerships were Apple, General
Motors, gold, Marvell Technology, Oil States International and Vodafone Group. The Partnerships
had an average exposure of 109% long and 72% short.

He ends the letter with an awesome quote: "Anyone who isn't confused doesn't really understand the situation." by: Edward R. Murrow.

Enjoy:

  Greenlight Capital Q3 2013 Letter

Leon Cooperman on CNBC describing thesis on Sprint (S)

Leon Cooperman was on CNBC today and gave his view on Sprint (S).  He thinks they could earn over $1 per share and they are currently trading at $6 so he thinks they have some nice room to run.

David Tepper on CNBC #3

David Tepper of Appaloosa was on CNBC today sharing his views on the market.  In this clip he talks about why he thinks market multiples are near the low end and how if the government doesn't do anything to screw it up we could be posed for some multiple appreciation from around 15x now to 18x - 20x.

David Tepper on CNBC #2

David Tepper of Appaloosa management was on CNBC today sharing his views on the market.  In this video he talked about how a default is not really that feasible.  He thinks the repercussions would be too huge to stomach and thinks its crazy that they would contemplate doing it now.

David Tepper on CNBC # 1

David Tepper was on CNBC this morning and shared his view that the Fed will not be tapering for some time.  He thinks that the uncertainty of the next three or four months will make it hard for markets to rally but his view is overtime the market is well positioned for continued appreciation.

Leon Cooperman on CNBC

Leon Cooperman was on CNBC today and recommended buying Qualcomm (QCOM), Motorola Solutions (MSI) and Swatch.  He also thought Chimera Investment (CIM) was worthwhile and is in the midst of a turnaround.  He also likes Sandridge Energy (SD) which he thinks is worth $10 vs a $6 stock price.

Interview with Bruce Greenwald

Bruce Greenwald was recently interviewed by Motley Fool.  In the interview Greenwald shares his thoughts on growth stocks and when to sell, the value of the financial sector today, whether reputation risk matters, predicting the macro environment, the need for a catalyst with investments, and three ways to hedge -- including gold and how to use it.  Pretty good stuff.  Enjoy:

Jim Chanos at WSJ Conference

Jim Chanos was recently interviewed at the WSJ Conference.  In the interview he shares his views on China, the energy sector, and Tesla (NASDAQ: TSLA).  Pretty good stuff:

Amit Kumar of Artham Capital Interview

Amit Kumar the founder of independent research shop Artham Capital has a nice interview with Manual of Ideas where he talks about how he looks for long and short ideas and gives some specific examples.  Pretty interesting and worth listening to.

David Winters on CNBC

David Winters was on CNBC today talking about why he thinks Coke, Wynn, and others are currently undervalued.  Enjoy:

Jim Chanos CNBC #3

In this clip Jim Chanos discusses how the natural gas revolution may have negative implications for coal players and other companies: