market folly
Updates on what top hedge funds are investing in

  • What We're Reading ~ Analytical Links 4/23/14
    A look at the Aereo Supreme Court case [SCOTUSblog]

    What's Alibaba really worth? [Value Venture]

    Macro and micro inefficiencies in equity markets [Ada Investments]

    Takeaways from a slew of recent earnings calls [Avondale]

    Americans still don't trust the stock market [CNN Money]

    The stock picker's market fallacy [Pension Partners]

    Can Facebook innovate? A conversation with Zuckerberg  [NYTimes]

    Brazil's 50 year snooze [Economist]

    Sell in May and go away? [Barrons]

    Putting lipstick on Ulta [Herb Greenberg]

    WWE Network profitable or on the ropes? [SNL]

    5 questions on the state of mortgage lending [WSJ]

    Why Apple is like a movie studio [Recode]

    Big Japan investors tell firms to make better use of cash [WSJ]

  • Greenlight Capital's Q1 Letter: Sees Tech Bubble Forming
    David Einhorn's hedge fund firm Greenlight Capital is out with is first quarter letter.  In it, they talk about how a potential bubble in tech is forming.  As such, they've shorted a basket of momentum names in small size in order to manage risk.

    Other main takeaways from the letter include various new longs for Greenlight: Resona Holdings (Japan: 8308), SunEdison (SUNE), Altice (Netherlands:ATC), and Conn's (CONN).  The last long might be a surprise to some, as many hedge funds have been short the retailer that also deals in subprime lending. 

    Greenlight also covered many unsuccessful shorts, including Chipotle (CMG), Fortescue Metals, Loblaw Companies, and Michael Kors (KORS).

    At the end of Q1, their largest long positions were Alpha Bank, Apple, gold, Marvell Technology, Micron, and Oil States International.

    Embedded below is Greenlight Capital's Q1 letter:

    You can view other recent portfolio activity from Greenlight here.

  • Pershing Square's Presentation on Allergan/Valeant: The Outsider
    Bill Ackman's hedge fund firm Pershing Square Capital has released a presentation called "The Outsider" that details perspectives from Allergan's largest shareholder and talks about a potential combination with Valeant Pharmaceuticals (background on Pershing's involvement via that link).

    One of the main concepts detailed in the presentation is platform value.  Pershing notes that, "Considerations in valuating this asset include management's ability to (1) identify new acquisitions, (2) execute those acquisitions on reasonable terms, and (3) integrate them effectively."

    Though Ackman is newer to the VRX story, other hedge funds are not.  ValueAct Capital has been invested in the name for many years and has seen Valeant do all three of the above time and time again.

    This is due in large part to a fantastic management team with CEO Michael Pearson at the helm.  There's a great book on the best capital allocators of our time called The Outsiders, which made Warren Buffett's recommended reading list.  Ackman argues Pearson should be included in that group.

    Embedded below is Pershing Square's slide deck on Allergan and Valeant, entitled "The Outsider":

    You can download a copy here.

  • JANA's Barry Rosenstein on Activist Investing: Interview
    JANA Partners' Barry Rosenstein talked with CNBC today about activist investing and touched on his stake in Walgreen's (WAG).  Rosenstein says that the company has a "lot of levers to pull, including tax inversion."  Shares of WAG jumped during the interview and WAG is apparently JANA's largest position.

    Regarding shareholder activism, he says that, "We don't get involved unless we have concrete ideas that make sense on a long-term and short-term basis and we know we have shareholder support and they're the right solutions for the company."

    Embedded below is video of a segment of Rosenstein's interview with David Faber:

    You can view additional recent portfolio activity from JANA here and for more on their investment process, you can check out an in-depth interview with JANA Partners here.

  • Jeff Ubben on Valeant Pharmaceuticals and Microsoft: Interview
    ValueAct Capital's Jeff Ubben appeared on CNBC today to talk about some of his positions.  The activist investor talked about his stakes in Microsoft (MSFT) as well as his long-term holding in Valeant Pharmaceuticals (VRX), which is in the news today in a big way.

    Late yesterday, we flagged that Pershing Square had acquired an Allergan stake and was working with Valeant to propose a merger.

    Ubben highlights how ValueAct's Mason Morfit joined VRX's board in 2007 and so this has been a long-term play for them as they have huge confidence in CEO Mike Pearson.  Ubben says, "Allergan and Valeant are a perfect match."

    He then talked about Microsoft (MSFT) and Ubben thinks new CEO Satya Nadella's interests are aligned with theirs.

    Embedded below are the videos of Jeff Ubben's interview with David Faber:

    Video 1 on VRX

    Video 2 on MSFT

    You can view some of ValueAct's recent portfolio activity here.

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