NFL’s Panthers a Great Bet for Investor Tepper

May 21, 2018 James Heinsman In the News

David Tepper, billionaire hedge fund manager, is after the NFL’s Carolina Panthers for

Image of David Tepper of Appaloosa Management. Photo courtesy of Wikipedia and Appaloosa Management.

about $2.2 billion about double what Forbes says it was worth in 2007, about $957 million. Observers see his move as one with long-term promise. The deal is still not approved, the NFL has to sign-off before it is official, but if it does pass muster, it will be the largest amount ever paid for a football franchise. The previous record was set in 2014 when the Pegula family purchased the Buffalo bills for what was then an astounding $1.4 billion.

Forking over more than $2 billion seems outlandish, but analysts agree that the team should pay Tepper back, and then some. In just two years the Pegulas saw the price of the Bills climb to $1.6 billion in only two years, bringing in $200 million more than their original investment. But Tepper is likely looking at the industry and sees where it is heading: up.

As the way people enjoy sports, and especially football, evolves, more avenues for making money are presenting themselves. Football fans can now watch games online using several venues: Amazon, Facebook, Twitter and YouTube are all skirmishing for rights to broadcast games.

Also fueling the value climb will be the recent US Supreme Court decision to allow states to legalize sports gambling. One investor, Mark Cuban, said the decision was wonderful news for sports investors and the gaming industry.

“I think everyone who owns a top four professional sports team just basically saw the value of their team double,” the owner of the NBA’s Dallas Mavericks said in a “Squawk Alley” interview. “It can finally become fun to go to a baseball game again.”

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Carolina Panthers, David Tepper, NFL,

Cryptocurrency Funds Coming Back to Life

May 15, 2018 James Heinsman Hedge Fund News

In case you were wondering where all the noise over cryptocurrency retreated to, you need wonder no more. After garnering much excitement at the end of 2017, when the year long gain notched a mouth-watering 1700 percent growth, (yes that’s 17 with two zeroes), the first quarter of 2018 was a bit bumpier. Eurekahedge observed its Crypto-Currency Hedge Fund Index dropped 6.04 percent in January, 13.21 percent in February, and 34.11 percent in March. Not something to write home about.

April saw a change in direction for this sector worth singing about, with a climb in value for that month alone of 83.86 percent. Currently the price of one bitcoin hovers at about $8300, leaving analysts and observers to speculate on the probability of the digital coin to reach $10,000, where it hasn’t been since early March. However, compared to where bitcoin was on December 18, 2017 when it reached an all-time high of just under $20,000, getting to $10,000 does not seem like such a big deal.

Although bitcoin has been showing signs of better health in recent weeks, it could be other cryptocurrencies that are fueling the Eurekahedge index growth. The second largest cryptocurrency by market cap, ethereum, grew by 70 percent in April. But Bitcoin Cash more than doubled its value during that same time span.

It might be hard to get a real overview of how cryptocurrencies are behaving since at the moment there are a tiny number of funds dedicated to investing in them-just seven on Eurekahedge’s index. But if digital money continue to dominate from now on, there is a good chance investors will take more of an interest in their performance and value.

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Hedge Funds Beat S&P First Time in Decade

May 9, 2018 James Heinsman Hedge Fund News

For the past several years we have been watching hedge funds closing down and returning what’s left of their investors’ money. High fees and low yields have played fast and furious with the reputation of hedge funds, painting them as poor choices for savvy investors.

So it may come as a surprise to hear that in 2018 hedge funds are making a comeback, and doing better than they have in about ten years.

Hedge funds so far this year are outperforming the S&P 500 with about 0.4 percent returns. That is the first time since the 2008 financial crisis that the industry did better than the index.

The positive performance is attributed to a marketplace that has been highly volatile, a rise in energy prices and some other good bets by managers. Total return for the year for the $3.2 trillion investment sector was 0.39 percent, compared to S&P’s 0.38 for the first third of 2018.

“The industry continues the process of evolving transitional politics and economics creating long and short opportunities across a wide continuum of specialized exposures and industries, including Fixed Income/interest rate-sensitive equities, retail, M&A, technology and blockchain,” HFR President Kenneth J. Heinz said. “This powerful process is likely to continue to drive performance through mid-2018.”

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Its Time to Invest in Oil Development Says Hedge Fund Manager

April 30, 2018 James Heinsman In the News

Drilling platform “Iran Khazar” in use on a production platform in the Cheleken of Dragon Oil Field (Turkmenistan). Photo courtesy www.dragonoil.com

One of the most respected hedge fund managers in the oil sector, Pierre Andurand, said that today’s general avoidance of investing in new oil production could lead to oil prices going to $300/barrel within just a few years.

Andurand tweeted his viewpoint on Sunday. Known for his usually bullish approach to investing, he explained that people are reluctant to invest in projects with long lead times due to the emergence of electric cars, which many view as eventually lowering demand for oil.

“So paradoxically these peak demand fears might bring the largest supply shock ever,” he wrote. “If oil prices do not rise fast enough, $300 oil in a few years is not impossible.”

He also expressed his view, contrary to the accepted standard opinion, that such high oil prices will slow the growth of demand for oil.

“So no, $100 oil will not kill the economy,” he tweeted. “And we need +$100 oil to encourage enough investments outside of the U.S”

Andurand’s viewpoint is similar to that of the Saudi Oil Minister Khalid Al-Falih. A few weeks ago, Al-Falih hinted that prices could keep rising above today’s $75/barrel and not do much damage.

“We have seen prices significantly higher in the past, twice as much as where we are today,” Al-Falih said. And the global economy absorbed the high price, keeping up until it hit $150/barrel, and then crashed.

Andurand met with Al-Falih last July in London, along with other top commodity hedge fund managers to discuss the situation in the oil market. OPEC, the Organization of Petroleum Exporting Countries, and its partners announced that they plan to keep production down this year, which has helped to increase prices.

Andurand’s fund lost almost 10 percent of its value during the first two months of the year due to unstable energy prices but made money in March. Launched in 2013, Andurand Capital Management LLP has made money every year since its inception.

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electric cars, Khalid Al-Falih, OPEC, Pierre Andurand,

Sohn Conference Stars are the “Little Guys”

April 23, 2018 James Heinsman Hedge Fund News

Another year has passed since the last annual Sohn Investment Conference, the highly anticipated event in which managers big and small present their investment ideas for the coming year. Once again, the most successful investment ideas come from the more modest sources, while the higher profile investors’ ideas are not as profitable.

According to a Reuters analysis, Josh Resnick, the founder of Jericho Capital Asset Management of New York, had the best overall performance of all the 11 presenters at the 2017 Sohn Conference. Resnick recommended to attendees last year to short Frontier Communications Corp. His bet against the company earned him 61 percent payoff since May 8, 2017, the date he made his recommendation.

Coming in second place was Larry Robbins, manager of Glenview Capital Management. His recommendation was a bullish bet on DXC Technology Company, which earned 33 percent since last year’s announcement.

This year’s conference, the 23rd yearly, will be held on Monday, April 23rd at the David Geffen Hall at Lincoln Center. Among the presenters will be Glen Kacher of Light Street, Chamath Palihapitiya of Social Capital, and Li Ran of Half Sky Capital.

Investing superstar David Einhorn of Greenlight is one example of a big name whose prediction turned to little gain. His recommendation last year was to short Core Laboratories NV. Sadly, for Einhorn, and anyone who followed his advice, the company gained 7.3 percent since May 8, 2017 and now, resulting in a losing position for anyone shorting the stock, like Einhorn recommended. In Just the first quarter of 2018 Greenlight was down by 14 percent.

This year’s conference will feature a stock-picking game, the Ira Sohn Stock Game. For a $100 entry fee, participants receive one million tokens to build a fantasy investment portfolio. The player with the best performance during the coming year will be declared winner and will receive two free tickets to the 2019 Sohn Investment Conference. The $100 entry fee will be used to fund the Sohn Foundation’s mission, to treat and find a cure for pediatric cancer.

For more details about the contest, go to the Sohn Conference web site.

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David Einhorn, Ira Sohn Stock Game, Josh Resnick, Larry Robbins, Sohn Investment Conference,

Is Tesla the New Enron?

April 16, 2018 James Heinsman Company Spotlight

Photo of Elon Musk courtesy of
OnInnovation.

Some analysts are wondering if high-flying Tesla will end up being the huge disappointment Enron turned out to be: one of the biggest failures in Wall Street history.

Harris Kupperman of Praetorian Capital has been wondering out loud if Tesla is on its way to oblivion. Short-seller Jim Chanos said something similar about Tesla near the end of 2017. Kupperman has some graphic evidence to support his prediction, an overlay chart comparing Enron’s spectacular fall during the year after it hit its all-time share-price high of $90 on August 23, 2000, with Tesla’s stock’s behavior since its all-time high on September 18, 2017 of $385 per share and now.

A casual observer not looking carefully at the overlay graph might indeed think something spooky is going on, but a closer observation of the two graphs is not particularly convincing.

Here is what Elon Musk, Tesla’s fearless leader, Tweeted about what one worry-wort at the Economist stated, that Tesla will need to raise $2.5 billion to $3 billion this coming year.

“The Economist used to be boring, but smart with a wicked dry wit. Now it’s just boring (sigh). Tesla will be profitable & cash flow+ in Q3 & Q4, so obv no need to raise money,” was Musk’s response.

Kupperman was not persuaded by Musk’s assertion, however:

“He hasn’t hit on any target or deliverable with any sort of reliability for years now. Why should I believe him now?” he writes. “Remember in 2016 when he said they’d be profitable and didn’t need any more money? Or when they said that in 2017? He’ll probably be saying the same thing at the bankruptcy hearing.”

Musk supporters like Global Equities Research analyst Trip Chowdhry informed his clients a week ago that Tesla is a rock-solid investment:

“Betting against Elon Musk is not only insane but total stupidity — equivalent to committing a ‘career suicide.’”

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Denver Post in Open Rebellion Against Its Hedge Fund Owner

April 8, 2018 James Heinsman In the News

Pulitzer Prize winning Denver Post finally decided to take action to improve what was becoming an increasingly untenable position for the 125-year-old newspaper. Over the weekend the paper went to its own opinion page declaring “News Matters- Colorado should demand the newspaper it deserves.”

This move was a response to a problem that effects newspapers all over the country as people get their news online instead of in print, creating revenue losses that are hard to replace.

Midsize newspapers like the Denver Post find their situation especially difficult. The decision was made to go public with their particular issue to try and avoid going bankrupt or just becoming irrelevant.

The main editorial blasts executives at Alden Global Capital, the paper’s hedge fund owner as “vulture capitalists.”

The editorial continued: “We call for action. Denver deserves a newspaper owner who supports its newsroom. If Alden isn’t willing to do good journalism here, it should sell The Post to owners who will.”

The Post has a weekday circulation of about 170,000 in a city of about 700,000 residents. Their website gets about 8.6 million unique monthly visits. It has won nine Pulitzer Prizes one of which was in 2013 for their coverage of the mass shooting in a movie theater in Aurora, Colorado. Alden Global Capital took control of the paper in 2010 when it bought its parent company, MediaNews Group after it went bankrupt. Alden runs the paper through a subsidiary, Digital First Media.

Readers showed support for the Post’s plight.

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Alden Global Capital, Denver Post, MediaNews Group, Pulitzer Prize,

Longtime Hedge Fund Pennant Cap Management Closing

April 2, 2018 James Heinsman Hedge Fund News

Alan Fournier’s 17-year-old Pennant Capital Management, with a $1.5 billion AUM is closing shop. The fund has been struggling since the 2008 financial crisis.

“While I take great pride in our long-term returns, especially in light of our consistent low risk portfolio structure, our recent returns have been disappointing,” Fournier told investors. “I have been frustrated by our inability to match our historical results and deliver appropriate returns for our investors.”

David Tepper, Fournier’s mentor, backed the establishment of the firm in 2001 with $12 million seed money. The letter to investors announcing the fund’s closing stated that the fund earned 11.9 percent annually over the life of the fund, compared to 6.4 percent growth for the same time period for the S&P 500 Index. But since 2014 until now the fund has earned only 2.4 percent.

Pennant will be converted to a family office dedicated to managing Fournier’s own sizeable wealth.

The stock market has been a frustrating place for Fournier, 56, who is a long-short stock picker, a strategy increasing difficult to make work in the brave new world of quantitative and passive investing. Others have fallen before Pennant: John Griffin closed his $6 billion blue Ridge Capital just last year after more than 20 years of management. Passport Capital, launched in 2000, was also recently closed down by founder John Burbank, saying he was facing “unacceptable” losses.

Pennant had its best year in 2007, right before the financial crisis, when it earned a whopping 42 percent. The following year Pennant lost just a bit under 2 percent at the beginning of the crisis. The fund bounced back in 2009 with a 23 percent ascent. In 2014 AUM reached a high point of about $7 billion.

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Alan Fournier, David Tepper, Pennant Capital Management,

February a Bad Month for Quants

March 26, 2018 James Heinsman Hedge Fund News

This past February marked the worst performance month for quantitative hedge funds in 17 years. These hedge funds, which rely on following trends and computer-based analysis were fooled by the steady upward movement of stocks ending in a sudden downturn, one of the fastest market corrections in history.

Commodity trading advisors” (CTAs) or managed futures funds, which surf the momentum of markets, made big bets in January based on last year’s rally, which ended in the best monthly equity fund inflows of money since 1987.

But in early February the sustained growth stalled suddenly, side-swiping trend-followers. It was the worst time for these systematic hedge funds since November of 2001.

“Trend-followers are either long or short equities on any given day. Obviously, after a significant upward move, they were likely to be long and therefore vulnerable to a quick downward move,” said Sushil Wadhwani, the head of Wadhwani Asset Management.

The reversal was so large that most quantitative trend-following hedge funds are now posting minus growth for the year. Despite the bad results some observers do not believe investors will be dissuaded from bets on CTAs.

“We don’t think investors who truly understand the strategy are nervous. They may hold off a little before allocating more to the space this year, but I’d be surprised if sophisticated investors meaningfully reduce their CTA exposure as a result of February performance,” said Marlin Naidoo, global head of capital introductions at Deutsche Bank.

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Paulson Hedge Fund Circling the Wagons

March 18, 2018 James Heinsman Hedge Fund News

The vast empire of funds under management by John Paulson’s management firm is continuing to dwindle in size with layoffs and redemptions.

Paulson’s company, once one of the largest in the sector, announced it will be returning money to investors in some of the firm’s funds including the Credit Opportunities fund. People with money in that particular fund will be able to transfer their capital to a separate holding area, or else they will have to redeem their funds. Several employees were let go as the firm cuts expenses.

About ten years ago Paulson leaped into financial stardom with a successful bet against the US housing market. That was ten years ago, today Paulson is going through a crisis which has cut his firm’s aum from a top $38 billion in 2011 to just about $9 billion today. And most of that money is Paulson’s own.

With about 90% of the money in the firm Paulson’s the question is whether he will close his firm to outside investors entirely. There are no plans underway at the moment to turn the firm into a family office, but the firm is switching its focus on to distressed debt and merger arbitrage strategies.

The loss of capital means there is less money to pay employees, and thus the flurry of lay-offs. In 2016 there were 128 employees, but today there are only 95.

“We are rightsizing the firm to focus on our core expertise in areas that are growing,” said a statement from Paulson’s office about the layoffs.

The headquarters is also being moved to the offices of Steinway Musical Instruments. Paulson bought the piano manufacturer in 2013.

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John Paulson, layoffs, Steinway,

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