Daily Alpha: Buffett’s Billions, Failed Event-Driven Strategies, Peruvian Petro, and Daily “Fantasy”

Daily Alpha: Buffett’s Billions, Failed Event-Driven Strategies, Peruvian Petro, and Daily “Fantasy”

Garrett Baldwin

Alternative Thinking on Buffett's Billions, Failed Event-Driven Strategies, Peruvian Petroleum, and FanDuel's "Gambling" Fantasy.

“The value of Berkshire's holdings increased 19% to $127 billion, as many of those shares declined. Overall the S&P 500 lost about 7% of its value during the quarter.”

CNN Money announces a few changes to Warren Buffett’s Berkshire Hathaway (BRK.A) holdings on a day that analysts began parsing through 13Fs. Buffett wasn’t the only big name announcing some big stakes in some big companies.

  • Warren Buffett boosted his position in the telecom giant. Buffett announced in a 13F he also increased his stake in General Motors Co. (GM), while he slashed his stakes in Goldman Sachs Group Inc.(GS) and Wal-Mart Stores Inc. (WMT). Buffett also increased his stake in International Business Machines Corp. (IBM), which saw shares jump 1.5% today.
  • Carl Icahn announced a 3.8% stake in PayPal (PYPL), valued at $1.4 billion. He’s also built an 8.7% stake in Freeport-McMoRan (FCX) and a 0.1% stake in American International Group (AIG), where he’s been pushing a breakup for more than a month.
  • John Paulson massively increased his stake in Teva Pharmaceutical Industries (TEVA). As of Sept. 30, he owns 18 million shares valued at $1.02 billion.
  • David Einhorn bought more Apple Inc. (AAPL) and General Motors Co. (GM). He sold solar giant SunEdison (SUNE), which fueled a large decline in its stock on Monday. However, Reuters points out that more hedge funds were reducing their holdings of Apple. In fact, the numbers are quite alarming.
  • Forbes reports that David Tepper is completely out of Alibaba Holding Group. (BABA).

The biggest news out of Buffett’s announcement is that he has exited some of his post-financial crisis stake in Goldman Sachs Group (GS). Buffett sold 13% of a stake of his preferred stock that historically looks like one of the best deals in the history of the market. When credit markets were falling apart in 2008, he purchased $5 billion in preferred Goldman stock with an annual dividend of 10%. As Bloomberg notes, Buffett also received warrants he would later execute in order to receive more than $2 billion of Goldman stock in a cashless transaction.

No wonder he doesn’t mind paying a higher tax rate.

Buffett’s largest holdings are now Wells Fargo & Co (WFC) at $24.1 billion and junk-food giant Kraft Heinz Co (KHC) at $23 billion.

As we note in our upcoming 2015 awards issue, available to Modern Trader subscribers later this month and on newsstands in mid-December, Buffett’s Kraft Heinz merger earlier this year was easily the deal of the year on Wall Street.

But not for the reason you’d expect. More on that in the coming weeks.

"The worst disappointment relative to our expectation at the start of the year and throughout the year would have been event.”

Robert Christian, research head of Franklin Resources Inc.’s K2 Advisors, drops an elbow on Event-Driven Hedge Funds. It shouldn’t be any surprise given the fact that very few major trends in the markets this year aside from the large downturn in emerging market currencies.

Hedge Fund Research notes that the average event-driven strategy is off 1.4% on the year.

Bloomberg breaks down the impact of low volatility, the Fed’s inaction in interest rates, and the other Indices that hedge fund managers should be keeping an eye on this year.

“Such channels can also become a source of systemic risk, especially when they are structured to perform bank-like functions and when their interconnectedness with the regular banking system is strong.”

Alternative quote: Why we drink…

Finalternatives notes that the global value of assets in so-called shadow banking increased by $1.6 trillion to $80 trillion last year, according to the Financial Stability Board (FSB).

No, it’s fine. It’ll all be fine.

The report, released by the FSB – headed by the Bank of England’s Mark Carney – is right here.

“We are looking to adjust conditions to be more attractive in this business.”

In September, we touched on the impact of low oil prices on South American exporters. Colombia was boosting a number of tax incentives in order to attract global capital.

Add Peru to that list. Over the weekend, the nation’s state oil regulator Perupetro announced plans to slash government royalties from 20% to an average of 5%.

That a 75% cut as low oil prices threaten ongoing development.

By no means is Peru a large oil producer: It pumps out about 58,000 barrels per day.

But it’s clear that tax incentives will be the weapon of choice to boost production.

Here’s Peru Reports on the decision.

“Daily fantasy sports combine everything dudes love. Sports, money, and a lack of commitment.”

Finally, you know you’ve done something wrong if HBO’s John Oliver dedicates 20 minutes of his television show to recap the nepotistic relationship between sports media channels and one-day fantasy sites.

As Oliver explains, there’s pretty much no media company left that doesn’t have a conflict of interest in reporting on the ongoing scandal with these one-day sites. How often were DraftKings and FanDeul advertising on television during the launch of this year’s NFL season?

Every 90 seconds.

In fact, because HBO is a subsidiary of Time Warner, which has an advertising interest in FanDuel… His own takedown of the sites are technically sponsored by FanDuel.

We’ve been hard at work at getting the January issue of Modern Trader up, which has cut back the time needed to get the Daily Alpha to a regular publishing schedule for in November.

But watch Oliver’s full recap on what has been happening in recent weeks, and be ready to laugh at the nonsense that the companies continue to say in defense of the argument that they are “not a gambling” product.

In fact, DraftKings is now facing a wealth of legal challenges – and as a result – they are trying to delay payments for some of their advertising, as MarketWatch explains. Be sure to read the breakdown of investors in the interactive charts.

Alarm bells are ringing…

Meanwhile, be sure to check back tomorrow.

We’ll be back on a regular daily schedule and ramping up to ensure the Daily Alpha becomes a part of your morning routine in 2016 and beyond.


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