Page 1
Quarterly Publication of Vantage Investment Research
Subscribe at GuruInvestorEdge.com
“Uncover High Quality Ideas From Super Investors.”
Copyright Warning: It is a violation to reproduce part or all of this publication for any purpose without written consent from InvestorVantage
Email [email protected] to request consent. © 2014-2015 by InvestorVantage. All rights reserved. InvestorVantage.com/termsofuse
GURU INVESTOR EDGE
REPORT
(Q3 2015)
→ What Are The Gurus Selling?
→ What Are The Gurus Buying?
→ Guru Conviction Positions
→ Value Revealed: Cheniere Energy
Exclusive New Content
In the GIE Members Area (log in at www.GuruInvestorEdge.com)
or email [email protected] )
Quote of the Quarter “Unfortunately, a good process does not prevent mistakes, nor does it guarantee good outcomes, espe-
cially on a short-term basis. Because we look for investments that have a healthy margin for error, a
misjudgment of analysis is rarely a disaster. We don’t need much to go right in order to make money,
and in many cases we can get a lot wrong and still break even…”
David Einhorn (Greenlight Capital)
Page 2
Idea Generation From Today’s Top Investors
Are These Stocks Fully Valued? During Q3 2015, Guru Investors trimmed big positions in Cheniere Energy, Micron, and Bank
of America Six Gurus reduced or eliminated positions in Allergan. Another four reduced posi-
tions in Priceline Group, MasterCard, and Wells Fargo.
As the stock market limped into the
new year, we saw Guru Investors
parring back position on a number
of their investments in anticipation
of such a move. We saw Guru Inves-
tors trimming numerous positions
in the Energy, Technology, and
Banking space. This is likely due to
these businesses approaching fair
value.
Richard Perry (Perry Capital)
sold his entire position in shares of
Cheniere Energy (LNG). Cheniere
is the owner and operator of the
Sabine. Carl Ichan just made
Cheniere a ~8% position in his
portfolio. In the 13D filing says they
will seek discussions on,
“operations, capital expenditures,
financings, and executive compen-
sation.” Shares are trading at $54
per share, near 52-week lows of
$53.71. Investors continue to pur-
chase shares in the business as they
see the exporting of LNG to be a ma-
jor growth industry over the coming
years.
This is another battleground stock
right now. Jim Chanos recently an-
nounced a big short position in the
name saying, “We've been pretty
negative for the past six months on
this LNG space. We think it's a loom-
ing disaster...It's a little bit tied into
Asia," Chanos said of his latest
short. "LNG was seen as a savior of a
lot of natural gas plays, a way to ba-
sically satiate the incredible de-
mand for energy out of Asia. The
problem is ... everybody figured it
out ... at the same time…with the
stock at 30 times 2020 earnings,
with the upside coming from a glut-
ted market, we think the risk-
reward in this, given where other
LNG plays are in Australia and else-
where, is just completely out-of-
whack.”
Richard Perry was active last
quarter as he eliminated his posi-
tion in Office Depot (ODP) as well.
He appeared to have gotten out just
in time as the merger between Of-
fice Depot and Staples was rejected
by regulatory authorities saying
that such a merger would not re-
duce competition in their respective
industry. Office Depot received a
bump in share price after the an-
nouncement, but shares have stead-
ily declined since the announce-
ment as the market expected the
rejection from the regulatory au-
thorities.
David Einhorn significantly
parred back his position in Micron
(MU) saying, it “was our biggest
winner in 2014. Unfortunately, we
overstayed our welcome and gave
back much of those gains this year.
The shares peaked at over $36 last
December before collapsing to
$14.98 on Sept. 30. Our thesis has
been that Micron Technology’s pri-
mary product, DRAM, has consoli-
dated to three players, who are like-
ly to create more industry profits
compared to when DRAM produc-
tion was highly fragmented…The
problem is that structural industry
improvement doesn’t make DRAM
less cyclical. The large capital re-
quirements force participants to
make large investments in anticipa-
tion of future demand. If the indus-
try overestimates demand, it still
makes sense to operate at full ca-
pacity and oversupply ensues. This
year, demand came up short, DRAM
prices collapsed, and despite our
concerns about PC demand, we
missed the turn of the cycle. “
The largest collection of Guru in-
vestor selling came from Allergan
(AGN) and Alphabet (GOOG). At
the moment, the selling in Allergan
appears to be relatively ill-timed as
shares traded well above the aver-
age of $295.80 during the quarter.
AIG’s appear ill-timed at the mo-
ment as shares are currently trad-
ing well above the avg price in Q3.
For the second straight quarter, 4
Guru Investors collectively sold or
eliminated shares in Priceline
(PCLN). Despite the selling, David
Rolfe has this to say about the com-
pany, “We continue to think Price-
line is doing an excellent job getting
returns on shareholder funds, rein-
vesting in travel service demand...
While Priceline’s business model
revolves around connecting travel
industry asset owners (e.g. hotels,
rental cars, restaurants) with travel-
ers, we think the Company’s com-
petitive advantage comes from be-
ing a highly-efficient, and therefore
low -cost provider focused on serv-
ing smaller, more fragmented asset
owners that lack the scale and mar-
keting reach of Priceline’s global,
online properties.”
© 2014-2016 by Vantage Investment Research. All right reserved. JOIN TODAY! GuruInvestorEdge.com Q3 2015 — Page 2 of 7
Page 3
The biggest individual NEW posi-
tions included the popular
Mondelez Int’l (Pershing Square)
and Alcoa Inc. (Baupost Group).
Mondelez (MDLZ) is the spin-off
from Kraft Foods in 2012. The bulk
of their revenue is derived from
snacks, such as Oreos, Ritz cracker,
and Trident gum. Bill Ackman’s Per-
shing Square recently established
a large position in the company,
making it the fourth largest position
in the portfolio. In the 2015 letter to
shareholder he said, “...while we
believed Mondelez was trading at a
significant discount to intrinsic val-
ue, we reduced our stake in
Mondelez through the sale of for-
ward contracts representing 15 mil-
lion shares at an average price of
~$44 per share, reducing our total
ownership in stock and derivatives
to ~105 million shares. We contin-
ue to be highly optimistic about the
potential for Mondelez as it im-
proves its operational efficiency and
continues to grow while remaining
an attractive merger candidate, and
therefore, we expect to remain a
substantial, long-term holder. While
we are long-term investors, we al-
ways seek to optimize the risk/
return profile of the portfolio by
changing the weightings of existing
holdings and comparing portfolio
holdings with new investment op-
portunities, making adjustments
and wholesale changes when appro-
priate.”
Union Pacific (UNP) is big new
position with Whitney Tilson estab-
lishing a large position, making it
the railroad company his ninth larg-
est position. Shares are trading at
~$78.00 per share, near 52-week
lows. Tilson had this to say about
the company, The multiple for apple
has contracted (likely to continue)
because of the drop in coal and
shale shipments. However, many of
the Guru Investors see this stock as
incredibly cheap at current levels.
Shares trade at relatively low valua-
tion multiples with forward P/E of
11.76, P/FCF of 19.63, and a EV/
EBIT of 8.38. Continued share re-
purchases and increased dividends
should help bolster this underval-
ued stock and close the gap be-
tween price and intrinsic value over
time.
The cable network industry con-
tinues to be a favorite sector among
Guru Investors and Time Warner
(TWC) seems to be the ‘go-to” in
the sector lately. MS Global Fran-
chise Fund had this to say about the
company, Time Warner “is one of
the largest U.S. cable network busi-
nesses and parent company of
Warner Brothers film and TV studi-
os. Time Warner networks include
CNN, HBO and Turner Networks.
Return on operating capital at the
cable networks is currently over
50% and closer to 15% at the film
studios. We believe Time Warner is
one of the best run cable network
businesses in North America as it
offers almost pure exposure to high
return businesses where other net-
works companies often do not. The
company is the leader in original
scripted content in North America
and also has a leading film fran-
chise. It has an extensive film li-
brary and is able to monetize its
content not just in the U.S., but glob-
ally. The stock is trading on a free
cash flow yield of about 7%, with
free cash flow expected to grow
over 6% per year for several years
to come.”
We saw a flurry of Guru Investors
buying shares in Microsoft (MSFT)
with 6 Gurus increasing or estab-
lishing new positions in the compa-
ny. They reported strong earnings
on the back of its cloud strategy and
game console sales. The new man-
agement team appears to be execut-
ing well and continues to spend
money and resources developing an
integrated operating system for lap-
tops, tablets, phones, etc. that
should help to slow down the attri-
tion and grow the business.
Amazon (AMZN) was another
stock that saw increased buying,
with 4 Gurus increasing or estab-
lishing new positions in the compa-
ny. Wally Weitz (Weitz Funds) had
this to say about the company. “The
company has a long runway of
growth ahead; Amazon’s strong,
customer- obsessed culture is
unique among technology and retail
firms, and its long-term investment
philosophy allows for a continuous
flow of new product ideas. In addi-
tion to the retail business, the com-
pany’s Amazon Web Service busi-
ness has built significant share and
scale within the infrastructure as a
service sector of technology. This
business is highly profitable and
participates in a large and growing
market.”
Notable buys near or approaching
52-week lows include AA, GM, LNG,
UNP, and CNQ.
Where’s The Value? Guru Investors added significant NEW positions in Mondelez, Alcoa, and Union Pacific. Eight
Gurus added to their position in Allergan. Six added to their position in Microsoft. And another
five added to their positions in Alphabet, Cheniere Energy, and Time Warner Cable.
Idea Generation From Today’s Top Investors
© 2014-2016 by Vantage Investment Research. All right reserved. JOIN TODAY! GuruInvestorEdge.com Q3 2015 — Page 3 of 7
Page 4
Conviction Positions
Berkshire Hathaway (Warren
Buffett) was given shares in Kraft
Heinz Co (KHC) after the newly
combined company began trading
in July 2015. Currently Kraft Heinz
is Berkshire’s second largest posi-
tion behind Wells Fargo. Buffett has
this to say about the company, “we
will be in the stock forever...it’s a
permanent holding, on our part…
the one thing I can promise you, is
that you will not see Berkshire re-
duce its interest.” Also, David Rolfe
had this to say about the company,
“We expect to see rapid profitability
growth over the next few years as
3G Capital instills its highly disci-
plined culture of minimizing cost
and expanding margins at the under
-earning Kraft Foods Corp (along
with further optimization at Heinz).
Once KHC margins have been max-
imized, we expect KHC to plow that
capital back into more M&A and re-
peat this process with other brand-
ed staples that exhibit bloated cost
structures. We expect this excep-
tional compounding of profits will
drive exceptional performance at
KHC for several years.”
David Einhorn (Greenlight Capi-
tal) increased his position in Ap-
ple (AAPL) by 52.08%. We’ve cov-
ered Einhorn’s position in Apple
before, and the large recent share
purchase tells us all we need to
know about his conviction for the
long-term sustainability of the com-
pany. Apple is by far the largest po-
sition in his portfolio at 20.53%.
Shares trade near 52-week lows and
the company has a fortress-like bal-
ance sheet with net cash.
Microsoft (MSFT) continues to
be a favorite among Guru Investors
with 7 owning the company at more
than 5% of their equity portfolio.
They reported strong earnings on
the back of its cloud strategy and
game console sales. The new man-
agement team appears to be execut-
ing well and continues to spend
money and resources developing an
integrated operating system for lap-
tops, tablets, phones, etc. that
should help to slow down the attri-
tion and grow the business.
Another favorite investment of
Guru Investors is Allergan (AGN).
Although the recent M&A spree in
the bio-tech space may be waning,
investors continue to like the long-
term potential for Allergan. Actavis
purchased Allergan and changed it’s
name to Allergan. They continued
their buying spree with a $2.1 bil-
lion buyout of Kythera. This buyout
will help bolster Allergan’s com-
pounded growth goals of 10% for
its branded drug business. The com-
pany continues to build its generic
business as well by purchasing U.K.
drug makers Auden KcKenzie for
over 300 million Euro in cash, plus
royalties. Revenues and free cash
flow have grown steadily over the
past five years at around 22.30%
and 24.10% per year respectively.
Traditional valuation metrics will
be a little “off” because of the M&A
activity, however, shares are trad-
ing at a forward P/E of 14.66 and a
P/FCF of 29.66.
Valeant Pharma (VRX) made the
list with five Guru Investors holding
a 5% or more position in their equi-
ty portfolio. There’s been a signifi-
cant amount of controversy sur-
rounding the company of late. Nu-
merous prominent shareholders
have paid dearly for holding shares
in the company as shares have
dropped from $260 to a low of $70
in mid November. Bill Ackman
(Pershing Square) stated in his lat-
est quarterly report, “When the
stock price rose this summer to the
mid-$200s per share, we did not sell
as we believed it was probable the
company would likely complete ad-
ditional transactions that would
meaningfully increase intrinsic val-
ue. In retrospect, this was a very
costly mistake. Our failure to sell
stock wasn’t entirely an unforced
error as we found ourselves largely
restricted from trading during this
period. During the summer, we
were made aware of a large poten-
tial transaction that Valeant was
working on, and as a result, we
were restricted from trading at a
time when it would have been pru-
dent to take some money off the
table. In retrospect, in light of Vale-
ant’s leverage and the regulatory
and political sensitivity of its under-
lying business, we should have
avoided becoming restricted to pre-
serve trading flexibility, or alterna-
tively, we should have made a
smaller initial investment in the
company.”
Baxter International (BAX)
popped up on our radar recently
when Dan Loeb increased his posi-
tion in Baxter by over 1,263.29%,
making it the largest position in his
equity portfolio. Shares appear to
be reasonably valued at current lev-
els and you’re paid to wait with a
dividend of 3.42%
Highest Conviction Investments? Guru Investors added significantly to their positions in Reynolds American, Apple, and Kraft
Heinz. Nine Guru Investors now hold Allergan at more than 5% of their portfolio. And another
seven hold 5% or more in their portfolio in Alphabet and Microsoft.
Idea Generation From Today’s Top Investors
© 2014-2016 by Vantage Investment Research. All right reserved. JOIN TODAY! GuruInvestorEdge.com Q3 2015 — Page 4 of 7
Page 5
Value Revealed: Cheniere Energy (LNG)
Cheniere Energy (LNG) is the owner/operator of the
Sabine Pass LNG terminal in Louisiana, a natural gas
liquefaction and export facility four miles from the Gulf
Coast. The company hopes to benefit from increased
global demand for LNG with demand forecasted to from
at a 5.7% CAGR by 2025. The company has already se-
cured federal permits for U.S. natural gas to be exported
overseas. They have signed deals to purchase gas for
over 20 years. But the company’s looming debt load
and additional capital expenditures has become a con-
cern for many investors as shares have dropped 32% in
the past year alone.
On August 6, 2015, Icahn disclosed an 8.18% “active”
stake in stock and options with his filing of a 13D. Icahn
used fairly standard language in the 13D filings, stating
“acquired their positions in the Shares in the belief that
the Shares were undervalued. The Reporting Persons
intend to have discussions with representatives of the
Issuer's management and board of directors relating to
the Issuer's operations, capital expenditures, financings
and executive compensation. The Reporting Persons
may also seek shareholder board representation if ap-
propriate.”
Management and their compensation over the past
Cheniere Energy
(NYSE:LNG)
Description: Engaged in LNG-related
businesses. Owner/operator of the
Sabine Pass LNG terminal in Louisiana.
Price $29.33
52-Week Range $26.77—82.32
Dividend Yield N/A
Enterprise Value 23.92 B
Notable Shareholders:
Carl Icahn
Farmstead Capital
Seth Klarman
Yost Capital
Claren Road
Finepoint Capital
INVESTMENT SUMMARY
It’s a very tempting and appealing story given the supply of natu-
ral gas in the U.S. and the potential long wave of growth for a com-
pany with first-mover and geographic advantages. It tip-toes the
line between investing and speculating — make sure it’s a small
percentage of your portfolio if you do invest.
INVESTMENT SPOTLIGHT: Cheniere Energy (LNG)
© 2014-2016 by Vantage Investment Research. All right reserved. JOIN TODAY! GuruInvestorEdge.com Q3 2015 — Page 5 of 7
Page 6
Value Revealed: Cheniere Energy (LNG)
few years were certainly significant concerns. Despite
never reporting net income or free cash, Cheniere’s
CEO, Charif Souki, was awarded a pay package of ~142
million in 2013. Currently, he receives no salary.
On August 24, 2015, two of Icahn Capital’s managing
directors, Jonathan Christodoro and Samuel Merksa-
mer, were appointed to the board. On September 9th,
famous short-seller Jim Chanos announced his short
position on Cheniere saying, “We've been pretty nega-
tive for the past six months on this LNG space. We think
it's a looming disaster." He goes on to say “…with the
stock at 30 times 2020 earnings, with the upside com-
ing from a glutted market, we think the risk-reward in
this, given where other LNG plays are in Australia and
elsewhere, is just completely out-of-whack."
Recently, Icahn increased his position to 12.07%. Re-
nowned value investor, Seth Klarman, also holds a large
position in Cheniere worth more than $1.5 billion. In a
recent interview on CNBC, Icahn said the contracts that
Cheniere has in place are “golden.” Even with in a de-
pressed natural gas environment, the company should
do well as the company has contracts in place with utili-
ties across the globe that need access to cheap natural
gas to keep the lights running.
BOTTOM LINE
Using traditional valuation metrics, the company is
grossly overvalued (near impossible to value). Let’s
make no mistake about it…this is a speculative play as
the company is riddled in debt and has never generated
net income, let alone free cash flow. But alas, the future
of the company does not benefit from the economics or
misdeeds of the past.
Regardless, this is a speculative bet on the future of
the U.S. as an exporter of natural gas. It’s a very tempt-
ing and appealing story given the supply of natural gas
in the U.S. and the potential long wave of growth for a
company with first-mover and geographic advantages.
Regardless, it’s difficult to justify investment (even with
activists and great investors circling the company).
Now, with that said, it’s ok to speculate in potential
game changers like Cheniere, just make sure it’s a small
percentage of your portfolio.
Notable Shareholders:
Carl Icahn | Seth Klarman | Claren Road | Farmstead
Capital | Yost Capital | Finepoint Capital
Source of figures and quotes: 13D Filing (SEC), Investor
Presentation
© 2014-2016 by Vantage Investment Research. All right reserved. JOIN TODAY! GuruInvestorEdge.com Q3 2015 — Page 6 of 7
Page 7
About Guru Investor Edge
Subscription Rates are $99 for 1 year, $149 for 2 years, $199 for 3 years ● Order online at GuruInvestorEdge.com or call 202-631-9460 to order
by phone ● Customers may cancel at anytime within 30 days for refunds and guarantee ● Guru Investor Edge is published by VantageInves-
tor.com (parent company: Elite Investing Blueprint, LLC) ● This entire newsletter is Copyright 2015 by Guru Investor Edge All Right Reserved. ●
Members of the press should contact Lukas at the above number or at [email protected] . Information contained herein was
derived from sources believed to be reliable. However, no guarantees can be made concerning the completeness or accuracy of said infor-
mation. Nothing herein should be construed as an offer or the solicitation of an offer to buy or sell any security. The Editor and affiliates of the
Editor may have positions in and may from time-to-time buy or sell any security mentioned herein. Past performance is not necessary indica-
tive of future performance.
Publication Information and Terms of Use Guru Investor Edge is published at GuruInvestorEdge.com (the “Site”) by InvestorVantage.com. Use of this newsletter and its content is gov-
erned by the Site Terms of Use described in detail at www.EndlessRiseInvestor.com/termsofuse. For your convenience, a summary of certain
key policies, disclosure and disclaimers is reproduced below. This summary is meant in no way to limit or otherwise circumscribe the full scope
and effect of the complete Terms of Use. We’re not investment advisors and we cannot provide personalized advice. We can’t know all the
relevant facts about your personally as well as your individual needs. And we can’t claim or represent that any of our Services are suitable for
you. You should seek out a registered investment advisor if you want personal advice. Some of our affiliates may provide individualized invest-
ment advice and investment products. They may even recommend or hold securities mentioned in our publications. We have no nonpublic
knowledge of any of our affiliate, advertiser or partner holdings and/or specific recommendations. Additionally, affiliate and partner personal
have no knowledge of any editorial content before it is published.
Although we believe we are the hardest working, most talented analysts and investing in the business (don’t we all), however we can’t make
guarantees for completeness or accuracy of the Content found in our Services or its usefulness for any specific purpose. Unfortunately, there
are no promises that our content or any Service will be delivered to you on an uninterrupted, timely, secure or error-free basis. Things do hap-
pen sometimes in life. And the only thing we can promise you is we’ll do our best to provide interesting, helpful and valuable information,
education and entertainment. So essentially we reserve the right to make mistakes, be wrong or even stupid sometimes (Yes, we are human).
Basically, it means that you agree that under no circumstances will Elite Investing Blueprint, it’s owners, its employees or its agents be liable for
direct, indirect, incidental or any other type of damages resulting from you use or downloading of any material on our sites, even if we have
been advised of the possibility of such damages. Additionally, this includes, but is in no way limited to, loss or injury caused in whole or in part
by our negligence or by things beyond our control in creating or delivering any of our Services.
At Guru Investor Edge we believe whole-heartedly that the best person to handle and make decisions about your finances is you. Through the
use of our Services, you’re agreeing that you bear complete responsibility for your own investment research and investment decisions. You
also agree that Guru Investor Edge , its owners, director, its employees, and its agents will not be liable for any investment decision made or
action taken by you and others based on news, information, opinion, or any other material published through our Services. We ourselves rely
on various sources of information and data that we believe to be accurate and reliable. We can’t and won’t take responsibility for, or make any
claims or representations about, the accuracy, completeness, or even the truth of every bit of data, information, and opinion provided through
our Services. The percentage of holdings of each portfolio is subject to change at anytime, and is likely not the exact percentage of overall
portfolio because it does not include private and other investments.
Remember: All information and content provided on or by Guru Investor Edge is to be used on an “as-is” basis. We are humans, we have faults
and we’re not perfect. This newsletter is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an
offer or solicitation would be illegal. This newsletter is distributed for informational and educational purposes only and should not be con-
strued as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There
are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth in this newsletter.
Endless Rise Investor will not be liable to your or anyone else for any loss or injury resulting directly or indirectly from the use of the infor-
mation contained in this newsletter, caused in whole or in part by its negligence in compiling, interpreting, reporting or delivering the content
in this newsletter.
Guru Investor Edge receives compensation in connection with the publication of this newsletter only in the form of subscription fees charged to
subscribers and reproduction or re-dissemination fees charged to subscribers or others interested in the newsletter content.
© 2014-2016 by Vantage Investment Research. All right reserved. JOIN TODAY! GuruInvestorEdge.com Q3 2015 — Page 7 of 7