WSJ : Ancient DNA Tells a New Human Story

Ancient DNA Tells a New Human Story
Armed with old bones and new DNA sequencing technology, scientists are getting a much better understanding of the prehistory of the human species, writes Matt Ridley

Imagine what it must have been like to look through the first telescopes or the first microscopes, or to see the bottom of the sea as clearly as if the water were gin. This is how students of human prehistory are starting to feel, thanks to a new ability to study ancient DNA extracted from bodies and bones in archaeological sites.

Low-cost, high-throughput DNA sequencing—a technique in which millions of DNA base-pairs are automatically read in parallel—appeared on the scene less than a decade ago. It has already transformed our ability to see just how the genes of human beings, their domestic animals and their diseases have changed over thousands or tens of thousands of years.

The result is a crop of new insights into precisely what happened to our ancestors: when and where they migrated, how much they intermarried with those they met along the way and how their natures changed as a result of evolutionary pressures. DNA from living people has already shed some light on these questions. Ancient DNA has now dramatically deepened—and sometimes contradicted—those answers, providing a much more dynamic view of the past.

It turns out that, in the prehistory of our species, almost all of us were invaders and usurpers and miscegenators. This scientific revelation is interesting in its own right, but it may have the added benefit of encouraging people today to worry a bit less about cultural change, racial mixing and immigration.

Consider two startling examples of how ancient DNA has solved long-standing scientific enigmas. Tuberculosis in the Americas today is derived from a genetic strain of the disease brought by European settlers. That is no great surprise. But there’s a twist: 1,000-year-old mummies found in Peru show symptoms of TB as well. How can this be—500 years before any Europeans set foot in the Americas?

The study of ancient DNA has challenged this view. We now know that mass migrations occurred repeatedly, overwhelming natives while absorbing some of their genes. In a study published in 2009 in the journal Science, analysis of ancient DNA by Joachim Burger and Barbara Bramanti of Johannes Gutenberg University in Mainz, Germany, and Mark Thomas at University College London, showed that the first farmers of central Europe could not have been descended solely from their hunter-gatherer forerunners.

In response to such research and to their own findings, Joseph Pickrell of Columbia University and David Reich of Harvard University argue that “major upheavals” of human population have been “overwriting” the genetic history of the past 50,000 years. The result, they say, is that “present-day inhabitants of many places in the world are rarely related in a simple manner to the more ancient peoples of the same region.” In short, we are none of us natives or purebred.

Perhaps the most striking example of this is a discovery announced by Dr. Reich’s team in a paper recently published in Nature: Just 4,500 years ago, long after the arrival of farming in Europe from the near East—a transition that had largely displaced the genes of the indigenous hunter-gatherers—another “massive migration into the heartland of Europe from its eastern periphery” occurred. People from the steppes northeast of the Black Sea swamped the European genome with their DNA, and that relatively new pool of DNA is still ubiquitous among Europeans today.

This tips the balance in another long-running argument among anthropologists about the origin of the “Indo-European” languages. From Irish to Sanskrit, there are close similarities of vocabulary among most of the languages of Europe and those spoken in parts of Central Asia, Iran and India—connections not shared by languages like Basque, Turkish, Arabic, Hungarian and Finnish.

Two main rival theories have been offered to explain this pattern. The first holds that proto-Indo-European was spoken by the first farmers who left the fertile crescent of Syria, Turkey and Iraq for adjacent regions. The second view is that the foundational language was spoken not by these early farmers but, as certain shared words seem to suggest, by horse-riding sheep and cattle herders who spilled out of the Ukrainian steppe a few thousand years later.

The recent research of Dr. Reich and his colleagues supports this latter hypothesis: Indo-European languages probably originated in the steppes just two millennia before the Christian era.

The discovery of the massive migration from the steppes 4,500 years ago was made possible by the analysis of DNA from 69 different individual bodies from between 8,000 and 3,000 years ago and the comparison of nearly 400,000 different sections on their genomes. This sort of massive analysis would have been impossible just a decade ago, but since the advent of low-cost, high-throughput DNA sequencing, as well as advances in statistical analysis, it is now almost routine.

Before these technical innovations, reading DNA required the laborious amplification of short segments, one at a time. By 2008, companies such as 454 Life Sciences in Branford, Conn., and the San Diego-based Illumina began marketing machines that could read millions of DNA samples in parallel. In the past, researchers wanting to study ancient or modern DNA had to sip from raindrops; now they can drink from fire hoses.

For now, such work can only be done in a few laboratories—not just because the sequencing requires big machines but also because the procedures needed to avoid contamination of ancient samples by modern DNA are elaborate and expensive, to say nothing of the skills required to analyze the massive amounts of data produced. As a result, says Greger Larson, head of a new ancient-DNA research group at Oxford University, scientists are conducting this work not at many different laboratories but in huge teams gathered around the leading experts in the field, such as David Reich at Harvard Medical School, Eske Willerslev of the University of Copenhagen or Svante Pääbo of the Max Planck Institute for Evolutionary Anthropology in Leipzig.

Dr. Pääbo is best known for his achievement in sequencing the Neanderthal genome in 2009 and for his discovery that a small amount (up to 4%) of Neanderthal DNA is found in modern Europeans and other non-Africans. This suggests that when African emigrants overwhelmed the Neanderthal populations of Europe and western Asia some 40,000 to 30,000 years ago, they interbred with them to some small extent—thus anticipating the scenarios of admixture described by studies of later waves of migration.

In 2010, Dr. Pääbo and his colleagues startled the world again by discovering (from the DNA in a 50,000-year-old finger bone found in a cave at Denisova in the mountains of western Siberia) that a hitherto unsuspected third type of early human lived in Asia at this time. These “Denisovans” are as distantly related to the Neanderthals as they are to us “Africans.” A small amount (up to 6%) of their DNA survives in the genomes of Melanesians and Australian aborigines, which suggests that somewhere on their way east from Africa, probably in southeast Asia, modern humans mated occasionally with Denisovans.

Now comes evidence that Tibetans also have a Denisovan connection. In the thin air of the Tibetan plateau, the local people can survive only because of specially evolved versions of a gene called EPAS1. In a study published last summer in Nature, Emilia Huerta-Sánchez and Rasmus Nielsen of the University of California, Berkeley, and their colleagues found this version of the DNA sequence around EPAS1 in the ancient genetic material of the Denisovans. Mating with Denisovans seems to have enabled people to survive at high elevations in Tibet.

Ancient DNA is telling us, in short, not only who mated with whom and when but which genes were then promoted by natural selection in the resulting offspring to improve their chances of survival. As Dr. Thomas of University College London points out, changes in the frequency of particular DNA sequences are the stuff of evolution itself. Directly measuring how DNA changed over time, by comparing samples from different periods of human history, allows us to see evolution not in the survival rates of organisms (that is, through a middleman of sorts) but in genetic material itself.

Consider, for example, the invention of farming in Europe about 8,500 years ago, a shift that caused rapid evolutionary change in the genes of Europeans as they adapted to new diets, new pathogens and new social structures. Some of this can be inferred from the study of modern DNA, but ancient DNA can catch it in the act.

A forthcoming paper by Dr. Reich’s group looks at 83 individuals from the period before, during and after the arrival of agriculture. The study analyzes 300,000 different sections of their genomes and pinpoints just five genes that changed rapidly.

The strongest signal came from the mutation for lactase persistence—that is, the ability to continue digesting the milk sugar lactose after infancy. Normally, mammals don’t need to digest lactose as adults, and the necessary lactase gene switches off when a baby is weaned from its mother.

This changed for human beings, however, when dairy farming introduced milk into the adult diet. A mutation that prevented the weaning switch-off spread in Europeans fairly late, around 4,300 years ago, probably long after dairy farming was invented, but it gave its possessors a significant advantage: They derived more nutrition from drinking milk (and suffered less indigestion) than their rivals.

Two genes that affect skin color were also subject to rapid evolutionary selection as early farmers tried to subsist on grain-rich, vitamin-D-poor diets in northern areas with low levels of sunlight. (Sunlight helps the body to convert a form of cholesterol into a form of vitamin D.) The shift to pale skin—which produces vitamin D more efficiently than darker skin—among northern Europeans after the advent of farming appears to have proceeded rapidly, pointing to some of the strongest selection pressures ever recorded in human genetics.

Since the discovery of DNA’s structure more than a half-century ago, genetic science has promised—and begun to deliver—a medical revolution, but it keeps producing other kinds of revolutions too. In the 1990s, it transformed the field of forensics, for example, and now it is having a similar effect on history and archaeology. Today, the prehistory of humanity is an open book as never before.

The lessons of this DNA revolution are not just scientific, however; they are social and political as well. The discoveries made possible by our new access to ancient DNA show that very few people today live anywhere near where their distant ancestors lived. Virtually no one on the planet is a true native—an instructive fact to consider at a time when ethnic and national differences still abound and the world continues to throw human beings together in new and unexpected ways.

WSJ : Daniel Loeb’s Third Point Builds Big Stake in Yum Brands

Daniel Loeb’s Third Point Builds Big Stake in Yum Brands
In investor letter, he says fund has built ‘significant position,’ in part on Yum’s China business

Daniel Loeb may prefer to eat healthy foods, but he’s looking to fatten up his hedge fund with a bit of KFC.

Mr. Loeb, a yoga devotee who avoids carbohydrates and sugary beverages, said Friday his Third Point LLC has built a “significant” position in KFC, Taco Bell and Pizza Hut parent Yum Brands Inc., expressing optimism about its business in China.

In his quarterly letter to investors, Mr. Loeb disclosed the position and said he sees a “dramatic profit recovery” coming in the next two years, while also crediting management for saying the right things about shareholder value.

While he is best known for being an activist investor and shaking up companies, Mr. Loeb has taken a more friendly tone in some recent investments. He expressed faith in Yum’s management and Chief Executive Greg Creed, saying they were already on their way to taking the kinds of steps he would support.

Mr. Loeb suggested the company could franchise more of its restaurants, add debt or create “an alternative ownership structure.” Analysts have speculated that the company could spin off the Chinese operations into a separate company, a notion Mr. Creed has left on the table.

“We appreciate their confidence and investment in Yum Brands,” a company spokesman said of Third Point.

Yum shares rose 6.9%, or $5.94, to $91.90, on Friday.

China accounts for nearly half of the company’s revenue, but sales were battered following reports last year that a supplier had intentionally sold meat past its expiration date. Yum cut ties with the company, but the incident followed earlier health questions surrounding suppliers in 2012. The company last week reported that same-store sales in China fell 12% in the first quarter.

Mr. Loeb said Yum seems able to move past the problems.

“We have spent substantial time assessing Yum!’s recovery potential and examining whether its status as a ‘repeat offender’ has irreparably damaged the brand in China,” Mr. Loeb wrote. “By an overwhelming majority, local consumers believe the food at KFC is safe or at least as safe as other restaurant options.”

Mr. Loeb also disclosed a new stake in Devon Energy Corp., an energy exploration and production company that Mr. Loeb said has valuable assets.

The letter touched on Mr. Loeb’s continued interest in Japan, which now accounts for about 10% of Third Point’s investments. He said he recently traveled to Japan to meet with industrial-robot maker Fanuc Corp., which he said was taking “important steps” to reward shareholders.

That meeting itself was something of a victory for Mr. Loeb, who is urging Japanese companies to open up to shareholders. Few activists have succeeded in Japan, though Mr. Loeb is trying.

Fanuc was long known for its secrecy, but it set up a shareholder-relations department that began work in April. This week it said it would sharply increase shareholder returns by raising its dividend and buying back stock. Those are all measures that Mr. Loeb sought in a public letter in February.

(TechCrunch) Rise Of The Quants — Again

Rise Of The Quants — Again link to article : http://tcrn.ch/1zn7EZZ

Editor’s note: Robin Vasan is a managing director of Mayfield, a global early-stage venture capital firm. He previously founded or worked in key positions at several software startups. He has an MBA from Harvard Business School and a dual bachelor’s degree in industrial engineering and economics from Stanford University.

I graduated from Stanford in the late 1980s with a dual degree in engineering and economics, and, like so many others of my day, I was drawn to Wall Street. Reaganomics was in full swing, Bloomberg terminals were still in their early days and popular culture was full of colorful characters like Gordon Gekko.

Wall Street was booming and firms were waking up to the massive potential of marrying technology and complex mathematics. Technology was transitioning from PCs running Lotus 123 to firms installing real-time data feeds and legions of Sun workstations. Foundational algorithms like Black-Scholes and binomial pricing models and Monte Carlo simulations were just starting to take hold.

Firms needed new hires with PhDs and Masters degrees in varying complex quantitative disciplines like physics, statistics and mathematics, as well as armies of software developers. The race was on to leverage new computing platforms and combine market data with complex algorithms to create new financial products and trading strategies. These new hires, with the skills to combine programming algorithms and large data sets, became known as quantitative analysts (or “quants”).

Over the ensuing several decades, quants completely transformed Wall Street from a suspender-wearing, sales-dominated culture to an environment built around supercomputers paired with proprietary trading algorithms. The changes impacted every aspect of finance, and became embedded in nearly every aspect of the industry.

Today, Silicon Valley is the hottest place for quants to be – though people with this skill set are often referred to now as data scientists. A similar confluence of factors — data, technology and algorithms — has combined to enable a new class of transformational opportunities. These opportunities are not limited to just financial services; they are showing up in every sector of the economy.

The volume and variety of data sources has exploded, with companies now regularly directly capturing all manner of user web and mobile traffic, e-commerce and real-world transactions, social profile information, location and even sensor data. In addition, there are vast pools of third-party data available through APIs for everything from advertising and beauty to yellow pages and ZIP codes.

Technology has also taken a dramatic leap forward to almost limitless cheap storage and incredibly efficient and scalable cloud computing. For the daily price of a Starbucks latte (~$3.50), you can rent a medium-sized server and 1TB of storage. Relational databases played a key role in simplifying data access in the 1990s, and today a new crop of open-source data technologies, including Hadoop and NoSQL are playing key enabling roles in managing and making accessible the vastly larger data stores of today’s world.

Finally, new foundational analytical techniques, most notably in machine learning and deep learning, have emerged from academia to help data scientists discover patterns and models across hundreds or thousands of parameters.

They have esoteric names (similar to the past) like convolutional nets, random forests and restricted Boltzmann machines, but the goal is still the same – to use large data sets, massive compute power and increasingly sophisticated algorithms to make sense of massive amounts of structured and unstructured data to make decisions and predictions that formerly required humans.

Wall Street circa 1990 All industries circa today
Data Real-time quotes ClickstreamTransactionsUser profiles & social
Location & sensor

Technology Unix workstationsRelational databases Cloud compute & storageHadoop & NoSQL
Algorithms Black-Scholes & BinomialMonte Carlo simulation Random ForestEnsemble ModelsDeep Learning

Consequently, tech companies are lusting after all manners of data scientists with the biggest companies (Google, Facebook, Baidu, Microsoft, etc.) already having made early acquisitions in machine/deep learning. However, these acquisitions may largely be used just to fuel their existing businesses in search, social and other applications inside their enterprises.

There are many, many more real-world problems to solve. The hunt is on across both horizontal business functions like sales, marketing, finance and security, as well as vertical industries such as retail, manufacturing, healthcare and even transportation. The Holy Grail here is finding patterns and insights where we didn’t know they existed.

For example, Lyft debuted last month discounted pricing from specific high-traffic street corners in San Francisco. This is a great marriage of rider data, population data, and demand data to improve their service. Further advancements down the road could leverage third-party event data (like sporting events or conferences), flight info and weather data to ensure there are enough drivers available at the right places at the right times.

An example of a company formed specifically to solve a very targeted problem is Enlitic. The company was founded to tackle the vital and humanitarian problem of cancer screening. Interestingly, the initial team was not stocked with oncologists or even MDs, but rather just experts in deep learning. By getting access to properly coded radiology images, they have been able to build models that will hopefully reduce the cost and improve imaging diagnostics.

Financial trading has long been a fertile ground for new algorithms, but there is still room for new entrants. Binatix initially applied new machine-learning techniques to speech recognition, but they subsequently pivoted into analyzing market price and trade data to identify unseen patterns they could exploit for their own trading purposes – effectively setting up an algorithmic trading shop.

However, there are still incredibly valuable and important broad-based problem areas that have not yet been solved. There are startups like MetaMind and SkyMind that are trying to provide platform technology for deep learning – but selling frameworks for developers can be a difficult proposition.

The potential projects here are endless so finding the right business application that has the highest impact is what matters.

Palantir, for example, started focused on security intelligence, found success, and then expanded its focus to many different industries, including finance, health, law, pharma and insurance, among others. From an opposite perspective, Kaggle and Wise.io started too broadly before narrowing their focus to a few markets.

Taking advantage of these opportunities isn’t easy. It requires a tight interlock between knowing the business problem worth tackling and the technical skills to actually tackle them – data, technology and algorithms.

This shift in tech toward quantitative disciplines will impact all walks of life, with the opportunities for both investors and quantrepreneurs only just now being realized.

NY Post : Dan Loeb invests heavily in Yum! Brands

You won’t find many hedge fund moguls eating at fast food joints — but boy do they like to own them.
Dan Loeb and Keith Meister, two hotshot activists, have taken big stakes in Yum! Brands, which owns KFC, Pizza Hut and Taco Bell.
Loeb revealed a “significant” stake in Yum! in the first-quarter letter from his Third Point hedge fund on Friday.
Meister, whose Corvex Capital also began buying Yum! last quarter, is now one of the top five investors in the company, according to sources.
Yum! shares have been coming back after taking a dive last summer following food safety incidents in China. Loeb doesn’t think that episode tarnished the brand — and the market seems to agree.
Yum! shares rose 6.9 percent, to $91.90, on Friday, for a year-to-date 26 percent gain.
Loeb is particularly excited about the potential for turning more of the restaurants into franchises, a trend investors are “in love with” because of the hefty cash flows, he said in the letter.
“Management is already taking steps to increase the mix of franchise units from 91 percent to 95 percent by 2017,” Loeb wrote.
But the franchising trend has recently drawn the ire of labor activists.
“The activist investors pushing for higher rates of franchising have contributed to driving down wages in the fast-food sector,” said Michael Klink of Hedge Clippers, the coalition of labor and community activists who are on a rampage against the billionaires while fighting for a $15 an hour minimum wage.

(Barron's) German Bunds: The Short of the Century

German Bunds: The Short of the Century
Region’s woes make it difficult to be sure of what currency holders willl get when the securities mature.

It’s springtime for bunds and Germany, to allude yet again to the big production number featured in Mel Brooks’ classic movie and, later, Broadway show, The Producers.

But spring isn’t always the idyllic season portrayed by Romantic poets like Wordsworth, but sometimes the one Eliot described when he called April the cruelest month. And so it has been with traders of Bunds, who have been whipsawed as if caught in one of the twisters that often sweep through the midsection of the U.S. this time of year.

In a matter of a couple of days last week, the yield on benchmark 10-year German government bonds, known as Bunds, more than doubled. And from its low in the middle of last month, the yield has jumped 11-fold, making for an especially cruel April for leveraged long players.

To be sure, on an absolute level, those changes don’t look like much, but they demonstrate the bizarre effects of near-zero and subzero interest rates. For the record, the 10-year Bund jumped 20 basis points (0.2 percentage points) in just two days, to 0.37% Thursday, before much of continental Europe took Friday off for May Day. Back on April 17, the 10-year yielded a mere 0.033%, while shorter maturities’ yields were negative.

The bizarro state of affairs has been much discussed here and elsewhere. In recent days, this weirdness has spurred the once and current Bond Kings to suggest that negative interest rates not only are unsustainable, but also tradeable as short sales. Bill Gross, the former head of Pimco before exiting for Janus Capital, called betting against Bunds the short “of a lifetime,” while his rival, Jeffrey Gundlach, who heads DoubleLine Capital, similarly termed it the short “of the century” that’s just 15 years old.

As Gundlach expounded in a Bloomberg television interview, shorting two-year Bunds that yield minus 0.2%, and leveraging that position 100 times—not unheard of with relatively short-term, high-grade debt instruments—should return 20%. It’s a mathematical certainty that the bond will lose value by the time it matures at par in two years, resulting in that leveraged return.

That is, in a normal world, which is not necessarily the one we live in today. As the folks at BCA Research say, investors in Treasuries, United Kingdom gilts, or Japanese government bonds know that when their securities mature, they will be paid in dollars, pounds, or yen, respectively. “But if you buy a euro-area long-dated sovereign bond, you cannot be absolutely [their italics] certain that you will get paid in euros when the bond ultimately redeems.”

Or to quote another movie, buying a euro bond is a bit like a box of chocolates: You never know what you’ll get, as the title character in Forrest Gump observed.

BCA envisions a “small but not negligible 20% risk of a euro breakup” through 2020, or roughly 4% a year. They further posit that a reintroduced Deutschemark would be revalued 10% higher, owing to Germany’s fundamental advantage of higher productivity versus the rest of the euro zone. Conversely, a reinstated lira would likely fall 10% to reflect Italy’s lower productivity.

Thus, a German Bund should trade 40 basis points (0.4%) lower in yield to reflect this currency redenomination risk (4% probability times 10% windfall gains from a revived D-mark), while Italian bonds should yield 40 basis points more to compensate for the similar risk of loss from bringing back the lira. And with the European Central Bank keeping its rates basically at zero as far as the eye can see, bond yields will be anchored there.

Were that to happen, selling euro-denominated bonds with negative interest rates wouldn’t be the short of the century. While Mario Draghi has so far delivered on his famous promise to do “whatever it takes” to preserve the euro, even Super Mario could fall short.

Five years after the initial bailout of Greece, the Athens government again is teetering on bankruptcy. The gap remains wide between the EU—led by Germany and demanding further reforms in exchange for the credit Greece needs to stay afloat—and the Greek government that is overseeing an economy suffering from a deep depression. Devaluation traditionally has been the palliative for such economic pain. Remaining in the common currency removes that possibility.

For whatever reason, Bunds got whipsawed last week, surging in yield, which translates to a drop in price, which was the occasion for much head-scratching. As David Ader, head of government bond strategy at CRT Capital, noted, those moves followed the opining by Gross and Gundlach about how Bunds were a great short. “Their timing couldn’t have been better, or alternatively, they had the position and then supported it with the public pronouncement,” he speculated slyly. An equally plausible analysis comes from RBC Capital Markets’ assessment of Thursday’s bund selloff: “Simply speaking, all that had gone up went down.”

Why all this emphasis on what’s happening over there? Because it has been a major driver of what’s happening over here.

THAT’S READILY OBSERVABLE, with the benchmark 10-year Treasury yield maintaining a relatively constant spread of about 170 to 180 basis points over the comparable Bund. And the yield rise translated into steep price losses in long Treasuries; the iShares 20+ Year Treasury Bond exchange-traded fund (ticker: TLT) shed 3.9% last week, roughly equivalent to a 700-point drop in the Dow.

Bank of America Merrill Lynch economist Gustavo Reis writes that “global factors have been significant drivers of U.S. bond and equity markets.” Quantitative easing by major central banks has pushed stock prices higher and bond yields lower, not only in the U.S. but also in Japan and Europe. Moreover, even as the Fed last year wound down QE, the bond purchases by the ECB and Bank of Japan made up for it.

But there has been selling elsewhere, notably by the governments most dependent on oil revenue. Saudi Arabia’s currency reserves plunged by $36 billion in the most recent two months and are down $47 billion since last October. Russia reportedly also is burning through its reserves, although its central bank was able to cut interest rates last week (aided by the rebound in the ruble and its equity market, with the Market Vectors Russia ETF (RSX) up by about a third this year).

That’s also surprising, given the sharp rebound in crude prices from their lows in March, which almost exactly coincides with the recent reversal in the dollar’s advance. And as oil has reversed its slide, the inflation premium in the bond market—the so-called TIPS spread, representing the difference between yields on 10-year Treasury notes and comparable Treasury inflation-protected securities—has widened from a low earlier in the year of 154 basis points to 195 basis points Friday (based on a 2.11% 10-year and a 0.16% TIPS).

Other commodities, notably metals, also have levitated as the greenback has slipped from its highs. Another BofA report attributes copper’s recovery to short-covering. Iron-ore prices are up sharply, too, from their recently depressed state, amid expectations of further stimulus in China, including QE on top of the central bank’s recent reserve-requirement and rate cuts. (See this week’s cover story for more on China.)

All of which has left U.S. stocks betwixt and between. On Friday, Louise Yamada, who heads the eponymous Louise Yamada Technical Research Advisors, laughed charmingly when we asked for her thoughts on this crazy market. She admitted to have gotten defensive prematurely a couple of months ago as the big market gauges went “up, up, up” in the face of divergences in the indexes. In particular, Louise pointed to the percentage of stocks in the S&P 500 exceeding their 50-day moving average slipping below 50%, a sign of waning momentum. Meanwhile, leadership has shifted to sectors lacking the heft to lead the market higher.

To be sure, she emphasizes, these are signs of a correction developing within a long-term secular bull market. Thursday’s decline of about 1% in the major averages might have been the start of that, she adds, although they recouped those losses Friday.

Other disquieting signs include the steep, 20%-plus drops last week in social-media stocks, such as Twitter (TWTR), LinkedIn (LNKD), and Yelp (YELP.) But Apple (AAPL), which was off about 7% from its peak after reporting blowout earnings, halved those losses by week’s end.

Such action is consistent with stocks entering their usual seasonally turbulent period. While earnings reporting season is winding down, geopolitical and other economic events loom large. As noted, an agreement on Greece’s debt hasn’t been reached. The U.S.’s own Greece, Puerto Rico, last week voted down tax reform to bolster its budget, sending its bond prices to new lows. Britain has a general election this week, although David Cameron’s Tories pulled ahead in the latest polls.

Closer to home, April’s nonfarm payrolls report, due Friday. will be the focus of the week. Stan Shipley of Evercore ISI forecasts a return to the robust gains prior to March’s punk rise of just 126,000. He sees a 245,000 gain, the high side of consensus guesses. That should keep the Fed on track for a second-half rate hike, but not push for a June move, which was taken off the table by the weak first-quarter GDP growth of just 0.2%.

That was supposedly a result of another lousy winter, which was followed by a nice spring. But, as with boxes of chocolates, you never know what to expect.

(Barrons) The Merger Boom Is Far From Over

The Merger Boom Is Far From Over
Regulators scotched two major acquisitions, but that doesn’t mean corporate deal-making will slow. The key driver: excess cash.

Mergers and acquisitions have staged a post-financial-crisis comeback, as companies look to put their cash hoards to use in ways that will boost growth. Investors have encouraged the couplings by rewarding not just the acquired company but the acquirer, while regulators have cast a blind eye toward the pairing-off.

In the past two weeks, however, government opposition killed two potential mega-mergers, raising questions as to whether the laissez-faire days have passed. While renewed government interest could make M&A more risky—and force investors to be more discerning—it doesn’t mean the end of the merger boom. To the contrary, it might just be gaining steam.

It isn’t hard to see why everyone’s loving the M&A party. U.S. corporations have plenty of cash on their balance sheets, but with interest rates still low—the 10-year U.S. Treasury yielded 2.1% Friday—they’re earning almost nothing on it. Those measly rates drag down returns on capital, in effect punishing companies for not pursuing growth. While share buybacks have been a popular way to put that cash to use, acquiring another company, especially one that is a good fit, seems like a no-brainer. Hence, the reward for both buyers and sellers.

Wells Fargo’s Gina Martin Adams notes that the average company in the Standard & Poor’s 500 index involved in a transaction has outperformed the benchmark during the month after a deal announcement in each of the past three years. This year, the average M&A participant has gained about 1.4 percentage points more than the S&P 500. “Investors are rewarding companies that are pursuing growth instead of hoarding cash,” Martin Adams says.

That is unlikely to stop, despite regulatory intervention. Last week, Department of Justice opposition on antitrust grounds scuttled chip-maker Applied Materials ’ (ticker: AMAT) planned acquisition of Tokyo Electron (8035.Japan). The prior week, Comcast (CMCSA) called off its merger with Time Warner Cable (TWC), also citing DOJ opposition. Applied Materials dropped 8.4% last Monday when its plans were upended, and ended the week down 8.3% to $19.99.

To say that these rejections were a shock would be an understatement. After all, the DOJ allowed major airlines to join forces, demanding only that certain carriers dispose of some gates at airports around the country.

Does the latest action signal a newfound desire by the government to play trust buster? No, says Roy Behren, co-portfolio manager of the $5.2 billion Merger fund (MERFX). He notes that the DOJ didn’t reject the deals for political reasons, but for specific concerns with each transaction. “It doesn’t mean a sea change in how the government is looking at transactions,” he says.

Strategas Research Partners’ Dan Clifton won’t rule out the possibility, however. He’s paying special attention to mergers in which the second- and third-largest companies in an industry combine to take on the dominant player. For instance, in the oil-services arena Halliburton (HAL) is buying Baker Hughes (BHI), and will become a more formidable competitor to Schlumberger (SLB). Likewise, tobacco companies Lorillard (LO) and Reynolds American (RAI) are joining forces to better compete with Altria Group (MO). Clifton is watching both deals for clues as to what regulators are thinking. If either gets rejected, it could mean the premium awarded to acquirers’ shares shrinks or disappears altogether. “You might not see companies get as rewarded unless the deals are slam dunks,” he says.

BUT EVEN MORE active oversight won’t keep companies from joining forces. For starters, some can’t afford not to merge. Citigroup analyst Jason Bazinet notes that after the failure of the Comcast-Time Warner Cable merger, most cable companies are priced as if another deal will happen. He estimates that Time Warner Cable has $33 of M&A value in its stock price, while Charter Communications (CHTR) has $35, and Cablevision Systems (CVC) $4. The upshot: “Sellers may feel compelled to sell because, absent a sale, their equity value may fall,” he says.

Indeed, there is now chatter about a Charter-Time Warner Cable merger, which Bazinet gives 80% odds.

The abundance of cash is likely to remain the driving force. Credit Suisse strategist Andrew Garthwaite figures that the cash on corporate balance sheets and in private-equity coffers worldwide, adjusted for the use of leverage, leaves some $4.3 trillion—or 10% of global market cap—potentially available for mergers and acquisitions.

Further deal-making could provide support for the stock market, Garthwaite says. He notes that the value of M&A in the past 12 months as a percentage of market cap is still 40% below its long-term average, leaving plenty of upside for mergers. That’s good news because the stock market usually doesn’t peak until about eight months after a merger boom crests.

(Barron's) China’s Long Bull Run

China’s Long Bull Run
The booming Hong Kong stock market could push up, but not without some bumps along the way. Eight stocks and one ETF for the long term.

China’s President Xi Jinping was born in the Year of the Snake, but at heart he is China’s biggest bull. Already, China’s paramount leader has orchestrated the planet’s hottest recent bull market: Over the past year, Chinese stocks available to mainland investors have surged a staggering 119% in Shanghai and 121% in Shenzhen, with the biggest gains coming since November. The offshore stock market in Hong Kong -- open to foreigners and laden with Chinese listings as well as global companies from Prada to Samsonite -- has lagged but is starting to catch up, jumping 13% in April alone.


Investors on the Chinese mainland recently opened new stock market accounts at a rate of 4.1 million a week; that’s up from 70,000 a year ago. And many are borrowing to swell the herd. Photo: istock
The scary part: Chinese stocks are braving seven-year highs just as economic growth slows to 7% from 12% five years ago.

You’d think a monster rally egged on by great expectations of monetary easing and market reform would attract a lot of attention, and it has -- starting with the locals. With real estate stagnant and stern restrictions on investing overseas, mainlanders seem only too happy to cheer on a homegrown bull. Local investors recently opened new stock market accounts at a rate of 4.1 million a week, up from about 70,000 a year ago. Many are borrowing to swell the herd, and margin balances have surpassed 1.6 trillion yuan ($258 billion), up from 300 billion yuan 16 months ago. By mid-April, BNP Paribas estimated, more than 70% of mainland-listed stocks were commanding prices exceeding 50 times earnings, while 40% fetched more than 100 times earnings.

Clearly, Red China’s bull run can give you a high like you’d get from guzzling too much Red Bull. “Mainland investors’ optimism toward the stock market is now far out of line with fundamentals,” warns Mizuho Securities’ Asian equity strategist Kengo Yoshida. The size and speed of this levitation, and pressure on the economy to live up to rising expectations, increase the likelihood of corrections of 10% or more, which could accelerate as margin traders liquidate their positions.

Now here’s the scariest part: Economists and strategists suggest that this bull market has just begun, as China begins to open its stock markets to global investors. At 4442, the Shanghai Composite Index still is 27% below its 2007 peak of 6092. This means long-term investors with horizons of more than three years may need to hold their noses and look to pullbacks to build their Chinese portfolios.

“Despite the run-up in equity markets, this is just the beginning,” says Helen Zhu, BlackRock’s head of China equities. “Structural-reform progress, rather than cyclicality in economic growth, has played a large part in driving the strong returns, and by reducing the tail risks that have been associated with China.” Chuck Clough, CEO of Clough Capital Partners in Boston, which manages several funds including one focused on China, agrees. He thinks the Chinese are just starting to buy stocks again for the first time in recent years. “China is at the beginning of a big movement from savings toward stock investing,” he says.

Because China’s rally will become more volatile, investors may want to avoid momentarily hot markets like Shenzhen, which is laden with smaller technology and nonfinancial stocks and already commands valuations near 50 times earnings. Instead, Barron’s has identified eight stocks that are still reasonable, ranging from Chinese brokerage GF Securities (ticker: 1776.Hong Kong) to Baoxin Auto Group (1293.Hong Kong), a car dealership that benefits from China’s aging fleet. Ironically, some of our picks are Chinese companies that once sought the glamour of a U.S. listing, but are now neglected as the fast money flocks east to chase China’s surge.

Make no mistake: Xi Jinping wants this surge to continue. It’s no coincidence that state-controlled media started cooing about the stock market last year just as Beijing relaxed restrictions on buying shares. “Encouraging robust market sentiment helps Beijing to achieve a number of policy objectives,” notes Joyce Poon, Asia research director at the Hong Kong research firm Gavekal Dragonomics. After all, Chinese companies looking to raise capital in recent years have had to issue bonds instead of stocks because share prices were so depressed. So a happier stock market not only increases funding for small enterprises and helps reduce China’s ballooning debt, but it also gives the Chinese another investment target besides real estate.

Critics will argue that Xi is merely swapping a bubble in real estate and debt for a new one in stocks. But a “paper” bubble of stock wealth is less malignant than a bricks-and-mortar bubble of empty homes and silent highways. Just look: The U.S. tech bubble of 2000, while painful, ultimately proved less debilitating than our 2007 housing bubble because there wasn’t a glut of physical inventory to work through.

Beijing, of course, knows how hard it can be to turn around a $9 trillion economy; controlling a stock market and its media apparatus is more easily done. Today, citizens can trade from as many as 20 brokerage accounts, up from just one. To encourage companies to raise capital in the stock market, regulators sped up initial public offerings and cleared a backlog of 600 pending new issues. In the first quarter, deal volume jumped 38% from 2014’s level.

More important, Beijing is taking big steps to liberalize mainland markets: Last November’s much-trumpeted Shanghai–Hong Kong “stock connect” scheme lets mainlanders buy eligible stocks listed in Hong Kong (commonly called H shares), while global investors can buy select mainland stocks (or A shares), up to a daily quota. This program boosted trading traffic and will spawn a similar link-up later this year, this time between Hong Kong and Shenzhen.

Enlarge Image

Xi, who consolidated power so much that he has earned the nickname “Xi DaDa” (literally “Xi the Big”), has a grand plan to establish China as a global superpower. Making the yuan more international and widely held is part of that plan, as is a thriving capital market. Xi has always said that China should pursue “the Chinese dream.” And what could be a bigger triumph than a bull market, made in China by the Communist Party, that’s the envy of capitalists the world over?

FOREIGN INVESTORS CANNOT AFFORD to ignore China, not when the U.S. bull market is maturing and the stench of disinflation wafts from Europe and Japan. Asian growth is slowing, but, at an average pace of 6.2%, DBS economists reckon it’s still enough to spawn an economy the size of Germany’s every 3½ years. China, which has cut rates twice since November, still has many tools to stimulate growth: The short-term interest rate is more than 3.3%, versus zero or negative for its trading partners.

Valuations also don’t yet inspire vertigo. Shanghai stocks fetch 22 times trailing earnings, versus 49 times in 2007. And Hong Kong’s Hang Seng Index fetches 12 times earnings, versus 20 times in 2007. China’s onshore stock market is at about 75% of its gross domestic product, still below 90% in South Korea and 150% in the U.S.

The Chinese are upbeat thanks to ample liquidity. Just as U.S. traders believe in not fighting the Fed, the Chinese swear by “don’t battle Beijing.” “So unless China’s policy makers undertake sudden tightening measures, the A-share bull run is likely to continue,” notes Chen Xingdong, BNP Paribas’ chief China economist.

Gavekal co-founder Louis-Vincent Gave believes that today’s biggest macro development isn’t oil’s collapse but China’s commitment to making the yuan more international and convertible. When that happens, the excuse for excluding China from global indexes weakens. If China’s weight in the MSCI All Country Index were to tick up from less than Spain’s (at 1.7%) to match Japan’s (10.6%), index managers will have to scurry to buy Chinese stocks. “Being short China will remain a very dangerous proposition,” Gave notes.

Already, brokerage firms are finding it hard to keep pace with this rally. For example, Mizuho on April 17 upped its end-of-June target for Shanghai to 4400 from 3400, only to see the index blow past the new mark four days later. Mizuho thinks the index could reach 5100 in the third quarter, peaking around the time of the Communist Party’s big policy meeting each autumn, before pulling back to 3300 by early 2016. “It will be the government’s job to curb the bubble,” writes Mizuho’s Yoshida, but there’s less chance of tightening with growth anemic and commodity prices weak.


Meanwhile, China has cut back its stockpiling of U.S. Treasuries and is instead spending its yuan on amassing physical assets across the globe. A booming stock market certainly will help that cause. Among the things the Chinese have already bought: the ancient Athens port of Piraeus; Smithfield Foods and, with it, hundreds of the biggest U.S. farms; and AMC Entertainment and 4,960 movie screens onto which Hollywood projects its American fantasies.

A made-in-China bull run can woo global investors if they’re prepared for bumps. Beijing has cut the reserves that banks must set aside, but hopes for a big interest-rate easing cycle may prove optimistic. Matthews Asia strategist Andy Rothman thinks Beijing is comfortable with slower growth because its economic base is now much bigger, and incomes are still expanding. Home prices surged in early 2014, leading to tough year-over-year comparisons in 2015 that should dissipate by the second half. Improving data could test the assumption that Beijing must ease aggressively, and a looming U.S. rate hike could siphon liquidity and life from China’s party.

Unlike Japan, where a wilting yen helped lift exports and the Nikkei, China seems hellbent on supporting its currency, at least through November, when the International Monetary Fund decides whether to add the yuan to a basket of key currencies that count toward official reserves. Without currency depreciation, Beijing must work harder to goose growth.

Already, there are concerns that the market is fizzier than it seems. Because Beijing controls so much of corporate China, its market’s free float -- the portion of shares available for public trading -- is just 39%; that compares with 75% in Japan and 94% at the New York Stock Exchange. Measuring margin debt against this free float, instead of total market value, shows real leverage may be as high as 8.2%, “above any historical example that we can find elsewhere,” notes Macquarie analyst Matthew Smith.

Beijing may even be the one tapping the brakes of this high-speed train. Its securities regulator recently allowed institutions to lend stocks for short selling, and barred margin financing through popular umbrella trusts. Such steps to curb the enthusiasm triggered brief selling, but in the long run may prove healthy. Yet, it makes clear that Beijing is very much the rally’s driver.

So, are there any bargains left? Barron’s has been bullish on Chinese stocks since we launched our Asia Website on Oct. 15 last year, and many of our stock picks have snagged double-digit gains, including 72% for Hong Kong Exchanges & Clearing (388.Hong Kong) and 80% for Chinese insurer Ping An (2318.Hong Kong). Disciplined traders sitting on big winnings might consider selling half of their positions to lock in gains, while using options to hedge their exposure. They might, for example, buy protective puts on relevant exchange-traded funds like the iShares China Large-Cap (FXI) or SPDR S&P China (GXC). Or replace stocks with call options to remain exposed to further rallies without risking more than the option premiums paid.

ULTIMATELY, THE BEAR CASE for China is similar to the bull case: It’s a rally propelled by policy, and it won’t stop until Xi Jinping lets it. Until then, strategists expect valuation gaps between stocks that are dual-listed on the mainland and Hong Kong to narrow, especially after Beijing let Chinese mutual funds buy Hong Kong stocks. But don’t grab just any Hong Kong ETF, since 40% of that market isn’t Chinese. A more targeted bet is the Hang Seng China Enterprises Index, which comprises Chinese companies listed in Hong Kong and trades at 10.5 times earnings. It’s tracked by ETFs including Hang Seng H-Share Index ETF (2828.Hong Kong).

Here are eight stocks that still look reasonable:

• Unlike mainland technology stocks that command 68 times what companies earned, versus 46 times historically, financial stocks are still cheap. It’s a good time to be a Chinese brokerage, and GF Securities just reported a 205% jump in first-quarter earnings. GF’s 2014 return-on-equity of 14.6% is better than its peer average of 11.4%, and stock trading at 16 times projected earnings is lower than 22 times for Citic Securities (6030.HK). GF’s Hong Kong listed H shares trade at a hefty discount to its Shenzhen-listed A shares. (See also “GF Securities Rides China’s Bull Market,” April 28.)

• Baidu is China’s Google (GOOGL) and one of its best brands, but the Nasdaq-listed shares (BIDU) are off about 20% since their November high. China’s dominant search engine just reported first-quarter revenue growth of 34%, and profits shrank slightly as Baidu spent to promote mobile services to new users in smaller cities. But worries about Baidu losing its stranglehold as search shifts from PCs to mobile devices are overblown, and shares trade at 25 times projected profits, well off its median of 45 times over the past decade. (See also “Baidu Dreams of Mobile Payoff,” April 30.)

• Falling oil prices have fooled some into thinking that Beijing is less committed to clean energy, but Earth’s biggest energy consumer has a terrible pollution problem. “Solar stocks are underappreciated right now,” says Earl Yen, a Shanghai-based managing director of CSV Capital Partners. His pick: JinkoSolar (JKS), which is off its 2014 high and trades at 8.9 times 2015 profits.

• Another Yen pick is Baoxin Auto. A major Chinese BMW dealer, Baoxin suffered slowing sales with the corruption crackdown, “but as the car population gets older and the secondary market gets bigger,” Yen says, “people will spend more on repairs and parts.” Analysts see profits growing 17% in 2016, but shares fetch just nine times 2016 earnings.

• Orient Overseas International (316.Hong Kong), a Hong Kong–listed container shipper, benefits from China’s plan to build a 21st century maritime silk road linking Chinese ports to Southeast Asia and points as far west as the Persian Gulf. Its superior technology optimizes fleet scheduling, and worries about industry overcapacity have kept the stock 30% off its 2011 peak. Shares trade below book value, and at 9.2 times 2015 earnings. (See also “Orient Overseas Should See Shiploads of Profits,” March 5.)

• Investors lunging at Internet retailers to bet on China’s middle class forget that goods ordered online must be shipped in boxes. Nine Dragons Paper Holdings (2689.Hong Kong) is China’s largest containerboard maker, and weak profits last year as China’s growth slowed shook out less committed investors. Operating margin tops 12%, but shares are cheaper and less leveraged than global peers, trading at 15 times 2015 profits. (See also “Unloved Nine Dragons is Ready for Lucky Break,” April 22.)

• China Cinda Asset Management (1359.Hong Kong) is China’s largest and only publicly listed distressed-asset manager. Rate cuts lower Cinda’s funding costs just as weak growth increases the pool of flailing properties it can browse. The stock has struggled amid concerns about its distressed-loan-book expansion, and fetches just seven times projected earnings, or 1.4 times book value. (See also “Cinda is a Good Stock for China’s Bad Debts,” March 5.)

• As China’s largest online niche retailer of beauty products, Jumei International Holding sure has an ugly stock chart. The NYSE-listed shares (JMEI) lost two-thirds of their value last year amid exposés of third-party vendors selling counterfeit goods on its Website, and a big shift to direct sourcing and quality control hurt results. But makeovers take time, and online cosmetics sales grew 137% each year between 2010 and 2013, versus 60% for online shopping. Shares trade at 26 times 2016 profits and 3.3 times book value -- versus price/book valuations of 9.3 times for Alibaba Group Holding (BABA) and 40 times for Vipshop Holdings (VIPS), an online flash retailer of luxury goods. (See also “Jumei’s Makeover is More Than Cosmetic,” March 17.)

Barron's: Novartis Looks Much Healthier


Novartis Looks Much Healthier

Novartis’ stock has had a good run since the start of the year, lifted by the promise of its audacious restructuring plan and a generally buoyant European equities market.


While European bullishness is starting to show signs of fatigue, the Swiss pharmaceutical company still has momentum and should continue to deliver solid returns. Its recent quarterly earnings release was the first since it completed a $25 billion overhaul and surprised on the upside.
In a three-way deal reached just over a year ago, Novartis (ticker: NVS) bought GlaxoSmithKline’s (GSK.UK) oncology business for $16 billion. That boosted Novartis’s already impressive array of cancer treatments and turned it into one of the sector’s most formidable players. It expects to get around 20% of future revenue from oncology. At the same time, Novartis merged its over-the-counter consumer health activities with Glaxo’s, which also paid roughly $7 billion for its vaccines business, and sold its animal-health unit to Eli Lilly (LLY) for $5.4 billion.
That complex game of musical chairs came during a period of high-stakes mergers and acquisitions in pharmaceuticals, during which some of the biggest deals failed to get off the ground.
British drug maker AstraZeneca (AZN) fought off a roughly $120 billion takeover bid from Pfizer (PFE), while AbbVie (ABBV) dropped plans to pay $54 billion for Dublin-based rival Shire (SHPG) after the U.S. government tightened tax rules on such deals, reducing their attractiveness and effectively scuppering plans.
THE NOVARTIS DEAL WAS DIFFERENT. Rather than attempting to create a megasize, diversified business, management sought real value by fine-tuning its activities. Its recent results proved the wisdom of that strategy. Shedding assets meant net income from its core businesses fell 4% to $3.2 billion, but proceeds of the asset disposals boosted its bottom line by $13 billion.


Ernie Cecilia, chief investment officer at Bryn Mawr Trust, says his clients have owned Novartis stock for some time. He believes the company is making the right strategic moves: “One of the things I like is that it has focused its attention on innovation with a commitment to R&D that has given it a strong pipeline of products.”
This has helped Novartis become a well-capitalized, cash-generative business with a debt-to-capitalization ratio of around 25%, within Cecilia’s tolerance threshold. “Novartis also has the propensity to raise its dividend and buy back shares,” Cecilia says.
While some analysts fear the strong Swiss franc could take some shine off Novartis’s earnings, CEO Joseph Jimenez told Barron’s at Davos in January, “People have overestimated the amount of cost base we have in Switzerland.” About 12% of Novartis’ costs are denominated in Swiss francs, and Switzerland accounts for 2% of revenue.
Cecilia says that despite currency pressures, Novartis is well positioned to plug into shifting demographics of emerging markets, where a growing middle class is likely to seek out its type of health-care products. “The areas Novartis is now focusing on—heart treatments, psoriasis, oncology—fit right into that demographic,” Cecilia says.
One particular hopeful sign is a heart medication known currently as LCZ696. It’s awaiting approval from the Food and Drug Administration, and is slated to produce about $5 billion worth of sales by 2020.


Cecilia is also impressed with Novartis’s commitment to margin expansion and willingness to shed businesses that aren’t earning their keep, while cutting costs. When it announced first-quarter results, it booked savings of $650 million, of which it attributed $350 million to bulk buying.
THAT PERFORMANCE IS OWED in large part to the creation of Novartis’s business-services unit and its focus on improving profitability by harmonizing activities between divisions. “There are a lot of biotech companies that employ smart scientists but have problems managing what happens on the business side,” Cecilia says. Novartis’ business services unit is able to bring those two sides together.
Berenberg analyst Alistair Campbell calls Novartis’ results impressive, with earnings-per-share in its core business beating consensus forecasts by 12%. He says that although the company maintained full-year guidance for mid-single-digit sales and high-single-digit core operating income growth, Novartis could lift estimates in coming months. “The company rarely raises guidance at the first quarter and it remains early in the year. We think there’s a good chance guidance will be raised at the interim results if first quarter momentum continues,” he says.
He has the company at Buy with a 110 Swiss franc price target ($117.48), and he says, “We expect Tasigna, Afinitor, Jakavi, Gilenya, Cosentyx, and LCZ696 to add over $10 billion of sales to the pharmaceuticals business by 2020, comfortably offsetting patent head winds.” The stock closed at 96.65 Swiss francs on Thursday.

>>> Ira Sohn Conference: Monday Presentation Schedule


Ira Sohn Conference: Monday Presentation Schedule

The Sohn Conference is set to take place this next Monday-Tuesday in New York, NY and will give a variety of investment managers the opportunity to speak about their view on markets, positions, etc.... A breakdown of the Monday speaker list is detailed below, with associated, notable stocks and notes listed for each manager. Stocks listed have a positional relationship to the speaker and may be subject to commentary: (Please see criteria and commentary below the following list)
  • David Einhorn (Greenlight Capital) - 
    • Is Long MU (14.54%), AAPL (12.67%), SUNE (6.47%) and CNX (5.96%) 
    • Is Short RAI (Unknown) 
    • Recently Added AER (1.93%), CBI (1.64%), GM (Unknown)
    • Note: Positions sourced directly from Greenlight's Shareholder Letter
  • Barry Rosenstein (Jana Partners) 
    • Is Long PETM (6.86%), HTZ (7.56%) and QCOM (3.99%) 
    • Is Short XLE (6.89%) and SPY (4.46%) 
    • Recently Added NCR (3.05%) 
    • Note: Most recent headlines include positions in QCOM and HTZ
  • Keith Meister (Corvex Management) - 
    • Is Long WMB (22.98%), ARCP (0.89%)
    • Is Short XLE (6.89%)
    • Recently Added SIG (8.9%)
    • Note: Media speculation today implied that Corvex has taken a recent top-5 shareholder stake in YUM. These reports are presently unconfirmed and speculative
  • Leon Cooperman (Glenview Capital Management) - 
    • Is Long ATLS (3.03%), SHPG (1.68%), ASPS (1.27%) and GILD (0.96%)
    • Note: Each listed position above has been the topic of direct/peripheral discussion in recent months
  • Larry Robbins (Glenview Capital Management) - 
    • Is Long CYH (3.26%), RLGY (1.39%), WOOF (3.12%), FNF (0.36%)
    • Note: Each stock listed above was recently included in a media piece as being one of Robbins' "top new ideas"
  • Mala Gaonkar (Lone Pine Capital) -
    • Is Long ADK (228%), PCLN (91%), FB (56%) and MA (32%)
    • Note: % represent the fund's Q/Q change from Q3 to Q4 (not % of portfolio) and is included to show recent fund capital flow
  • Jeff Gundlach (DoubleLine Capital) - 
    • Notes: Provides regular macro-economic commentary in media pieces, and runs a fixed income fund. Has been known to make interest rate predictions that can affect a variety of markets.
  • David Tepper (Appaloosa Management) -
    • Long GM (12.65%) and TX (1.14%)
    • Note: TX was one of only two (excluding GM warrants) of Appaloosa's Q/Q increased equity positions from Q3 to Q4
  • Bill Ackman (Pershing Square Capital Management) - 
    • Is Long ZTS (11.15%) and VRX (Unknown) 
    • Is Short HLF 
    • Note: VRX was disclosed as a new position this past quarter, and its weight in the portfolio is not yet known. Also, speculation about another short, in addition to HLF, within the portfolio is intriguing. The existence or identity of such a short is unknown yet however.

  1. (% in quotations, refer to the percentage of a manager's portfolio that a given stock represents- as of end 4Q15. Lone Pine Capital being the exception)
  2. The use of an (Unkown) denotes a new position since Q4 disclosure or other factor that does not allow for reliable portfolio calculation
  3. Positions for inclusion were determined using several criteria. Notably, sizeable positions (+5%) with either recent media mention/inclusion or a substantive Q/Q increase were targeted for analysis. 
    • Positions that are notably smaller than 5% were included based upon recent media focus or for outlying Q/Q increases. 
  4. Positions listed for each manager above, do not represent the entirety or proportionality of their respective fund's composition. 

(BN) Monsanto-Syngenta Mega-Merger Would Drive More Deals: Real M&A



Monsanto-Syngenta Mega-Merger Would Drive More Deals: Real M&A
2015-05-01 22:18:34.292 GMT


(For a Real M&A column news alert: {SALT REALMNA <GO>}.)

By Brooke Sutherland
(Bloomberg) -- A combination of Monsanto Co. and Syngenta
AG would set the stage for even more mergers and acquisitions.
Monsanto has approached Syngenta about a takeover that
would create a giant in the market for seeds and crop chemicals
with more than $30 billion in revenue. Getting a deal approved
by regulators won’t be easy -- and may not happen at all. To
address antitrust issues and help its case, Monsanto has planned
for a deal to include a sale of parts of the combined business,
a person familiar with the matter has said.
The biggest concerns may be tied to what would be an
unprecedented market share in soybeans and corn seeds for the
combined company. Syngenta’s operations in those areas would
appeal to a range of buyers from Dow Chemical Co. to BASF SE and
Bayer AG, said Colin Isaac of Atlantic Equities LLP. Even
private-equity firms could look.
Syngenta’s “seed businesses would be pretty easy to sell
for good multiples,” Isaac, a London-based analyst, said in a
phone interview. “People are always looking to buy share.”
DuPont Co. could also be a buyer of any assets that are
divested, said Bill Selesky, an analyst at Argus Research Co.

Dupont-Dow

There is another possibility: At Dow, activist investor Dan
Loeb once pushed for a breakup, and Chief Executive Officer
Andrew Liveris has suggested the company is open to divesting
its agriculture unit. Monsanto becoming a much stronger
competitor could be a catalyst for the $60 billion company to
more seriously consider taking that step, said James Sheehan of
SunTrust Banks Inc. That segment would be prime pickings for
DuPont and its Pioneer seed business, he said.
“That’s the deal that I’ve always expected to happen,”
Isaac of Atlantic Equities said in a phone interview. “It’s
attractive for Pioneer and it’s attractive for Dow in terms of
focusing their portfolio on the chemicals business and raising a
lot of cash.”
If Dow doesn’t want to sell directly to DuPont, both
companies could combine their agriculture businesses in a
separate entity, Argus’ Selesky said.

For Related News and Information:
Monsanto Still Has Heart Set on Biggest Chemical Deal: Real M&A
No Monsanto, No Problem for Syngenta on Path to Deal: Real M&A
Dow Chemical Breakup Is Better Than Status Quo: Real M&A
DuPont’s $5 Billion Gain Undercuts Peltz Breakup Plan: Real M&A
Top deal news: DTOP <GO>
Real M&A columns: NI REALMNA <GO>

To contact the reporter on this story:
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman