United Technologies Corporation (NYSE:UTX) is one of a few companies Daniel Loeb’s Third Point discussed in its Q4 2018 Investor Letter – you can download a copy – here. We already covered the fund’s thoughts on BAX. Now, we’ll take a look at what the fund had to say about United Technologies Corporation and its recent split into three separate companies.
We are pleased that the Board of Directors decided to split United Technologies Corp. (“UTC”) into three separate, focused companies. Unfortunately, the initial announcement caused confusion and created uncertainty about the free cash flow generation of newly-acquired Rockwell Collins. We believe management has largely rectified this by shortening the time to separation and providing better disclosure on Rockwell Collins’s free cash flow generation. We have urged management to quantify the elimination of stranded costs and explore a highly value-creating transaction for Carrier,and believe they are receptive to these suggestions.
Despite the separation announcement, UTC’s sum-of-the-parts discount has continued to widen and the valuation gap versus UTC’s closest multi-industry peer, Honeywell International, has reached a new 10-year high. The coming separation will shine a greater spotlight on the large valuation gap to UTC’s pure-play peers.During the separation process, we expect the management team to highlight UTC’s asset quality and to increase transparency around Pratt & Whitney’s very significant multi-year inflection in free cash flow generation.
travellight/Shutterstock.com
United Technologies Corporation is a Farmington, Connecticut-based multinational conglomerate that manufactures a variety of products for aerospace systems, elevators, fire and security industries, among many others. Year-to-date, its stock has gained 21.8%, having a closing price on April 2nd of $131.90. The company’s market cap is of $113.75 billion, and it is trading at a P/E ratio of 20.29.
At the end of the fourth quarter, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards UTX over the last 14 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Andreas Halvorsen’s Viking Global has the number one position in United Technologies Corporation (NYSE:UTX), worth close to $743.6 million, accounting for 4.2% of its total 13F portfolio. The second most bullish fund manager is Bill Ackman of Pershing Square, with a $594 million position; the fund has 10% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism include Ken Fisher’s Fisher Asset Management, Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners and Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC.
Interactive Strength Inc. (NASDAQ:TRNR – d/b/a/”FORME”) operates a digital fitness platform that combines premium connected award-winning fitness hardware products with 1:1 personal training and coaching (from real humans) to deliver an immersive experience and better outcomes for both consumers and trainers. Management believes that TRNR is the pioneer brand in the emerging sector of virtual personal training and health coaching. Moreover, this approach accelerates a powerful shift towards outcome-driven fitness solutions. It is part of a growing group of emerging companies that seek to leverage the Internet to provide users with a gym like experience within the comfort of their homes, however TRNR is differentiated with a virtual personal training offering and business model that capitalizes on time-zone efficiency. The Company recently announced the signing of an LOI to acquire a profitable, growing connected fitness business, which could dramatically changes outlook, revenue, profitability, and valuation for TRNR. The acquisition expected to close by the fourth quarter of 2023.
Warren Buffett never mentions this but he is one of the first hedge fund managers who unlocked the secrets of successful stock market investing. He launched his hedge fund in 1956 with $105,100 in seed capital. Back then they weren’t called hedge funds, they were called “partnerships”. Warren Buffett took 25% of all returns in excess of 6 percent.
For example S&P 500 Index returned 43.4% in 1958. If Warren Buffett’s hedge fund didn’t generate any outperformance (i.e. secretly invested like a closet index fund), Warren Buffett would have pocketed a quarter of the 37.4% excess return. That would have been 9.35% in hedge fund “fees”.
Actually Warren Buffett failed to beat the S&P 500 Index in 1958, returned only 40.9% and pocketed 8.7 percentage of it as “fees”. His investors didn’t mind that he underperformed the market in 1958 because he beat the market by a large margin in 1957. That year Buffett’s hedge fund returned 10.4% and Buffett took only 1.1 percentage points of that as “fees”. S&P 500 Index lost 10.8% in 1957, so Buffett’s investors actually thrilled to beat the market by 20.1 percentage points in 1957.
Between 1957 and 1966 Warren Buffett’s hedge fund returned 23.5% annually after deducting Warren Buffett’s 5.5 percentage point annual fees. S&P 500 Index generated an average annual compounded return of only 9.2% during the same 10-year period. An investor who invested $10,000 in Warren Buffett’s hedge fund at the beginning of 1957 saw his capital turn into $103,000 before fees and $64,100 after fees (this means Warren Buffett made more than $36,000 in fees from this investor).
As you can guess, Warren Buffett’s #1 wealth building strategy is to generate high returns in the 20% to 30% range.
We see several investors trying to strike it rich in options market by risking their entire savings. You can get rich by returning 20% per year and compounding that for several years. Warren Buffett has been investing and compounding for at least 65 years.
So, how did Warren Buffett manage to generate high returns and beat the market?
In a free sample issue of our monthly newsletter we analyzed Warren Buffett’s stock picks covering the 1999-2017 period and identified the best performing stocks in Warren Buffett’s portfolio. This is basically a recipe to generate better returns than Warren Buffett is achieving himself.
You can enter your email below to get our FREE report. In the same report you can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12-24 months. We initially share this idea in October 2018 and the stock already returned more than 150%. We still like this investment.
Free Report Reveals
Warren Buffet's Secret Recipe
Our Price: $199FREE
We may use your email to send marketing emails about our services. Click here to read our privacy policy.
