Fall 2015

Ellie Mae is positioned to become the industry standard in the mortgage sector by providing a Software as a Service solution that streamlines the mortgage filing process. With a growing subscriber base and increasing revenue per subscriber, the company is expected to benefit from the industry's shift towards technology adoption, making it difficult for competitors to displace them.

Flotek Industries produces surfactants used in fracking, which initially seemed promising for increasing oil extraction. However, upon further diligence, it became clear that the U.S. onshore drilling market is evolving rapidly, with companies finding more efficient methods that could undermine Flotek's product demand. As a result, the thesis shifted to shorting the stock across the industry as production efficiency trends emerged.

Daqin Railway is the largest cargo railroad in the world and has recently gained pricing flexibility from the NDRC, allowing it to increase prices for the first time in years. With a strong EBITDA margin and a structural shortage of rail capacity in China, Daqin is well-positioned to benefit from further price hikes, making it an attractive long-term investment.

The U.S. housing market has disappointed investors, but signs of recovery are emerging, including improved labor markets and accessible financing. Builders FirstSource, as a lumber distributor, is well-positioned due to industry consolidation and cost-cutting measures, making it an attractive investment opportunity.

Helmerich & Payne is facing a significant decline in utilization in the oil services sector, which is expected to lead to a price-down despite market excitement about a recovery. The oversupplied machinery market suggests that their price-to-book ratio will be negatively impacted going forward.

Rentech Nitrogen Partners LP is positioned to benefit from favorable market conditions in the nitrogen fertilizer sector, making it an attractive long investment. The paired trade strategy suggests that while Rentech is expected to outperform, CVR Partners is likely to underperform, creating a compelling risk-reward scenario.

CVR Partners is facing headwinds in the nitrogen fertilizer market, which could lead to underperformance compared to its peers. This makes it a suitable candidate for a short position in the paired trade strategy with Rentech Nitrogen Partners.

Las Vegas Sands is likely to face challenges due to market saturation and increased competition in the gaming sector, making it a suitable candidate for a short position. The expected decline in revenue growth supports this bearish outlook.

After previously exiting our position in Apple due to concerns about slowing smartphone adoption and competitive pressures, we have re-entered the stock. We believe that Apple's value is being underestimated, particularly with potential growth in the automotive sector, where even a small market share could significantly impact earnings per share.

We identified LinkedIn as a strong investment due to its significant market penetration potential and strong competitive advantages in the talent management space. Our analysis suggested an earnings power of $8 per share, leading us to set a price target nearly 2.5 times the stock's trading price at the time, based on a 30x earnings multiple.

Ellie Mae is positioned to capture a significant market share among larger mortgage companies that have not yet adopted their systems. With current margins around 20%, there is potential for sales to double or triple, leading to much higher operating margins.

Amazon is positioned to dominate both e-commerce and the public cloud, with significant growth potential as global companies increasingly adopt AWS. The FAA's recent $100 million annual deal with Amazon highlights the scale of opportunity, suggesting that AWS could capture a majority of global IT budgets over time.

NetEase has a strong position in the mobile gaming market, with its recent launch of 'Fantasy Westward Journey Mobile' expected to generate around $1 billion in revenue. This is significant given the company's total revenue of $2.6 billion last year, and they have more mobile games in the pipeline that could provide additional upside.

Electronic Arts has effectively leveraged its strong intellectual property, particularly with franchises like FIFA and NFL Ultimate Team, to capitalize on the lucrative console market and the emerging mobile gaming opportunities.

By going long Rentech Nitrogen (RNF) shares and shorting CVR Partners (UAN) shares, investors can capitalize on the arbitrage opportunity created by RNF's sale to UAN. The market undervalues RNF's shares at $12.00, failing to recognize the additional value from cash distributions and the potential sale or spin-off of the Pasadena facility, which could add significant value per share.

Tenneco's recent share price decline is attributed to concerns over a slowdown in China and disruptions at a major customer, Volkswagen. However, the company is well-positioned to benefit from increasing global automotive emissions standards, which will drive demand for its emissions reduction components and systems, making it a strong long-term investment.

CVR Partners is acquiring Rentech Nitrogen's facility, which diversifies its input costs and enhances its operational efficiency, making it a compelling investment opportunity.

Tenneco is positioned to benefit from increasingly stringent emissions standards and enforcement, which will drive demand for its emissions reduction products. The company has a strong market share and is expected to grow its organic revenues faster than vehicle unit volumes due to significant per-vehicle content additions. Additionally, Tenneco's share repurchase program is expected to boost EPS in the near term, and the company has opportunities in adjacent markets.

Las Vegas Sands is facing significant headwinds due to a slowing Chinese economy, a corruption crackdown affecting spending, and oversupply in the gaming industry. The consensus is overly optimistic about recovery, creating an attractive short opportunity with a target price of $30, representing a ~35% downside from current levels.

Las Vegas Sands is facing significant headwinds due to declining revenues in Macau and increased competition from new casinos. The company's strategy to diversify into non-gaming revenues may not be sufficient to offset these challenges, especially with political and tax risks looming. A DCF valuation suggests a price target of $30, reflecting a bearish outlook on future earnings.

China Resources Enterprise owns 50% of CR Snow, the largest beer company in the world, and is expected to improve EBITDA margins significantly over the next five years due to industry consolidation and operational improvements. The recent bid for non-beer assets by China Resource Holdings is seen as a positive move for minority shareholders, enhancing the company's value.

Daqin is a monopoly rail infrastructure company that benefits from the ongoing demand for coal transportation in China. The company is expected to maintain strong volumes and profitability despite broader economic uncertainties, making it a valuable investment opportunity.

GEM has held a position in Oaktree Capital since acquiring shares from Castle Point's stake. They believe in the business model and have a strong understanding of the financial sector, which makes it a favorable investment.