Winter 2015

First Solar is facing significant headwinds due to increasing competition in the solar industry and potential regulatory changes that could impact its profitability. The company's reliance on government incentives and its inability to maintain market share against lower-cost competitors raise concerns about its future earnings potential.

JetBlue Airways is well-positioned to capitalize on the growing demand for air travel, with a strong brand and customer loyalty. The company has a solid balance sheet and is expanding its routes, which should drive revenue growth and improve profitability in the coming years.

Schibsted Media Group is undervalued due to its strong digital transformation and growth in online classifieds. The company's diversified revenue streams and leadership in the Nordic market position it well for future growth, making it an attractive investment opportunity.

CDK Global is a leader in providing technology solutions for the automotive retail industry. With a strong customer base and recurring revenue model, the company is poised for growth as it continues to innovate and expand its offerings, making it a compelling long-term investment.

The Shaw Group has a strong balance sheet with over $1 billion in unencumbered cash and a solid management team that has demonstrated success in building the business. Despite positive developments, the stock price has declined, presenting an opportunity to average down on the position.

Investing in Six Flags was driven by the management of Jim Reid-Anderson, who has a proven track record of success in turning around companies. His plans for Six Flags post-bankruptcy were reasonable and achievable, leading to a successful investment.

Cott Corporation was initially considered for purchase at $18 per share despite its rapid rise from $3, as the potential for future growth was recognized. The stock eventually appreciated significantly, demonstrating the importance of focusing on future potential rather than past performance.

Chicago Bridge & Iron's acquisition of Shaw Group at a premium indicates the value of Shaw's business and the effectiveness of its management team, reinforcing the investment thesis for Shaw.

Buy Progressive Waste Solutions equity with a three-year base case share price of $46, representing ~55% upside from the current share price. The investment thesis is supported by a new management team focused on enhancing ROIC, favorable industry dynamics, and improvements in free cash flow generation that enable attractive capital allocation options.

Bill Ackman believes that Herbalife is a pyramid scheme and that the quality of work done by those who own the stock is poor. He asserts that if investors continue to hold the stock, they will ultimately lose 100% of their investment.

Ackman considered McGraw-Hill due to its valuable assets like the S&P franchise but ultimately decided against investing due to concerns over potential liabilities associated with the bond rating business and the risks of litigation.

Ackman is open to hearing contrary views on Valeant, indicating that he is aware of the significant debate surrounding the stock and is willing to consider opposing perspectives.

Zoetis is the largest company in animal health, benefiting from rising income levels and increasing demand for protein in diets. The companion animal health segment is also expected to grow as more affluent cultures care for their pets more. This positions Zoetis as a high-quality business with strong growth prospects.

Bill Ackman expresses a strong belief in being short Herbalife, suggesting that if the best arguments against it are not convincing, he would want to increase his short position. He highlights Amazon as a formidable competitor in retail, indicating a cautious stance towards retail investments due to Amazon's dominance.

Ackman discusses the challenges of GAAP accounting for companies like Valeant, suggesting that while it has been acquisitive, the focus should be on understanding the economic earnings rather than just reported earnings. This indicates a belief in the potential value of the company despite its accounting complexities.

Ackman discusses the creation of Pershing Square Holdings as a way to manage capital and pursue high-quality investments, indicating a long-term strategy focused on significant investments in companies with strong business quality.

Ackman notes that Air Products was brought to them by a shareholder of Canadian Pacific, suggesting a belief in the company's potential for improvement and value creation through their involvement.

Ackman indicates that Canadian Pacific came from an unhappy shareholder, suggesting that there is potential for value creation and improvement in the company, aligning with their investment strategy.

Bill Ackman mentioned spending a significant amount of time on Allergan, indicating a strong focus on this investment. The context suggests that he sees potential in Allergan's business model and growth prospects.

We liked the private label tissue business and saw potential for value creation under new management. The company has been buying back shares aggressively, indicating confidence in its future earnings power.

Orora, a spin-off from Amcor, has a strong market position and a management team with a proven track record of creating shareholder value. The stock was trading at a low multiple, and we believed it had significant upside potential due to cost-cutting measures and insider buying.

Despite market concerns about past management decisions and industry challenges, we see a strong core business with stable cash flow and significant cash earnings potential. The stock is undervalued, and we expect management to successfully navigate labor negotiations and separate profitable operations from less profitable ones.

We believe RJET is a better buy today as earnings are quickly ramping and management has proven its ability to execute. The stock has done notably well since being a $5 stock in 2011, and we expect the market to focus on $3.50 per share in pro forma cash earnings power over the next year.

If natural gas prices remain low, LyondellBasell may benefit significantly from the change in the macro environment, as the company could see improved margins and profitability due to lower feedstock costs.

Goodyear Tire has appreciated 370% over six years, significantly outperforming the market. Despite this growth, it remains undervalued at 9x earnings due to the market's slow recognition of its sustainable profitability improvements.

Avis is considered a quality, analyzable business that benefits from industry consolidation and is trading at a significant discount to its intrinsic value.

Hertz is viewed as a quality business that benefits from consolidation in the car rental industry and is trading at a significant discount to intrinsic value.

Western Digital is another quality business that is a beneficiary of consolidation and is trading at a significant discount to its intrinsic value.

AerCap is one of the cheapest stocks in the portfolio, trading at 7.9x earnings despite having appreciated 1,200% since initial investment. It operates in the commercial airplane leasing sector, which is expected to generate stable earnings.

Goodyear has transformed its business by exiting the low-end tire market and focusing on high-value performance tires. Despite past struggles, the company is now positioned for strong profits with projected earnings of $3 per share this year, trading at a modest valuation of just over 9x earnings.

AerCap's business model is less credit-sensitive than perceived, as it can repossess airplanes and find new renters easily. The acquisition of ILFC has significantly boosted earnings, with projections of $4.95 per share this year, making it an attractive investment.

Whole Foods is facing increased competition in the organic foods market, which is negatively impacting its earnings. Despite being a strong brand, the stock is overvalued and has further downside potential as competitors gain market share.

Coca-Cola is overvalued at a 20x earnings multiple given its stagnant growth of 5% per year. With changing consumer preferences and a lack of growth catalysts, the stock has significant downside potential, making it a profitable short.

First Solar is facing significant headwinds due to declining average selling prices (ASP) and a saturated U.S. utility-scale market. The expiration of the Investment Tax Credit (ITC) will further pressure pricing, and increasing competition will make it difficult for FSLR to maintain revenue levels. The projected decline in project volumes and margins suggests a price target of $30, representing a downside of approximately 25%.

JetBlue has significant upside potential as it implements shareholder-focused initiatives under new CEO Robin Hayes. The company is expected to improve its return on invested capital (ROIC) by over 700 basis points, driven by low-hanging fruit initiatives and potential load factor increases. At an 8x adjusted EBIT multiple for 2017, JetBlue could be valued at $26 per share, indicating a 64% upside from its current price of $15.15.

JetBlue is expected to exceed management's conservative guidance for additional operating income through initiatives like Fare Families and Cabin Refresh, which will significantly enhance revenue and ROIC. The implementation of an overbooking policy could further improve load factors and profitability. With a target price of $26.42, the stock presents a compelling upside based on its valuation metrics.

Schibsted is transforming into a leading online classifieds operator with significant growth potential in multiple countries. The company's strong position in Norway and Sweden, combined with its shift to monetization, is expected to drive 40%+ annual EBITDA growth, leading to a potential doubling of shares in the next 2-3 years as it aligns with its classified peers.

Schibsted Media Group is undervalued due to a significant monetization gap between its Scandinavian properties and its other sites. The company's core classified properties in Norway, Sweden, France, Spain, and Italy are estimated to be worth significantly more than its current valuation, with potential for substantial EBITDA growth as they drive monetization. The recent joint venture with Naspers is expected to enhance competitive positions in key markets, further supporting growth.

CDK is positioned for significant topline growth driven by the transition from analog to digital in the automotive retail industry, alongside substantial margin expansion and strong free cash flow generation. The company is expected to achieve a price target of $65, representing a 61% upside from the current price, based on a 17x forward FCF multiple.

Despite being a market leader in solar energy installations, SCTY's valuation does not account for significant business risks, including lack of differentiation, no cost advantage over peers, and regulatory threats that could impact profitability. The focus on market size and revenue growth rather than competitive positioning is a critical oversight.

We believe SolarCity's competitive advantages are eroding due to the emergence of new financing options for solar installations, which diminish their unique selling proposition. Additionally, the company's cost structure does not provide a significant advantage over competitors, and the impending reduction of the ITC will further harm their unit economics. Our analysis suggests that even under aggressive assumptions, the stock price can only justify 77% of its current value.

Cardtronics is facing a secular decline in ATM usage as society moves towards a cashless economy, which is negatively impacting their core business. Despite management's optimistic projections of growth, the reality is that their returns on capital are diminishing, and they are struggling to find profitable investment opportunities. We project a price target of $20, indicating a potential downside of approximately 50% from current levels.

Cardtronics is facing significant risks due to the potential loss or reduced economics of its largest contract with 7-Eleven, which represents a substantial portion of its revenues and EBITDA. The company's acquisitions have not created shareholder value, and declining ROICs indicate a deteriorating business model. With a projected downside of 40% to 80% over the next 12 to 18 months, the stock is recommended as a short position.

Progressive Waste Solutions is expected to generate $1 billion in free cash flow over the next three years, which is significant compared to its current market cap of $3.4 billion. The company has opportunities for accretive tuck-in acquisitions and is projected to improve its EBITDA margins closer to its peers, justifying a target price of $46 based on a 13.8x forward multiple of EBITDA-CapEx.