Graham & Doddsville An investment newsletter from the students of Columbia Business School Spring 2012 Inside this issue: Issue XV Jim Chanos P.1 Jim Chanos — Tom Russo —“Capacity to Tom Russo P.1 Rooting out Fraud Suffer” is Critical Julian Robertson P.1 Thomas A. Russo has been a partner at Gard- Alex Roepers P.1 ner Russo & Gardner since 1989. The firm Robert Luciano P.2 has over $5 billion un- der management, and Pershing Square P.4 he oversees $4 billion Challenge as general partner of Semper Vic Partners Finalist Pitches P.6 limited partnerships, as well as in individually Trip to Omaha P.14 managed accounts. Jim Chanos Prior to joining Gard- Mr. Chanos is the founder and ner Russo & Gardner, Tom Russo Editors Managing Partner of Kynikos Mr. Russo was at the Associates, a firm he founded in (Continued on page 31) Anna Baghdasaryan 1985. Throughout his career, MBA 2012 Mr. Chanos has identified and sold short the shares of numer- Alex Roepers — Joseph Jaspan ous well-known corporate finan- MBA 2012 cial disasters; among them, Concentration Key Mike DeBartolo, CFA Baldwin-United, Boston Chicken, Sunbeam, Conseco and to Outperformance MBA 2013 Tyco International. His most Jay Hedstrom, CFA celebrated short-sale of Enron Alexander J. Roepers is the shares was dubbed by Barron’s as founder and Chief Invest- MBA 2013 “the market call of the decade, ment Officer of Atlantic In- Alex Roepers Jake Lubel (Continued on page 16) vestment Management. Pre- vious employers include MBA 2013 Julian Robertson — Looking for Thyssen-Bornemisza Group and Dover Corporation, Competitive Spirit where he was responsible Visit us at: Mr. Robertson founded the legen- for acquisitions and divesti- www.grahamanddodd.com dary investment firm Tiger Man- tures. Alexander holds a www0.gsb.columbia.edu/students/ agement, one of the first hedge Master of Business Admini- organizations/cima/ funds. Mr. Robertson has trained stration from Harvard Busi- and supported some of the best ness School and a Bachelor hedge fund managers in the world of Business Administration (collectively known as “Tiger from Nijenrode University, Cubs”). He graduated from UNC- the Netherlands School of Chapel Hill and also served in the Business, which he obtained US Navy. in 1984 and 1980 respec- tively. Alexander is fluent in G&D: How did you get your start in Dutch, German and French. investing and what has shaped your (Continued on page 44) Julian Robertson (Continued on page 53) Page 2 Welcome to Graham & Doddsville We are pleasedvery pleased to present to pre- you ter for Graham & Dodd Invest- that Apple and Google will con- withsent youIssue with XV Issueof Graham XV of & Gra- ing, outlined his global value tinue to outperform and talked Doddsville,ham & Doddsville Columbia, Columbia Business equity investing strategy. Mr. about some personal qualities School’sBusiness studentSchool’s-led student invest--led Russo noted that he focuses on that he believes are key to suc- mentinvestment newsletter, newsletter, co-sponsored co- companies with high reinvest- cessful investing. bysponsored the Heilbrunn by the CenterHeilbrunn for ment opportunities by manage- Pictured: Bruce Greenwald at GrahamCenter for & DoddGraham Investing & Dodd and ments that possess the Alex Roepers, founder of At- the Columbia Student Invest- theInvesting Columbia and theStudent Columbia Invest- “capacity to suffer” through lantic Investment Management, ment Management Conference Student Investment Manage- early burdens on reported described his transition from in February 2011. ment Management Association. ment Association. profits in order to advance being “Mr. Divestiture” at an The Heilbrunn Center sponsors their competitive advantage. industrial conglomerate to es- the Applied Value Investing pro- TOO ADD Before we introduce you to Mr. Russo detailed his invest- tablishing his own firm, Atlantic gram, a rigorous academic cur- Pleasethis issue’s feel freecadre to of contact outstanding us if ments in Nestle, Mastercard, Investments that has had a very riculum for particularly commit- youinvestors, have commentswe would orlike ideas to Martin Marietta, Brown- successful investment track re- ted students that is taught by abouttake a themoment newsletter. to thank We sev- Forman, and E.W. Scripps. cord. Mr. Roepers outlined his some of the industry’s best prac- hopeeral individuals you enjoy who reading have Graham made investment process, which is titioners. &our Doddsville time at Columbiaas much as Business we We were thrilled to speak with centered on staying within his enjoytruly special. putting it together! Jim Chanos of Kynikos Asso- circle of competence and having ciates, one of the world’s most a very concentrated portfolio. -Our Editors, deepest Graham thanks & Doddsville go to successful short sellers and Mr. Roepers described the rea- Bruce Greenwald, Louisa someone we deeply respect for soning behind his investments in Serene Schneider ’06, his contributions to finding and Joy Global and Owens Illinois. Tano Santos, and the en- calling out fraud in corporate tire Heilbrunn Center’s America. Mr. Chanos dis- Robert Luciano, founder and Board of Directors for cussed the early days of his managing partner of VGI Part- their outstanding leader- career and outlined what quali- ners, outlined his investment ship of the Applied Value ties he believes are essential to philosophy, which closely mir- Investing program at Co- being a successful short seller. rors that of Warren Buffett. Mr. lumbia Business School. Mr. Chanos also talked about Luciano detailed his investment Their tireless contributions his bearish view on the Chi- theses behind Oracle and WD- to improving the invest- nese real estate market, the 40. Pictured: Heilbrunn Center ment management cur- U.S. natural gas industry and Director Louisa Serene Schnei- riculum at Columbia Busi- for-profit education sector. Our time at Columbia Business der at the CSIMA conference in ness School were greatly School was filled with many February 2012. noted and appreciated. We Julian Robertson, legendary memorable moments and great Louisa skillfully leads the Heil- would also like to thank Heil- founder of Tiger Management, friendships, and we are grateful brunn Center, cultivating strong brunn Center’s small but very talked about his history of to all the individuals who have relationships with some of the capable staff of Julia Kimyaga- mentoring numerous successful made our experience so unique world’s most experienced value rov and Preeti Bhattacharji. hedge fund managers. He also and wonderful. We hope you investors and creating numerous described the need for analysts enjoy reading this issue of Gra- learning opportunities for stu- Noted value investor Tom to focus on companies with ham & Doddsville where we have dents interested in value invest- Russo, member of the Advi- strong management teams. Mr. tried to highlight some of those ing. The classes sponsored by sory Board of Heilbrunn Cen- Robertson outlined his belief special moments! the Heilbrunn Center are among the most heavily demanded and highly rated classes at Columbia Business School. Robert Luciano — “Concentrate Capital In Your Best Ideas” Robert Luciano, CFA is Luciano spent five years the founder and Manag- as an Executive Director ing Partner of VGI Part- and Investment Manager ners. Mr. Luciano has with Caledonia Invest- over eighteen years ex- ments in Sydney. Mr. perience gained as a Luciano earned his portfolio manager, equi- B.Com and M.Com from ties analyst and account- the University of New ant. Prior to founding South Wales. Mr. Robert Luciano VGI Partners in 2008, Mr. (Continued on page 58) Page 3 2012 CSIMA Conference in Pictures William von Mueffling and Eduardo Silveira Mufarej Daniel Loeb Michael Karsch Bruce Greenwald and David Einhorn And the hundreds of guests and students that made it all possible... Daniel Krueger Page 4 2012 Pershing Square Value Investing and Philanthropy Challenge Students and alumni gathered on April 25, 2012 for the Fifth Annual Pershing Square Value Investing and Philanthropy Challenge, a value oriented stock pitch competition, co- sponsored by the Heilbrunn Center for Graham & Dodd Investing and Pershing Square Capital Management. The cash prize for the competition is $100,000, half of which is di- rected to the school for philan- thropic purposes, and the re- mainder to the winning teams. would stand on their own and Pershing Square Challenge Finalists Investment Idea The prize structure supports learn to deliver oral investment the goals for value investors of pitches efficiently and effectively. First Place Anna Baghdasaryan '12 Long doing well and doing good. Rohit Dhingra '12 Avon Products (AVP) Throughout the semester, invest- Second Place Jonathan Au ’13 Long William Ackman, of Pershing ment management industry prac- Square, kicked off the competi- titioners generously donated their Arjun Bhattacherjee ’13 Ingersoll-Rand (IR) tion by introducing the team of time and worked closely with the Rory Ellison ’13 judges. Each team then gave teams to provide feedback and Third Place Rod de Crayencour ’13 Long ten minute prepared presenta- suggest further areas of research. Jake Lubel '13 Legg Mason (LM) tion of the idea that they had Grant Smith '12 First place was awarded to the chosen, followed by Q&A. Michael Durand ’12 Long team of Anna Baghdasaryan David Hendrickson ’13 FleetCor Technologies (FLT) The five finalists were selected ’12 and Rohit Dhingra ’12 who from a pool of 36 teams, which presented a long recommenda-