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Farallon Capital Management, LLC, is a global institutional asset management firm founded in 1986 by Thomas Steyer. It invests globally across asset classes, seeking superior risk-adjusted returns through bottom-up fundamental analysis that emphasizes capital preservation. While its investment philosophy remains consistent, its execution is flexible, allowing capital to shift among strategies, asset classes, and geographies based on prevailing opportunities. Farallon is headquartered in San Francisco and has offices in London, Singapore, Hong Kong, Tokyo, and São Paulo.
Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).
Farallon started new positions in Microsoft Corp. (MSFT), Comcast Corp. (CMCSA), Time Warner Cable (TWC), and Spreadtrum Communications (SPRD) and it sold positions in AutoZone Inc. (AZO) and Pfizer Inc. (PFE).
Why buy Microsoft Corp (MSFT)?
Microsoft’s stock has been on the rise recently on the back of positive earnings that beat analyst estimates this quarter, despite its core businesses being vulnerable to the decline in the PC market. Net income rose 17% to $5.24 billion, or $0.60 a share, in the fiscal first-quarter from $4.47 billion, or $0.53 a share, in the year-earlier period. It said on its earnings call that the PC market is showing signs of stabilization and growth was better than expected. Its devices and consumer revenue grew 4%, to $7.46 billion, while commercial revenue grew 10%, to $11.20 billion. The company said its enterprise revenue remained strong despite a tough macro environment, and that high customer satisfaction is driving a high enterprise agreement renewal rate. It made meaningful progress in its consumer business, including office 365 Home Premium, Skype, Bing, and SkyDrive. In terms of outlook, it expects the enterprise business to remain strong and anticipates that Surface, Xbox One, and a host of devices from its partners will do well in the upcoming holiday season.
The departure announcement of CEO Steve Ballmer on August 23 and the hunt for his replacement led to a spike in the company’s share price, but gains were erased when Microsoft announced the acquisition of Nokia’s phone business in a $7.2 billion deal on September 2.
With this acquisition, Microsoft aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing. Microsoft expects this acquisition will help it grow its footprint in the mobile market through better integration of the Windows Phone OS with Nokia’s hardware. According to Microsoft’s strategy rationale presentation for investors, it expects to acquire a 15% market share in the smartphone market by 2018 with Nokia’s support. In its annual shareholders conference, held in November, Microsoft said it has begun the transformation to a devices and services company. And with the One Microsoft realignment, it has improved the way it brings innovative products such as Surface, Windows 8.1, and Office 365 to the market.
The company’s board of directors recently declared a quarterly dividend of $0.28 per share. It announced at the beginning of this week that the launch of Xbox One on November 22 was the biggest launch in Xbox history, with more than 1 million consoles sold worldwide in less than 24 hours—surpassing day one Xbox 360 sales and setting a new record for Microsoft.
Farallon manages approximately $19 billion for institutions, including college endowments, charitable foundations, pension plans, and high–net worth individuals. According to its website, Farallon pursues multiple investment strategies on an opportunistic basis, which includes five core investment strategies: credit investments, value investments, merger arbitrage, real estate–related investments, and direct investments. Each investment is evaluated independently on a fundamental basis.
Farallon invests globally, focusing on both developed and emerging markets. It invests in public and private debt and equity securities and direct investments in private companies and real estate. It prioritizes preserving capital. While it values and employs risk management analytics, it primarily manages risk through rigorous research and analysis. It also seeks to build strong relationships with the management of the companies it invests in.
Farallon Capital Management founder Thomas Steyer attended Philips Exeter Academy and graduated from Yale University. He received his MBA from Stanford Business School, where he was an Arjay Miller Scholar. He announced in October 2012 that he would be stepping down from his position at Farallon in order to focus on political activism—in particular, advocating for alternative energy.