TPG-Axon Capital starts new positions in 3Q 2013

Part 7
TPG-Axon Capital starts new positions in 3Q 2013 (Part 7 of 7)

TPG-Axon Capital buys CNX, M, OUTR, and DDS and decreases positions in ROC, GNC, and WYN—13F Flash G

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TPG-Axon Capital Management LP (TAC) is a privately owned $4 billion hedge fund firm founded by Dinakar Singh in February 2005, in partnership with private equity firm Texas Pacific Group. TPG-Axon Capital Management is based in New York, with additional offices in Hong Kong and Tokyo.

In this six-part series, we’ll go through some of the main positions TPG-Axon Capital traded this past quarter.

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).

The fund started new positions in Consol Energy (CNX), Macy’s Inc. (M), Outerwall Inc. (OUTR), and Dillard’s Inc. (DDS) and it decreased positions in Rockwood Holdings Inc. (ROC), GNC Holdings Inc. (GNC), and Wyndham Worldwide Corp. (WYN).

Why sell Wyndham Worldwide Corp. (WYC)?

Hospitality company Wyndham Worldwide Corporation reported positive 3Q 2013 earnings that were above analyst estimates. Diluted EPS was $1.41, an increase of 25% from $1.13 in 3Q 2012. Revenue was $1.4 billion, an increase of 13% from the prior year. The increases in revenues and adjusted net income reflect stronger operating results across all of the company’s businesses. Earnings per share also benefited from the company’s share repurchase program. It saw revenue growth in all its three operating segments—Lodging, Vacation Exchange and Rentals, and Vacation Ownership. In its Vacation Ownership segment, it said a change from the timeshare development model to an asset-light model is driving longer-term sustainable growth with better cash flows and returns.

The company repurchased 2.7 million shares of common stock for $160 million during the third quarter of 2013. From October 1 through October 22, 2013, it repurchased an additional 0.8 million shares for $50 million. Its remaining share repurchase authorization totals $732 million as of October 22, 2013.

For full-year 2013, the company expects revenues of approximately $4.925 to $5.100 billion and adjusted EBITDA of approximately $1.140 to $1.165 billion. In an environment with modest economic growth in the U.S. and recovering economies in many of the other countries in which it operates, it expects to deliver EBITDA growth within its target range of 6% to 8%. It said currency movements have been a significant headwind this year against guidance assumptions, creating a $14 million drag on EBITDA guidance. The outlook for the company appears positive on the back of new sales initiatives, marketing alliances, and a robust development pipeline.

Wyndham Worldwide provides a wide range of hospitality products and services through its global portfolio of world-renowned brands. The world’s largest hotel company based on the number of properties, Wyndham Hotel Group is home to many of the world’s best-known hotel brands, with over 7,440 franchised hotels and over 638,300 hotel rooms worldwide. Wyndham Exchange & Rentals is the worldwide leader in vacation exchange and the world’s largest professionally managed vacation rentals business, providing more than 5 million leisure-bound families annually with access to over 106,000 vacation properties in 100 countries through its prominent exchange and vacation rental brands. The industry and timeshare ownership market leader, Wyndham Vacation Ownership develops, markets, and sells vacation ownership interests and provides consumer financing to owners through its network of 190 vacation ownership resorts serving approximately 915,000 owners throughout the United States, Canada, Mexico, the Caribbean, and the South Pacific.

TPG-Axon Capital buys CNX, M, OUTR, and DDS and decreases positions in ROC, GNC, and WYN—13F Flash GEnlarge Graph

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TPG-Axon Capital Management, the activist hedge fund firm, provides its services to high–net worth individuals, pension funds, and banking institutions. It manages limited partnerships for its clients. The firm invests in the public and private equity markets across the globe. It typically invests in healthcare, pharmaceuticals, financial services, technology, energy, and basic materials and retail.

Founder Dinakar Singh served as a co-head of the Principal Strategies Department at Goldman Sachs until early 2004. He became a Partner at Goldman Sachs in 1998. Prior to this, he spent four years in Hong Kong, establishing the proprietary investing effort in Asia. He serves on the President’s Council on International Activities and is the Trustee of the Goldman Sachs Foundation. Singh has been a Trustee of Cold Spring Harbor Laboratory Inc. since November 2010. He is also the Founder and Chairman of the Spinal Muscular Atrophy Foundation. He graduated from Yale University in 1990.

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