EFTA00955459.pdf

From: Paul Barrett To: Jeffrey E. <jeevacation(r{:gmail.com> CC: Rich Kahn c Subject: FW: Portfolio Changes Date: Wed, 20 Jun 2018 16:51:45 +0000 Attachments: Buy_and_Sell_recommendations.pdf Inline-Images: image003.jpg Jeffrey As a follow up to our meeting: • Keep the $72MM in fixed income which I will manage as I have done up until now (focus remains on shorter dated HY and Pfds targeting 5-8% type yields) • My preference is to liquidate all my remaining equity positions and move $9MM into an Interactive Brokers account for trading. If my equity report card is going to be on the $9MM trading account then that should be the focus. As instructed I will focus my equity trading on 3 positions using $3MM of capital per name at any given time including the use of options if appropriate. However if we were to keep some positions I would: o HOLD • BABA — cloud business in China; Ant Financial payments business; Chinese consumer exposure • GOOG — GDPR a big boost to GOOG; cloud business growing; mobile search revenue opportunity remains • AMZN — AWS, search business underappreciated, core business remains healthy • MLPs — yielding 8%. US economy remains strong supporting volume growth; • KRE (regional bank ETF) - deregulation; potential for higher dividend payout ratios; M&A; funding of small biz capex given 100% tax write off • Tencent — remains global #1in eGaming, huge monetization potential with WeChat and QQ, 20% ownership of Didi. EM headwinds could persist short term. • Ubisoft — keep half. Stock has had a great run; two AM titles being released; huge opportunity in China following the Tencent partnership • AVGO — exposure to data center growth to offset wireless weakness; noise around QCOM takeover fading • Allergan — drug pricing pressures priced in. Sentiment still very negative in the space. Potential asset sales would help unlock some value. • MSFT and Equinix — both names to capture data center/cloud growth. SAAS and Azure to lead to further MSFT re-rating. These positions total $19.9MM (current value) • We have 4 structured notes which I would hold given the deep buffers we have: o $2.5MM linked to Eurotoxx 50; matures in March 2019 with a 26.5% buffer. Index down 2.5% o $3MM linked to Eurostoxx Banks; matures Apr 2019 with a 28% buffer. Index down 16% o $3MM linked to Japan Banks; matures Feb 2019 with a 25% buffer. Index down 15% o $3MM linked to Merrill Lynch Index (sells deep out of the money SPX put spreads and buys VIX calls). Matures Apr 2019. Delta 1. Up 1%. EFTA00955459  These total $11.5MM notional or $10.5MM current value o Sell: • Nintendo — price action in the stock not reflecting the success of Switch sales; slow to get into the China market; market worried it will miss the trend towards games with battle royale format • iShares South Korea ETF — shrinking Fed balance sheet likely keeps EM under pressure. Samsung is the 3rd largest holding in EEM but represents 20% of the Korean ETF. Does not offer the same growth prospects as Tencent. • CD Projekt — I sold half yesterday. Stock has had a great run. • XLF (Financials ETF) — more upside in regional banks • GS — Market not rewarding improved FICC business. Again I think the market will give a higher multiple to regional banks as deregulations help ROEs. • JD.Com — this is the Amazon of China. Stock has been volatile and they have built an amazing distribution network. Margin pressure keeping a lid on the upside. • General Dynamics, Lockheed Martin, Northrop and Raytheon — I think these could be dead money for the time being. While I still think global defense spending will continue to increase, the time frame is stretching out and multiples will likely contract in the near term to reflect that. Longer term I still very much believe in the stocks. • Naspers — switch back into Tencent • Clean up smaller positions: BUD, BAC • Switch GE into a risk reversal — Sell Dec 2018 $10 Puts and buy $16 calls. At $10 that is a $87BIn market cap which is about equal to conservative estimates of their Aviation business. These total $19.7MM current value • Remaining legacy positions to discuss: Biogen, Centene, FMI, Sangamo, Sequential Brands, BMY, Disney. Paul Paul Barrett Alpha Group Capital LLC 142 W 57th Street, 11th Floor, New York, NY 10019 (o) (c) EFTA00955460