Value Investing Congress: Notes From Day 1 (Einhorn, Robertson, Greenblatt) ~ market folly

Tuesday, October 20, 2009

Value Investing Congress: Notes From Day 1 (Einhorn, Robertson, Greenblatt)

The Value Investing Congress is finally here and it's time to hear some investment ideas from some of the most prominent hedge fund players in the game. Yesterday marked the first day of the 2-day extravaganza and attendees heard from David Einhorn of Greenlight Capital and Julian Robertson of Tiger Management among other notable speakers. Let's jump right into their thoughts.

David Einhorn (Greenlight Capital)

Einhorn spoke with prepared remarks regarding a few topics but he really went after Ben Bernanke, Timothy Geithner, and government policy in general. There are two main things to take away from Einhorn's speech. Firstly, he likes gold. A lot. A long time ago we covered his first foray into gold via the exchange traded fund GLD. Since then, he has moved into physical gold as he prefers the physical commodity to the ETF. Just a few weeks ago at another hedge fund symposium he confirmed his fondness for the precious metal. Yesterday he has said that his case for gold is not inflationary but instead is based on poor government policy. And, he even stated that his firm's 'horde' of gold is stored somewhere nearby in New York. Secondly, he focused on the potential for a currency crisis to cause a domino effect in terms of re-assessing credit risk of other fiat currencies. He has bought long-dated options that will profit if higher interest rates come to fruition in countries like Japan and other developed nations, noting that these are 4-5 year plays.

We want to leave our brief summary at that because below we have attached David Einhorn's speech from the Value Investing Congress in its entirety. It truly is a must-read, so embedded below is his presentation:

Alternatively, you can also download the .pdf here. For more ideas from Einhorn, also check out his short thesis on the ratings agencies. Lastly, you can view some more of Greenlight's portfolio holdings here.

Julian Robertson (Tiger Management)

Julian did not have prepared remarks and instead just fielded questions and talked markets. He again focused on the notion that the US cannot keep spending more than it is earning, something he's been harping on during his recent media appearances. Since Julian touched on a variety of topics, we'll just present his thoughts in quick hits below. He was bullish on solar but says that China 'could be a big bubble.' As he did in his interview with the FT, Julian again touched on his thoughts on gold. He thinks that shorting long-term bonds is a better inflation hedge than gold. He thought gold bugs to be 'certifiably crazy' and noted that it is essentially the same price it was 30 years ago as there is no real supply and demand, everyone just saves it.

Turning to equities, Robertson mentioned that he is still bullish on Mastercard (MA) and Visa (V) as we've noted many times on the blog before. Numerous Tiger Cub hedge funds have also accumulated large stakes in these names over the past year. He also revealed that he is bullish on Intel (INTC) and Google (GOOG) as they have a low price relative to their EPS (earnings per share) potential. Citing these plays, Robertson said that his approach as a value player has shifted to one that looks at if a stock is trading at a low price relative to the expected earnings for the next few years. His (and many Tiger Cubs') investment style seems to focus on value, but still tolerates growth-at-a-reasonable-price (GARP) plays. Also, he again mentioned he is bullish on the currencies of Norway, Czech Republic, and New Zealand while he is bearish on the UK Pound Sterling.

Since we often cover the Tiger Cub funds here in our hedge fund portfolio tracking series, we thought it was interesting that Julian could sum up their success very succinctly. Robertson credited the Tiger Cubs as smart, honest, and competitive. Those are qualities he has always looked for in fund managers and he continues to seed various funds with managers that exude these qualities. It's obviously a different role than what he'd been used to in the past (running Tiger Management). However, he's loving what he's doing and one can only imagine the think-tank of ideas that goes on in discussions amongst Julian and the Tiger Cubs. For more insight from Robertson, check out his play on higher interest rates, his recent interviews, and our profile on the Tiger Management founder if you're unfamiliar with him.

Joel Greenblatt (Gotham Capital)

Today Joel Greenblatt came out and unveiled Formula Investing, his new online management venture. The noted value investor and hedge fund manager of Gotham Capital sat down with CNBC to explain his value investing formula and how he's laid it out in model portfolios. Embedded below is Joel's interview:


Also at the Congress yesterday was Roger Nierenberg of D3 Family Funds. He took a 'learn from the past' approach and highlighted some of his battle wounds, highlighting the use of 13D and 13G filings. Nierenberg said, "Investing is not only about the numbers, it's also about the people and the process. Selling is not the only option when confronted by the issues of performance and governance. A lot of times, the dogs we decide to take home are improvable." He also went on to say that corporate governance movement can feel like a "faith based movement where people who advocate radical solutions often don't think things through." Thanks to for that great quote and make sure to check out their notes from day 1 as well.

In the end, interesting observations and insight from two of Wall Street's most watched hedgies. Einhorn has been touting the gold play for some time now and it appears that his conviction has steadily increased over time. Julian also shares Einhorn's concern over fiat currency and a ballooning deficit. Stay tuned for more updates from day two of the Value Investing Congress. In the mean time, make sure to also check out our notes from the Great Investors Best Ideas symposium where numerous prominent hedge fund managers recently presented investment ideas.

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