Whitney Tilson, Carlo Cannell, Alexander Roepers: Notes from Value Investing Congress ~ market folly

Thursday, October 14, 2010

Whitney Tilson, Carlo Cannell, Alexander Roepers: Notes from Value Investing Congress

Continuing our coverage of day two of the Value Investing Congress, we have summaries of the presentations from Whitney Tilson & Glenn Tongue (T2 Partners), Carlo Cannell (Cannell Capital), as well as Alexander Roepers (Atlantic Investment Management).

If you missed it, we've posted a plethora of resources from the event, including:

- Presentations from John Burbank & Lee Ainslie
- Bill Ackman's Q&A session from the Congress
- Presentations from David Einhorn, Kyle Bass, & Mohnish Pabrai
- Summaries of speeches from fund managers Zeke Ashton, Guy Spier, & Michael Lowitt

Next, onto the last round of speakers at the Value Investing Congress:

Carlo Cannell ~ Cannell Capital

The fund manager's presentation was named after 'Megaloceros Giganteus,' or an Irish elk that became extinct. Cannell says that over a long enough timeline, all companies will die and his talk zeroed in on a company he believes to be on the verge of extinction. He is short Pitney Bowes (PBI), a company that he says has an obsolete business model. There has been a decline in mail demand and this is hurting the mail processing equipment company.

Cannell warns that it might not be an 'actionable' short at the moment. At the same time, he cautions that stubborn short sellers can be come extinct just as easily. Remember the old market adage? The market can stay irrational longer than you can stay solvent. This isn't the first fund manager we've seen with a negative stance on Pitney Bowes. In the past, we've seen that Matt Iorio's White Elm Capital has owned puts on PBI for numerous quarters.

Two companies that are on Cannell's watchlist as potential shorts are Buffalo Wild Wings (BWLD) and Texas Roadhouse (TXRH). You can view notes from a previous talk by Cannell here.

Whitney Tilson & Glenn Tongue ~ T2 Partners

Tilson and Tongue began their presentation focusing on the economy and their fund has been positioned conservatively given their tepid economic outlook. The T2 managers highlight that the market is likely to remain range-bound, trading sideways via oscillations in either direction that cancel each other out. Housing remains the biggest issue to the economy as prices still have further to fall and inventories need to be absorbed. As such, T2 Partners is short the homebuilders via the exchange traded fund XHB.

The hedge fund is still long BP (BP) as they purchased it back in the company's darkest hour as shares tanked due to the unfortunate oil spill. He jokingly said that he's thankful for Jim Cramer, who he has utilized as a contrarian indicator. Tilson thinks the stock is easily worth $50 (it currently trades around $41 per share, so 20% upside potential). Fears from the oil spill have been greatly overblown and T2 feels the company is still cheap and will reinstate the dividend at some point.

Regarding other portfolio positions, recall that Tilson has been short InterOil (IOC). We've also detailed T2 Partners' latest letter to investors for those interested.

Alexander Roepers ~ Atlantic Investment Management

Roepers typically runs a concentrated portfolio and focuses on mid-cap stocks. He likes predictably profitable companies with solid balance sheets and solid cashflows. Roepers will focus on companies with market caps of $1 billion to $20 billion with a holding period of typically 1-3 years.

He pitched Owens Illinois (OI), pointing to its very strong moat and increasing share in emerging markets and thinks it goes to $45 per share (currently trading around $27). Roepers labeled the company a growth business and points to their packaging business in particular. Hedge fund Viking Global had previously held a position in OI, but they sold completely out in the first quarter of this year.

He also mentioned positions in Xerox (XRX) which he views as an acquisition target and targets $18 per share as a fair valuation of the company. The manager also mentioned ITT (ITT). Lastly, Roepers also rattled off positions in Rheinmetall (RHMGY) in Germany, as well as Muraka and Creata Water.

That wraps up our series of notes from the event. You can scroll through our entire coverage of the Value Investing Congress by clicking here. Stay tuned because in the coming days we'll take in-depth looks at some of the investment ideas from select hedge fund managers. Don't miss out! Receive our free updates via email or free updates via RSS reader.

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