Notes From Great Investors Best Ideas Conference (GIBI) Dallas 2017: Ackman, Einhorn & More ~ market folly

Friday, October 6, 2017

Notes From Great Investors Best Ideas Conference (GIBI) Dallas 2017: Ackman, Einhorn & More

The 11th annual Great Investors Best Ideas (GIBI) Dallas Investment Symposium just took place where managers shared investment ideas to benefit The Michael J. Fox Foundation for Parkinson's Research and Vickery Meadow Youth Development Foundation.  Below are some brief notes on the event:

Notes From GIBI Dallas Conference 2017

David Einhorn, Greenlight Capital

Still owns a huge position in General Motors (GM) but has been trimming it since it's grown too large (risk management, position sizing, etc).  Still his largest position by a longshot though.  Still thinks it's very cheap and points to an opportunity for a new shareholder base to get into shares.  Likes they've gotten rid of its riskiest international business and is investing in autonomous cars and electric vehicles: the future.

He also likes Tempur Sealy (TPX).  Thinks estimates are way too low (notes that management's incentives are way higher).  The company had a dispute with Mattress Firm and stopped selling its mattresses there.  Despite that, customers still actively sought out the TempurPedic brand, so the co is replacing its lost Mattress Firm sales elsewhere at higher margins.  Thinks there's also a reasonable chance MF comes back to them since MF has lost sales.

Einhorn said that his 'bubble basket' of shorts in highflying tech stocks like Amazon and Tesla are valued like profits don't matter ... ever.  He says eventually people will wake up and profits will matter and their stocks will crater.  He also pointed to somewhat of a cult following status that is attached to Tesla's stock with all the hype that Elon Musk continuously builds with various projects.  There's around 30 stocks in Einhorn's bubble basket.   He noted he owns a Tesla, but also points out that the company probably lost $20-30k selling it.  Says company hasn't figured out how to make cars profitable on a unit basis.  You can also read Greenlight Capital's Q2 letter here.

Bill Ackman, Pershing Square Capital

Pitched his newest long: Automatic Data Processing (ADP).  Has an activist position.  Thinks it's a quality business: simple, not capital intensive, secular tailwinds (sees lots of growth ahead).  Automating employees.  Ackman thinks the stock's a double.  We've posted Ackman's presentation on ADP previously.

Also mentioned the GSEs he's involved with: Fannie Mae & Freddie Mac.  Still owns and thinks there's huge upside there.  He originally pitched these plays three years ago at the same conference.  Thinks they will eventually trade multiples higher of where they are now.

He's still short Herbalife (HLF) and has lost millions on the bet as the stocks' up around 40% from his average short price.  Said that of the risk factors considered for the position, Carl Icahn coming in and buying 20+% of the company wasn't one he considered.

Noted he still owns Howard Hughes (HHC) and while he doesn't see any immediate catalysts, thinks it's a long-term play as a high quality business.

Says average investor can be plenty concentrated with 10-15 holdings.  Biggest mistake of his career?  Not selling when new information emerged that didn't jive with his investment thesis.  You can read Pershing Square's Q2 letter here.

Tom Russo. Gardner Russo Gardner

Spoke about global brands and various companies still controlled by the founding families.  His best idea was the company hit with a scandal and PR crisis: Wells Fargo (WFC).  Previously he had noted how his WFC stake has remain unchanged (around 6% of his assets) and that he thought the company simply became too fixated singly on one variable (cross-selling) which lead to a bunch of accounts being opened in customers names.  The company now suffers from poor optics but on a risk level, direct financial harm has been modest and he has faith in the legal process.

Andrew Wellington, Lyrical Asset Management

A couple of picks:  Flex Ltd (FLEX), co is seeing double digit growth in its bottom line and 50% of FCF going to shareholders.  Trading around 12x earnings.

Affiliated Managers Group (AMG): asset management play, owns equity stakes in boutique management firms.  Says they own really good managers.  Trading around 12x NTM earnings.

Van Hoisington, Wasatch-Hoisington US Treasury Fund

He concluded that we're heading to a recession as the Fed has restrictive policies already in effect and money and credit are slowing noticeably.  Structural impediments to growth are over-indebtedness globally as well as adverse demographics.  Thinks rates will stay lower. 

Jeanie Wyatt, South Texas Money Management

A few ideas: Citigroup (C) as a value play.  Thinks it could re-rate from almost 1x book value to closer to 1.4x.  Since the crisis the company has a better situation and less subprime.

KAR Auction Services (KAR):  notes 20% EPS growth, end markets that are accelerating as well.  Trading just over 22x next year's earnings but with a big opportunity ahead as various leases will be coming to term.

Electronic Arts (EA): video game stock that's benefited from going over the top (OTT) as it leads to higher margins than the typical video game distribution model of physical games, etc.  Accelerating sales growth.  Also sees new potential upside in e-sports. 

Vodafone (VOD): Stock has traded sideways but the company has improved in end markets.  Thinks it offers good downside protection as sales growth has accelerated.

For more stock picks from recent investment conferences, we posted up notes from the Sohn San Francisco Conference yesterday.

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