Great Investors' Best Ideas Conference Notes 2013: Price, Akre, Gabelli, Pickens, Russo & More

Below are some brief notes from the 7th annual Great Investors' Best Ideas Conference in Dallas benefiting the Michael J. Fox Foundation for Parkinson's Research and the Vickery Meadow Youth Development Foundation.


Notes From Great Investors' Best Ideas Conference


Michael Price (MFP Investors): He pitched three ideas:  long Hospira (HSP), long Songbird Estates (SBD.LN) and long Dolby Labs (DLB).  HSP has seen value guys buying it, transitioning away from growth investors as the investor base changes.  The company has good free cash flow and he thinks the stock can hit $60.  His thesis on Songbird is a discount to NAV story (around 30%).  Dolby (DLB) has a ton of cash and no debt with huge royalty streams (80% of revenue).  As tablets and PCs continue to grow, they'll make money.


Chuck Akre (Akre Capital Management):  His picks were Moody's (MCO) which he likes due to its oligopoly position, solid return on equity and pricing power,  as well as O'Reilly (ORLY), the auto parts supplier which recently bought CSK Auto and the integration has gone well and now they're buying back shares.  His presentation also focused on how you should stick with your circle of competence and acknowledge when you're unsure of things. Focus on 3 things in a business:  growth of capital (high ROIC), good management, and solid reinvestment (how they used past FCF).  The price you pay is very important.


T. Boone Pickens (BP Capital):  He pitched Diamondback Energy (FANG) which he likes for its growth potential, no debt and a lot of cash.  He also likes Basic Energy Services (BAS) as excess capacity has been taken out.  He also touched on his picks from last year: National Oilwell Varco (NOV) which he still likes, as well as Pioneer Resources (PXD), almost a double and he likes the Permian basin acres (continues to like this stock as well).


Karen Finerman (Metropolitan Capital Advisors):  She pitched North Atlantic Drilling (NADL.NS) traded in Norway which was a spin-off from Seadrill (SDRL).  The spread between non-Norway rates and Norway rates is very big and many contracts already locked in.  She likes the cheap valuation, big dividend (potential for it to grow), says there's limited downside due to the backlog. There's also a catalyst with an IPO coming for a US listing and it won't be too dilutive. 


Tom Russo (Gardner, Russo & Garnder):  He pitched Nestle (NSRGY) and Berkshire Hathaway (BRK.A/B).  It seems like Russo always pitches Nestle when he speaks somewhere.  He's a global value investor and is looking for companies like See's Candies and invests for the long-term.  They have a lot of European companies in their portfolio and like market volatility as it provides opportunities to long-term investors.  The last major portfolio buys they made were AB Imbev (BUD) and Mastercard (MA) 3 years ago.


Mario Gabelli (Gabelli Funds):  He presented Cablevision (CVC) as a potential buyout candidate with John Malone (and Charter Communications) active and pushing for consolidation.  Will the Dolans sell CVC?  Argues that the company is worth up to $23 in a buyout, versus current levels of around $16.


Caroline Cooley (Crestline Investors):  She's focused on event-driven plays.  She specifically mentioned Macquarie Infrastructure (MIC) which is involved with infrastructure building, has a nice yield and could see it head higher.  It's undervalued because it cut the dividend in '09 and has limited sell-side following. says this story is probably in the middle innings.


Tom Gayner (Markel):  He pitched General Electric (GE).  He pitched the same stock at GIBI in 2007 when it was $40 and now the stock's at $25.  They still own shares and now have a $23 cost basis.


For more conference notes, we also posted up notes from Invest For Kids Chicago (Lasry, Eisman, Cooperman).

John Paulson on Gold, Housing/Real Estate & Risk Arbitrage: Delivering Alpha Conference

John Paulson, founder of hedge fund firm Paulson & Co, sat down with CNBC's Carl Quintanilla at the Delivering Alpha Conference today and touched on numerous topics, mainly focusing on gold and the housing recovery/real estate.  He noted that his returns this year at his main funds range from 5% and 32%.


Paulson on Gold

He's been getting a lot of negative publicity for his Gold Fund.  However, he points out that this fund is only around 2% of his assets under management.  He was looking for a currency alternative to the US dollar in the event we get inflation, and he notes that gold has been an excellent candidate for this in the past.

Paulson said, "Although the Fed has printed a lot of money to date, there is little inflation.  Some (investors) who bought gold have lost patience.  The rationale for owning gold has not gone away.  The consequences for printing money over time will be inflation... it's just difficult to predict when."

He thinks gold is in a 'pause period' right now and sees demand for gold increasing again and points out that it's always been volatile.  He thinks it's an important part of anyone's portfolio.


Paulson on Housing / Real Estate / Land

They took a long-term view on housing, as it's a cyclical area (7 years up, 7 years down).  They saw a peak around 2006 (and shorted subprime) and they think it's bottomed so they've gone long.  He sees it as the beginning of the recovery and said it could last another 4-7 years, inviting others to jump in, saying "it's not too late."

Paulson went on to say, "Buying a home is the best investment an individual can make.  Affordability is at an all time high.  You can lock in rates of a fixed rate mortgage and get the benefits."

He then continued, noting, "I'm not sure (home prices) will increase 10% every 5 years, but probably around 5-7%."

Paulson has exposure in real estate via land as he says land is actually affected the worst in real estate cycles.  He noticed this pattern in the crisis of 1990, so he set up special real estate funds to exclusively buy entitled lots across the country.

Prices fell almost 80% from their peak value in 2006.  They like to buy in distressed situations (from banks, builders, etc) in growth areas of the country.  They've focused on Arizona, California, Colorado, Nevada, and Florida.

They've also played securities:  Before/during the crisis, they shorted BBB tranches, then started buying AAA tranches that fell in price by 40%.

He also highlights his stake in Realogy (RLGY), the largest residential broker in the country (we flagged Paulson's stake in RLGY late last year and also pointed out how Lone Pine Capital bet on RLGY recently as well).

On his bet on the housing recovery, John Paulson said he's as sure of this bet as he was about his subprime short.


Paulson on His Legacy Risk Arbitrage Strategy

Paulson's legacy fund strategy is merger arbitrage.  He talked about how companies he likes to buy are often ones from the announced deals that could get a competitive bid.  He's also looking to see which industries will see consolidation and take a stake in companies that could be takeover targets.

He also talked about his stakes in Sprint and Leap Wireless that have panned out well.

Paulson also noted how there's a lot of talk/chatter in the cable business.  He pointed to John Malone's stake in Charter Communications (CHTR), which he thinks will acquire more cable assets.  While there's been talk of Time Warner Cable (TWC), he says that's a large entity.  He also named Cablevision (CVC) as a potential target, but notes that's up to the Dolan family.

In risk arbitrage, he says "There's always a regulatory risk, and that's an important part of the analysis."

Paulson said he never considered retiring after his successful big subprime bet: "The goal in money management is not to do one great year, it's to compound returns over many years."  He says he'd like to manage money another 20 years, as he admires Warren Buffett and George Soros.

Video from Paulson's interview is embedded below:




For more from the Delivering Alpha Conference, head to:

- Nelson Peltz on PepsiCo & Mondelez

- Best ideas panel with Mark Kingdon, Chris Hohn, Jim Chanos & Lee Cooperman

- Larry Robbins & Jacob Gottlieb on healthcare plays

- Carl Icahn on activism 

JANA Partners 2010 Letter: New Positions in Cablevision (CVC), Williams Companies (WMB)

Barry Rosenstein's hedge fund JANA Partners released its year-end 2010 letter and in it we see they've returned 14.3% annualized since inception in April 2001. JANA returned 8.4% last year and you can see how they stack up against others in our post on 2010 hedge fund returns.

New Positions

We'll start with the newest additions to JANA's portfolio as they fall in the special situations category. They like these companies now that they are considering value-maximizing moves.

Cablevision (CVC): This cable company caught their eye due to the announced spin-off of Rainbow Media (cable networks that include the hit show Mad Men). This tax-free transaction will take place by the middle of the year and JANA likes that this spin-off will leave a more pure-play cable company that could be a consolidation target.

Market Folly readers will recall that many hedge funds owned CVC earlier last year (including JANA) due to the company's spin-off of Madison Square Garden (MSG) in a value-unlocking event. We wouldn't be surprised to see more event-driven/catalyst aficionados purchasing this name for the same reasons JANA has.

Williams Companies (WMB): Rosenstein's hedge fund has previously owned this stock before and returned due to the CEO's retirement in October 2010. JANA says, "We expect that WMB will find a way to separate their large exploration and production portfolio from their pipeline assets."

Renault SA (RNO FP): JANA is looking for the company to set higher free cash objectives and to resume dividend payments.

Embedded below is JANA Partners' year-end 2010 letter where you'll also find updates on their stakes in TNT NV (TNTTY), Charles River Labs (CRL), and Convergys (CVG). Email readers come to the site to read the letter:



For other hedge fund letters, we've started to post a bunch of other prominent manager commentary including:

- David Einhorn's Greenlight Capital letter
- John Paulson's year-end letter to investors
- Summary of Kleinheinz Capital's letter
- Dan Arbess & Xerion Fund's 2011 strategy