Notes From Great Investors Best Ideas Conference (GIBI) Dallas: Einhorn, Pickens, Gabelli

Below are some notes from the 2016 Great Investors Best Ideas (GIBI) conference in Dallas, TX.  It featured prominent investors sharing investment ideas to benefit the Michael J. Fox Foundation for Parkinson's research and Vickery Meadow Youth Development Foundation.


Notes From Great Investors Best Ideas (GIBI) Dallas Conference 2016

David Einhorn (Greenlight Capital):  Likes Mylan (MYL), thinks the Epipen situation is overblown relative to the rest of their business as they're mainly in generic drugs.  "So the earnings that we're looking at in 2018 are in the low $6's and we think only about 25 cents of it comes from EpiPen, so you're gonna earn something in the high $5s, excluding EpiPen and the stock's today in the mid $30's."

Contrasted the situation to that of Mallinckrodt (MNK) which bought QuestCor, a formerly highly shorted hedge fund name.  Their Acthar Gel drug has raised prices from $40 in 2001 up to a whopping $40,000 a dose but you don't hear about it as much because less people use it but says they're more exposed to potential health care focus on lowering drug prices given Acthar is a much larger portion of MNK's profit. 

Thinks General Motors (GM) is cheap and can earn its entire market cap before Tesla turns a profit.  Laid it out as follows:  stock could fall 3/4 and still has enough to pay the dividend.  Another quarter of the earnings are stock buybacks so you're basically getting a 5-6% share reduction, a 5% dividend so you're almost getting a 11% return just by sitting around. 

Thinks the Rite Aid (RAD) deal closes and separately also sees upside in Chemours (CC).  You can view his thesis on Chemours in Greenlight's Q2 letter.

Talked about the active vs passive investing debate.  Noted that "It seems to me that passive money management strategies are fundamentally momentum strategies.  In other words, the more the stock goes up, the more it becomes weighted in the index.  The more it becomes weighted in the index, the more important it becomes.  It continues going up, it doesn't ever revert."  Also called stocks like Apple (AAPL), Herc Holdings (HRI), and CIT (CIT) 'very cheap stocks.'



Boone Pickens (BP Capital):  Sees oil at $60 by the end of 2016 and up to $70 by the end of next year.  Likes EOG Resources (EOG) as well as Pioneer Natural Resources (PXD). Says 'you can't miss' on the later, argued that the only thing that can mess up his thesis is a recession.  Says PXD has a huge amount of oil.  (In the past we've posted how David Einhorn has/had been short PXD.)  Pickens says he's up 300% this year



Mario Gabelli (GAMCO Investors): Likes Herc Holdings (HRI), recent spin-off from Hertz Global (HTZ),  as a play on infrastructure: thinks EBITDA margins widen up to 1000 basis points.  Says the biz is growing 4-5% and is a highly fragmented biz but with 3 major players (other two being Ashtead (LSE:AHT) and United Rentals (URI).  Thinks stock triples over next 5 years.  He also posted about HRI on his Twitter account here.



Andy Beal (Beal Financial): He was pretty bearish and argued that government policies are basically depriving them of potential investment opportunities and basically said to get out of everything.  Talked up rental real estate.



Lisa Hess (SkyTop Capital):  Formerly of Loews, now manages SkyTop.  Her pick was Constellium (CSTM) as a proxy for more use of aluminum in automobiles etc.



Caroline Cooley (Crestline Investors):  Long Shutterfly (SFLY).  Says they have 60% market share and likes it as a growth play.  Said she's not worried about competition from the likes of Amazon (AMZN) and others like Snapfish.  Cited Apple trying and failing to compete with a similar service.  Says SFLY earns ten times that of its next biggest competitor, giving them a huge advantage.  Likes new CEO Chris North (previously of Amazon UK) and says company has some potential partnerships in the works and has bought back stock in the past.



Ray Nixon (Barrow Hanley Mewhinney & Strauss):  Talked about active vs passing investing.  Argued Buffett could potentially buy Phillips 66 (PSX) around $100 per share.  We've highlighted how Buffett has been accumulating PSX.


For more coverage of other recent investment conferences, head to our notes from the Sohn San Francisco conference.

Cobalt Capital's Thesis on EOG Resources: Q3 Letter

Wayne Cooperman's hedge fund Cobalt Capital is out with its Q3 letter.  In it, they briefly detail their thesis on EOG Resources (EOG), a stock they were buying in the third quarter.

If you're unfamiliar with Cobalt, the name Cooperman should ring a bell as Wayne is Lee Cooperman's son.  Lee, of course, runs a hedge fund himself: Omega Advisors.  Cobalt has compounded 15.3% net annually since inception.

During Q3, Cobalt averaged 60% long and 28% short for net exposure of 32%.

Their view on markets is that interest rates heading higher and less earnings growth will be problematic for markets.  That said, Cooperman, like his father, feels equities are the best asset class.  And with the Fed on the market's side for the time being, the market should have a tailwind.  They're cautious but still on the lookout for opportunities both long & short.


Cobalt's Thesis on EOG Resources

In his Q3 letter, Cooperman writes,

"Our largest purchase in the third quarter was EOG resources. EOG has some of the best oil   resource assets in North America, particularly its large core position in the Eagle Ford Shale. We tracked EOG’s well results in the state-reported data and believed that production was trending above expectations. With the stock trading at just 5-6x forward EBITDA, a one-to-two- turn discount to peers despite better assets and growth, we took advantage and purchased shares at a meaningful discount to intrinsic value. Generally speaking, we have found that oil-focused E&P stocks have been a much better value than gassy E&P’s and other energy plays lately, especially given their scarcity value as oil prices have risen and global tensions remain acute. In general, oil stocks do not price in oil remaining at or near current levels for long so we have been able to purchase high quality oil assets at good prices and we have hedged out some of our oil exposure by shorting oil futures."

At the end of the third quarter, EOG was Cobalt's fifth largest position.

For more hedge fund letters, we recently posted up David Einhorn's Q3 letter, as well as Corsair Capital's thesis on News Corp.