Notes From 2013 Value Investing Congress Las Vegas: Day 1

Here's some brief notes from the 2013 Value Investing Congress taking place in Las Vegas.  This event has somewhat of a new format with a lot more speakers presenting rapid fire ideas.  As such, we'll highlight the takeaways from each pitch below from day 1.  Check back tomorrow as we'll have notes from day 2 as well.

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Steven Romick, FPA Funds: Occidental Petroleum (OXY) & Oracle (ORCL)

Romick likes to focus on contrarian names that investors have seemingly forgotten about.  He mentioned old large cap tech names such as Oracle (ORCL), Microsoft (MSFT), and Cisco Systems (CSCO).  He likes ORCL because they offer a unique product and have recurring revenue streams.  His other idea was Occidental Petroleum (OXY), an oil producer that isn't really focused and can make a lot of adjustments to create value now that the chairman is gone.  Romick says OXY is a sum of the parts play.


Phil Goldstein, Bulldog Investors: Imperial Holdings (IFT)

The company was raided by the FBI and lawsuits post-raid and Bulldog started buying around $1.60.  They went activist and got seats on the board and he thinks there's value to be unlocked there.


John Hempton, Bronte Capital: Transglobe Energy (TGA)

He mentioned he's short an astonishing 120 companies.  His specialty is frauds and he looks for fake cash and fake assets (receivables, goodwill, etc).  He spoke negatively about Transglobe Energy, pointing out they don't collect on oil they've sold until 7 months later.  He's also skeptical since the company shows no inventory and he has other balance sheet questions.  Additionally, he flagged Jos A. Bank (JOSB) due to potential inventory issues and PureCircle (PURE.LN) for balance sheet issues.


David Nierenberg, D3 Funds: Rosetta Stone (RST)

His firm runs a concentrated portfolio of microcap stocks (typically busted growth names).  His pitch was on Rosetta Stone (RST), the popular language learning software company.  Nierenberg notes RST's solid brand in a fragmented industry.  He highlighted that the company has $7 per share in cash and no debt and has been cutting costs by closing some of their mall kiosks. He sees upside of 75% but notes that competition in the space could intensify and free offerings could emerge.


Tim Eriksen, Eriksen Capital Management: First Internet Bancorp (INBK)

He focuses on the section of the market where many companies are ignored (companies with market caps below $100 million) and he also runs a concentrated portfolio.  His pick was First Internet Bancorp (INBK):  $45m market cap, trading below TBV, with a potential catalyst of rising interest rates (loan growth).  Eriksen argued it's cheap because no one really knows about it, investors are still somewhat hesitant about financials and it's slightly illiquid.


Marcelo Lima, Heller House Capital: Hargreaves Services PLC (HSP.LN)

Lima pitched the out of favor coal industry via a UK play: Hargreaves Services PLC (HSP.LN), noting that the UK gets around 40% of its electricity from coal power.  He likes the acquisitions they've made at less than 7x earnings and highlights the benefits of their long-term contracts not being vulnerable to the ebbs and flows of commodity prices.  In the past, fraud at a Belgian subsidiary and issues at a mine weighed on shares but those problems are now gone.


Geoffrey Batt, Euphrates Advisors: Baghdad Soft Drinks (IBSD.IQ)

Batt runs the Euphrates Baghdad Fund and compared Iraq to Germany after World War II, South Korea in the 1960's and Russia in the 1990's. He sees countries that have undergone chaos as opportunities ripe for investing and Iraq fits the bill this time around.  But obviously, he points out, you still need to see stabilization in the economy and if things gradually become less worse, then equities there can head higher.  He says that the country has begun a private credit cycle and notes their oil production potential is huge.  However, he didn't pitch anything oil related.  Instead, he said he likes soda via Baghdad Soft Drinks, a Pepsi bottler.


Zack Buckley, Buckley Capital Partners: Bluecora (BCOR)

His expertise is technology stocks and he pitched Bluecora (BCOR), formerly Infospace.  He likes that they bought TaxACT and highlights Bluecora's $700 million in net operating losses (NOLs).  He said they'll probably look to do acquisitions within a year or so.


Isaac Schwartz, Robotti & Co: Halyk Bank of Kazakhstan (LON:HSBK)

He pitched Halyk National Savings Bank of Kazakhstan (Borat, anyone?) as he likes to play "ugly ducklings."  Schwartz notes the company trades around TBV and is the largest bank in the country (even though its market share is only around 20%) with the dividend now back at 4%.


Amitabh Singhi, Surefin Investments: Greenply (MTLM.IN)

He specializes in India and mentioned that Indians are fixated by gold.  Sighi likes the underappreciated, unfollowed small cap sector in India.  He's looking long-term and thinks agriculture could be a big winner.  Singhi notes that land prices have accelerated higher and while there's around 400 million acres of ag-land in the country, farms are usually only around 5 acres each.  His pick was Greenply (MTLM.IN), an Indian plywood maker.


Chan Lee & Albert Yong, Petra Capital: Sebang, Sebang Global Battery

These two harped on how South Korean equities are very cheap compared to other equity markets (they're based there).  In particular, they're focused on small & mid caps and note how these plays give you access to emerging markets exposure.  They like Sebang the holding company and subsidiary Sebang Global Battery.  They also mentioned Daechang Forging.


Jeff Pintar, Pintar Investment Company: Residential Real Estate

Pintar owns a ton of residential properties, over 2000 as the real estate bubble created immense opportunities.  He pointed out that demand for new homes is rising and supply can't keep up so more homes need to be built.  As to where the biggest demand will be in the future, he singled out Texas, Florida, California and the Carolina regions.  He thinks values can head as high as 50% in select areas.


Chris Mayer, Capital & Crisis Newsletter: First Citizens Bank (FCNCA), Atlas Financial (AFH)

He manages a newsletter with 28,000 subscribers and talked about the positives of investing in owner-operators and likes management to have skin in the game.  Mayer pitched First Citizens Bank as it's 33% family owned and also lauded Atlas Financial (AFH), Howard Hughes (HHC) and Covanta (CVA).


Be sure to check back tomorrow for notes from day 2 of the Value Investing Congress 2013 in Las Vegas.


*** Special discount for Market Folly readers:  The New York Value Investing Congress will take place in September and you can currently get a 50% discount to the event with code: N13MF.  This discount expires tonight (Tuesday) so take advantage while it lasts.  This is the biggest discount you will see for the VIC. ***

Nantahala Capital Management's Latest Activity

Wilmot Harkey's hedge fund Nantahala Capital Management recently filed two 13D's with the SEC.  The hedge fund primarily focuses on small caps and has a market-neutral discipline.

Imperial Holdings (IFT)

First, they've disclosed a 9.65% ownership stake in Imperial Holdings with 2,045,707 shares. The filing was made due to activity on May 10th and marks a .6% increase in their position size since the beginning of the year. 

In the 13D, Nantahala includes a statement in the purpose of transaction section:

"Bulldog Investors General Partnership, pursuant to an authorization statement dated April 25, 2012, which has been filed with the Securities and Exchange Commission, is soliciting from shareholders of the Issuer authorizations to demand a special meeting of shareholders to, among other things, amend the bylaws of the Issuer to increase the number of directors from seven to twelve and to elect five directors to fill the vacancies created by such increase.  The Reporting Person has determined to execute the revocable authorization supporting the calling of such meeting with respect to Shares reported in this Schedule 13D because it believes that it is in the best interests of shareholders for a meeting to be held to consider such matters. "

Per Google Finance, Imperial Holdings is "a specialty finance company with a focus on providing premium financing for individual life insurance policies issued by insurance companies and purchasing structured settlements backed by annuities issued by insurance companies or their affiliates. In its premium finance business it earns revenue from interest charged on loans, loan origination fees and agency fees from referring agents. In its structured settlement business, it purchases structured settlements at a discounted rate and sells such assets to, or finances such assets with, third parties."


Adams Golf (ADGF)

Second, the hedge fund has also filed an amended 13D on Adam's Golf (ADGF) and they've sold over half their position in the name.  They now own 3.927% of the company with 313,960 shares.  They sold on May 8th at a price of $10.75.

A few months ago, it was announced that TaylorMade-adidas Golf Company was acquiring Adams Golf for $10.80 in cash (shares currently trade around $10.78).  It appears as though Nantahala is ready to put some of this capital to work elsewhere with the deal spread pretty tight.

Per Google Finance, Adams Golf "designs, assembles, markets and distributes golf clubs for all skill levels. The Company’s products include Idea Tech V3 irons and hybrids, Idea a7 and a7 OS irons and hybrids, Speedline Fast 11 and Speedline 9064 drivers, Speedline Fast 11 fairway woods, and Idea Pro Black hybrids and irons."


For more from this hedge fund, we've posted up Nantahala's other recent portfolio activity here.