Susan Byrne's Investment Outlook: Likes Kapstone Paper & Media Nusantara

We're posting up notes from the Great Investors' Best Ideas Investment Symposium in Dallas and next up is Susan Byrne of Westwood Holdings.  Westwood serves various institutional clients and manages $15 billion.


Byrne's Investment Outlook

She started by focusing on Westwood's outlook that in the next 1-3 years we'll see slow below potential GDP growth.  She disagrees with Lee Cooperman a little bit. She's more positive on corporate earnings and likes playing high quality names globally.

Byrne thinks we'll see rising but tame inflation and she likes to play companies that have yields higher than the S&P 500.  She said that the "ultimate risk instrument is stocks" so you need some insulation/protection in the form of a dividend.

She likes companies that grow dividends and put up a chart of the likes of Microsoft (MSFT), Exxon Mobil (XOM), Honeywell (HON), Johnson & Johnson (JNJ), General Electric (GE), and Automatic Data Processing (ADP).  She points out that all of these have equity yielding more than their bonds.

Byrne feels the S&P is "somewhat undervalued" by 10-12% and she wants to beat inflation with dividend yields.  She said to look at emerging markets, in particular Indonesia.


Byrne's Stock Picks

And speaking of Indonesia, she had a stock pick from that country via shares of Media Nusantara (PTMEY via ADR), an advertising company there.  She points out that they're growing advertising by 22% a year and you can play it in the domestic market or via ADR.  The company has a 2% dividend and a mid-teens multiple.


Byrne also pitched a domestic small-cap play via Kapstone Paper (KS).  It trades at 5x EV/EBITDA, has a 10% free cash flow yield and the company's price increases for their products are holding.


For the rest of the presentations, head to notes from the Great Investors' Best Ideas conference.

Corsair Capital Management's Letter: Q4 2010

Jay Petschek's Corsair Capital Management is out with its fourth quarter letter. In it, we see that Corsair finished 2010 up 15.4% which ironically is the exact same number as their compound net annual return since inception.

Highlighting their overall market view, Petschek writes, "as we believe post-recession equity markets are generally driven by the direction of earnings, which in turn is driven by economic growth, the markets seem to have room to move higher."

Portfolio Positions

Corsair singles out their position in LyondellBasell (LYB) in the letter as they believe the stock still trades at a discount to its peers. You'll recall that Dan Loeb's Third Point owns LYB in size as well. The company announced a dividend policy and plans to optimize its capital structure.

Petschek also highlights their stake in CapitalSource (CSE) as the company continues its transition from an over-leveraged REIT into a bank. Corsair believes shares are still undervalued and likes the company's debt repurchases and share repurchase plan.

Their letter also focuses on their position in Aon (AON). The hedge fund notes that the integration of Hewitt will create shareholder value and further entrench the company's dominant position in human capital solutions. We penned an in-depth analysis of AON in our last issue of our Hedge Fund Wisdom newsletter as many hedge funds had accumulated shares in past quarters. Click here for a free sample issue.

Corsair Capital Management's full letter and their investment write-up on Neo Material Technologies (NEM) is embedded below:



You can download a .pdf copy here

If you missed them, we've posted up a plethora of hedge fund letters recently, including:

- Maverick Capital's letter
- John Paulson's year-end letter
- Dan Loeb & Third Point's Q4 letter
- JANA Partners' letter
- Greenlight Capital's commentary
- Summary of Perry Capital's letter
- Xerion Fund's 2011 strategy
- Summary of Kleinheinz Capital's letter

Third Point, Royal Capital, & Monarch Alternative Capital Oppose Smurfit-Stone Takeover

A group of hedge funds including Dan Loeb's Third Point, Royal Capital Management, and Monarch Alternative Capital recently penned a letter to Smurfit-Stone (SSCC) opposing the company's proposed acquisition by Rock-Tenn (RKT). The hedge funds collectively own 9% of SSCC and oppose Rock-Tenn's cash and stock bid that valued SSCC at $38 per share.

Smurfit-Stone recently emerged from bankruptcy and these funds received the majority of their shares through the restructuring process. The various hedge funds are pushing for shareholders to veto the deal. They feel the company can either do better as a standalone company or attract higher offers from Rock-Tenn or others in the packaging industry (such as Temple-Inland (TIN), Packaging Corp of America (PKG), International Paper (IP), MeadWestvaco (MWV), or KapStone Paper (KS)).

We'll have to see if their letter can shake things up and unlock further shareholder value in the stock. Embedded below courtesy of Dealbook is the hedge funds' letter to Smurfit-Stone (email readers visit the site to view it:



As we've detailed before, Third Point likes post-reorg equities and Smurfit-Stone is one of those positions. The hedge fund also has a sizable stake in recently re-listed Lyondell Basell (LYB). And just a few days ago, we highlighted how John Paulson likes restructured equities as well.