Notes From Leaders In Investing Summit: Leon Cooperman, Larry Robbins, Bill Ackman, Howard Marks & More

The CIO/CEO Leaders in Investing Summit took place on Tuesday at The Metropolitan Club of New York and featured presentations from numerous high-profile hedge fund managers.

The summit is a peer-only event only open to those investing third party capital. We're pleased to present notes from the event concerning specific investment ideas and/or commentary on the economy:


Leon Cooperman (Omega Advisors): The legendary hedge fund manager's talk centered on equities as the best house in the financial asset neighborhood. He argued that you need to believe four issues in order to have a positive view on today's market:

1. The U.S. is not another Japan and will not suffer a lost decade.
2. The European Central Bank (ECB) will act to stabilize Europe.
3. President Obama will move to the center.
4. The Middle East's turmoil leads to democracy and oil stays below $135.

Cooperman continued to voice his concern over employment. He also pointed out that the yield curve is quite steep and that the Federal Reserve is trying to inflate the country out of debt. Cooperman says inflation is not bad for stocks (see the best investments during inflation).

He argues that stocks are cheap trading at 13.6x relative to bonds and history. The Omega Advisors founder also thinks that bonds are 'screaming' to be shorted. Other hedge fund managers have also advocated shorting bonds. Don't forget that you can also hear Cooperman's latest investment ideas at the Value Investing Congress in October (click here for a discount).



Larry Robbins (Glenview Capital): Formerly of Cooperman's Omega Advisors, Robbins founded Glenview Capital. His presentation yet again focused on Life Technologies (LIFE). The company trades at a 11x P/E and is likely to grow EPS 20% over the next few years as they were able to grow EPS throughout the slowdown and 95% of their business grows with research spending.

Robbins highlighted free cashflow is 91% of EPS and that the company will have 80% market share versus competitor Illumina (ILMN). One could postulate that he's short ILMN as a hedge but when asked about it he said that he's "only here to discuss my longs."

And speaking of longs, he said some of his top holdings are Expedia (EXPE), Flextronics (FLEX), Xerox (XRX), and BMC Software (BMC) in technology. We've detailed the in-depth investment thesis on EXPE in the latest issue of our Hedge Fund Wisdom newsletter.

In general, Glenview looks for good businesses, low valuations, excess capital, a business that can succeed regardless of economic environment, and pricing power. Currently, Robbins thinks the economy will grow slowly and with heightened volatility due to excess government intervention.



Tom Russo (Gardner Russo & Gardner): The long-only manager is still bullish on China and pitched Nestle (NSRGY) at the event. His idea is simply to buy prominent international players and hold through the ups and downs. In the past, he's talked about how Nestle can invest large amounts of money in emerging markets and see high rates of return.

He is also still holding SAB Miller (LON: SAB) despite declining EBITDA margins as the company is now making acquisitions to make up for the lack of growth. Russo did not seem to like the Foster bid.



Howard Marks (Oaktree Capital): His presentation focused on the keys to success in a low return world. Marks focused on three key questions to ask yourself as an investor today:

1. Should we prepare for prosperity? He argued no because the economic recovery is faltering.

2. Should we worry about losing money or missing opportunity? For now, he says to be mindful of losing money.

3. What holds the key? Capital and nerve? Or discernment, discipline, risk control and selectivity? Marks argues the latter right now, saying that stocks are slightly cheap, but not by much.

Marks says that your choices today are as follows: invest for the long-term, go to cash, take more risk (chase yield), or find niches. Take your pick. Marks also brought up a good point that just because stocks are flat over a ten-year period doesn't mean they are a buy because the P/E was 30x ten years ago.

Oaktree recently filed for an initial public offering and Marks' recently released his new book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor which has received praise from legendary investors Warren Buffett and Seth Klarman.



Paul Singer (Elliott Associates): This hedgie's talk focused on the shape of the next crisis. He mentioned that all major banks are quite opaque and no one can truly analyze them, meaning the next crash could be even faster because the leverage is still there. He doesn't seem to be a fan of Bernanke.

Singer points out that the lesson was "sell first, move assets first, ask questions later." Those that took more time to do so got stuck and that is dangerous. He also believes that Dodd-Frank has made the system more brittle and thinks there should be NO financial institution that is too big to fail.

Lastly, he also mentioned that monetary policy has caused commodity inflation (Howard Marks also thinks this is the case).



Bill Ackman (Pershing Square Capital): Speaking on activist investing, Ackman said that you have to work *with* management. He cited his investment in J.C. Penney (JCP) as an example as the company has a new CEO who redesigned Target (TGT) then most recently headed Apple's (AAPL) wildly successful retail operation. He also says that the company has a big advantage by owning its own real estate and not paying rent. We've covered Ackman's JCP thesis here in-depth for more.

Concerning his recent investment in Family Dollar (FDO), Ackman said that Nelson Peltz's Trian Fund is driving the effort. The company has a bid on the table and is a prime leveraged buyout candidate. The vote is in January and management has to fix the company or sell it. We've also posted Ackman's presentation on FDO.

Ackman also talked about lessons he learned from his mistakes. He said that liquidity is very valuable and lack of it is a big opportunity cost. Also, he pointed out that as you get older, you further understand the opportunity cost of time. He likes to measure whether the potential return justifies the time and risk.

Citing his past failed investment in Borders (BGPIQ), Ackman said he underestimated the risk of technological change. He would rather invest in a good business than just good management. He said the limitation of his approach is that although the stocks he invests in are liquid, his concentrated stakes are not (Ackman also mentioned 27% of his fund was redeemed during the crisis).



Ron Gutfleish (Elm Ridge Capital): Gutfleish likes the defense sector and in particular, Lockheed Martin (LMT). He argues the company doesn't make bad acquisitions, pays a good dividend and does smart buybacks. While he admits to being "usually too early," the hedgie thinks that these stocks are very cheap no matter what you think about the defense sector.

The bear case there is very obvious, he notes, pointing to a budget under pressure. However, he argues that these companies generate huge cash flow during down cycles and deploy it in shareholder friendly ways.



Joel Greenblatt (Gotham Capital): Greenblatt's presentation focused on the 'big secret for value investors.' He was, of course, referring to his new value-weighted indexing method which is detailed in his new book, The Big Secret for the Small Investor: A New Route to Long-Term Investment Success.

He argues that indexes have the flaw of market cap weighting. Evenly weighted, the SPX outperforms by 3% per year over the last 20 years. A value weighted index of 800 stocks beats the SPX by 7% a year.

Right now, Greenblatt says his statistics point to stocks being at about average valuations. Some of the stocks on his list right now include: Gamestop (GME), Wellpoint (WLP), and Intel (INTC). He says that these companies are trading at bargain prices either due to uncertainty or because they are troubled.




That sums up notes from the summit. Keep in mind that many of these hedge fund managers will be presenting investment ideas at the upcoming Value Investing Congress in October and Market Folly readers can receive a discount to the event by clicking here.

Ricky Sandler's Hedge Fund Eminence Capital Boosts Bet On Financials: 13F Filing

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)

Next up is Ricky Sandler's hedge fund Eminence Capital. Prior to Eminence, Sandler started his career as a research analyst for Mark Asset Management and then went on to start Fusion Partners at the age of 25 with Wayne Cooperman. As their investment styles started to differ, Sandler went on to start his new hedge fund. Sandler employs a 'quality value' approach to running his portfolio, spending equal time on both the long and short sides of his portfolio. In the past, he has said they employ gross leverage and are typically around 120% long and 70% short. Sandler attended the University of Wisconsin and holds a CFA designation. You can find a more in-depth look at Sandler and his investment process at the bottom of the article.

The positions listed below were Eminence's long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. All holdings are common stock unless otherwise denoted.


Brand New Positions
Becton Dickinson (BDX)
Accenture (ACN)
Carnival (CCL)
Baxter (BAX)
Northrop Grumman (NOC)
Fidelity National Information (FIS)
Henry Schein (HSIC)
Burger King (BKC)
Autodesk (ADSK)
Burlington Northern Santa Fe (BNI)
Talecris (TLCR)
Raytheon (RTN)
Walgreen (WAG)
Chipotle (CMG)


Increased Positions
Hasbro (HAS): Increased position by 1,342%
Goldman Sachs (GS): Increased by 349%
Lowes (LOW): Increased by 161.3%
Equifax (EFX): Increased by 107.4%
US Bancorp (USB): Increased by 105.6%
Qualcomm (QCOM): Increased by 98.5%
JPMorgan Chase (JPM): Increased by 96.9%
Thermo Fisher Scientific (TMO): Increased by 59.2%
Lockheed Martin (LMT): Increased by 57.4%
Ebay (EBAY): Increased by 38.7%
Abbott Laboratories (ABT): Increased by 29%
Walmart (WMT): Increased by 27.9%
Fiserv (FISV): Increased by 26.3%
Mastercard (MA): Increased by 19.4%
Apple (AAPL): Increased by 16.8%


Reduced Positions
Cognizant Technology (CTSH): Reduced position by 61.8%
Cisco Systems (CSCO): Reduced by 28%
Google (GOOG): Reduced by 24.6%


Removed Positions (Sold out completely):
Monsanto (MON)
Cintas (CTAS)
Abercrombie & Fitch (ANF)
Morgan Stanley (MS)


Top 15 Holdings by percentage of assets reported on 13F filing

1. Oracle (ORCL): 5.63%
2. Abbott Laboratories (ABT): 4.92%
3. Apple (AAPL): 4.24%
4. Lockheed Martin (LMT): 4.21%
5. Thermo Fisher Scientific (TMO): 3.46%
6. Walmart (WMT): 3.33%
7. US Bancorp (USB): 3.15%
8. Fiserv (FISV): 3.15%
9. JPMorgan Chase (JPM): 3.11%
10. Goldman Sachs (GS): 2.95%
11. Equifax (EFX): 2.74%
12. Becton Dickinson (BDX): 2.72%
13. Qualcomm (QCOM): 2.71%
14. ccenture (ACN): 2.70%
15. Carnival (CCL): 2.61%
    

Ricky Sandler's hedge fund increased their long US equity exposure in dramatic fashion in the fourth quarter as assets reported via 13F filing were $5.2 billion, way up from the previous $3.1 billion. And obviously you can see that with all the increased and new positions listed above. Some of their more notable additions were massive increases in their positions in financials via US Bancorp, JPMorgan Chase, and Goldman Sachs. Just earlier this morning we saw that hedge fund Valinor Management added heavily to their GS stake, and Sandler's Eminence has as well.

In addition to financials, Eminence added to Hasbro, Qualcomm, Thermo Fisher Scientific, and Lockheed Martin. While their portfolio shows hints of the most popular hedge fund holdings with AAPL, WMT, & QCOM, they also have some interesting picks mixed in as well. We haven't seen many funds with positions in Equifax, Oracle or Lockheed Martin, but Sandler's hedge fund owns all three.

They also added a bevy of stocks as brand new positions and their new stakes in BDX, ACN, CCL and BAX are all pretty sizable as well, all in the top ten holdings. In terms of positions they sold completely out of, we see yet another hedge fund has dumped Monsanto. Overall, Eminence increased financials and healthcare exposure and reduced technology exposure.

Data used for this article comes from Alphaclone, our source for backtesting strategies and sorting through all the hedge fund portfolio maneuvers with ease. Assets reported on the 13F filing were $5.2 billion this quarter compared to $3.1 billion last quarter, a whopping 66% increase. Remember that these filings are not representative of the hedge fund's entire base of AUM.

For more on Ricky Sandler and Eminence's investing style, we've attached this old copy of Value Investor Insight:




We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, David Tepper's Appaloosa Management, Warren Buffett's portfolio, John Paulson's hedge fund Paulson & Co, Lee Ainslie's Maverick Capital, Dan Loeb's Third Point, Eddie Lampert's RBS Partners, David Ott's Viking Global, and Chris Shumway's hedge fund Shumway Capital Partners, Chase Coleman's Tiger Global, Philip Falcone's Harbinger Capital Partners, Roberto Mignone's Bridger Management, Thomas Steyer's Farallon Capital, John Burbank's Passport Capital, Brett Barakett's Tremblant Capital, George Soros' hedge fund Soros Fund Management, and Philippe Laffont's Coatue Management Charles Anderson's Fox Point Capital, Bill Ackman's Pershing Square Capital Management, Jonathan Auerbach's Hound Partners, Lee Hobson's Highside Capital, David Stemerman's Conatus Capital, Matt Iorio's White Elm Capital, and David Gallo's Valinor Management. Check back daily for our new updates.