Michael Keller Long Zoetis & Perrigo: London Value Investor Conference

We're posting notes from the London Value Investor Conference 2016.  Next up is Michael Keller of Brown Brothers Harriman who pitched long Zoetis (ZTS) and long Perrigo (PRGO).


Michael Keller's London Value Investor Conference Presentation

Brown Brothers Harriman are bottoms up, research intensive high quality franchise investors who look to hold stocks for at least five years. Too many investors are index huggers that charge large fees. They aim to beat the market on the way down. They focus on the full cycle even if it means missing out on some of the upside.


Investment idea: Zoetis (ZTS)

Tim Harch of Brown Brothers Harriman pitched Zoetis at the conference last year. They still like it. Zoetis is a global leader in animal health for livestock and pets. It offers a broad array of products for preventative care and disease treatment. Unlike human healthcare animal medicine does not suffer from a lack of government reimbursement issues. The secular trends in animal health are durable. Expect steady mid-single digit revenue growth.  (MF note: Bill Ackman recently sold ZTS shares.)


Investment idea: Perrigo (PRGO)

Perrigo produces white label consumer goods for chemists – pain medication, health products, branded products and generics. It holds royalty rights for Tysabri a mature MS drug with a large patient population. It is domiciled in Ireland.

There are three business drivers: the ageing demographic that favours pharma; store brand products; conversion of Rx to over the counter. The stock is down because:

- The long term CEO has left to join Valeant (VRX)
- Pricing pressures in generics
- The Omega acquisition has been less successful than expected

Keller believes the price weakness is overdone. The current valuation implies an 8% FCF.



Be sure to check out the rest of the presentations from the London Value Investor Conference.

SALT Conference Best Ideas Panel: Chanos, Bass, Burbank, Cooperman, Karsch

At the Skybridge Alternatives (SALT) Conference in Las Vegas, the best ideas panel featured top hedge fund managers giving their top stock picks.  Here's a summary:


SALT Conference Best Ideas Panel: Chanos, Bass, Burbank, Cooperman, Karsch

Jim Chanos (Kynikos Associates):  Short oil integrators.  Specifically, short Royal Dutch Shell (RDS), doesn't like the merger with BG.  Short Chevron (CVX) as well due to their liquefied natural gas (LNG) challenges.  He also summed up Brazil's Petrobras (PBR) by saying they're "lying, cheating and stealing."  Also check out Chanos' SALT interview we posted earlier.


Kyle Bass (Hayman Capita): Long Perrigo (PRGO).  Doesn't think they get bought out by Mylan, but thinks someone else acquires them.  "We're short enough pharma."  Bass' separate new fund has been challenging pharma patents and says the industry is ridiculous as prices of drugs have spiraled out of control.  He gave the example of Mylan's (MYL) epipen drug specifically.  Says 13% of the company's revenue comes from this drug (which came off patent back in the 1950's).


John Burbank (Passport Capital): Long NCB AB, a Saudi Arabian banking play.  "The banking giant you've never heard of in the country you're too scared to invest in."  He says the vast majority of deposits don't pay interest due to Sharia Law so they'll be in a good position when rates rise.  Harps on the fact that outsiders are going to be able to invest in Saudi and by 2017 90% of investors will own some part.  "All the risks are already known in Saudi."  This isn't a new theme from him as Burbank has pitched Saudi investments in recent years.


Lee Cooperman (Omega Advisors): As he has been for a while now, he again advised reducing fixed income exposure.  He also said to go short on any rally if you're adventurous. His stock picks were the same as his Sohn Conference picks: ACT, AER, C, DOW, GM, GOOGL, PCLN.


Michael Karsch (Hunter Peak Capital): Long NOS SGPS, a Portuguese cable/wireless provider.  Biggest cable play and #3 wireless provider in the country, a hidden gem.


For more from the SALT conference, check out Dan Loeb's talk.