Invest For Kids Chicago Conference Notes 2018: Griffin, Zell & More

The Invest For Kids Chicago 2018 conference recently took place.  It featured investment managers sharing their latest ideas to benefit underprivileged children in the Chicago area.  Here's notes/summary of the event:


Notes From Invest For Kids Chicago 2018

Ken Griffin (Citadel Investment Group):  Took down risk in August.  Hasn't felt comfortable with lots of risk in about a decade.  Says there's lots to worry about and October has obviously thus far been volatile, but this is where portfolio managers can shine.  Sees lots of opportunity for Citadel in commodities.  Says to hire great people then delegate.


Sam Zell (Equity Group Investments):  Macro commentary, lots of uncertainty about next month's elections.  Long cash, maybe gold?  He thought we were in the 8th inning a few years ago, elections have since taken us into extra innings.


Christopher James (Partner Fund Management):  Long Intuit (INTU).  Known for its TurboTax and QuickBooks products, proprietary datasets are where the real value is.  Big Data + Workfroce 2.0.  New "One Intuit" ecosystem driving value as well.  People trust the company, are opting into data sharing.  INTU has underappreciated upside and is partnering well with a range of other fintech companies.


Mark Lampert (BVF Partners):  Long Idorsia (IDIA-CH), spin-off from Actelion done in conjunction with Actelion's sale to Johnson & Johnson.  Founders/owners of co are exemplary scientists and business operators.  Invested $525 million into Idorsia, more open market purchases recently.  Insider purchases stand out as among biggest in industry.  Thesis is to co-invest with the Clozels, the founders.


Vivian Lau (One Tusk Investment Partners):  Long Bombardier.  Prior management made a ton of mistakes.  Co has a strong backlog and good long-term demand.


Daniel O'Keefe (Artisan Partners):  Long Dentsply (XRAY).  Depressed earnings/multiple.  Co is growing, has good margins and ROIC.  Says dental spending is seeing secular, long-term growth.  180 million Americans are missing at least one tooth.  XRAY historically trades low-to-mid 20's P/E but has recently been mid-to-low teens.  They overpaid for Sirona, failed merger integration, and have had 4 CEO's in 3 years.  Thinks margins should revert, sees FY19 op margin at 17-21%, EPS at $2.30 to $2.80, stock worth $41-71, currently trades $35.


John W. Rogers Jr. (Ariel Investments):  Long Stericycle (SRCL), long Madison Square Garden (MSG), MSG Networks (MSGN).  People will probably still want to watch live sports, they own very valuable sports rights in a world class city.


Vivien Azer (Cowen & Co):  Long Canopy Growth (CGC/Weed).  Says it's a once-in-a-career disruption and only a matter of time.  Consumer packaged goods companies are getting into the sector.  Target price: C$82.00, 30x sales in three years.


Jeremy Schiffman (Palestra Capital):  Long Airbus.  In the good part of the cycle, about to get even better.  Higher margins to follow: op margins going to mid-teens in next three years.  Worth 180 Euros per share in three years.  Stock buyback is possible next year.  40,000 new aircraft deliveries worldwide in the next decade.  FCF heading from under 3bn Euros to 8bn Euros.  Short U.S. Trucking: (Wener, Knight-Swift, Heartland): good part of cycle right now but about to get a lot worse.  60 PMI likely to mean-revert to 50 or lower; if 40, short makes a lot of money.


Philip C. Ordway (Anabatic Investment Partners): Long Alaska Airlines (ALK).  Advantages from cost structure, customer loyalty, and markets/routes.  Attractive margins and returns on capital.  Current valuation = very low expectations. Secret sauce is Alaska's credit cards: loyalty program generated ~$1 billion of CFFO in '17. Operating margins ~40-50% with zero capital required, membership growing 10-12% per year. Bank of America pays Alaska every month based on members' credit card usage.  Co's integration of Virgin America almost complete, sees FCF >$2 bn in next 3 years. ALK 10% FCF yield, 9x P/E.


Constance Freedman (Moderne Ventures):  Long Fujifilm.  Venture capitalist looking to invest in old industries undergoing technological transformation.  3d printing, augmented reality, digital transactions are technologies applicable to many markets.  Document solutions, healthcare, imagine segments all use disruptive technologies.  Undervalued today relative to peers.  Revenue and profit growth from healthcare and imaging.  Sees 15x E 2018 EPS, 6% ROE


For more recent investment conference coverage, head to our summary of the Great Investors Best Ideas (GIBI) Dallas Conference. 

Sequoia Fund Q4 Letter: Added to Alphabet, Exited Fastenal & Danaher

Ruane, Cunniff & Goldfarb is out with Sequoia Fund's fourth quarter letter.  They returned 20.07% for the year.

At the end of 2017, their top 10 holdings were:

1. Berkshire Hathaway (BRK)
2. Alphabet (GOOG)
3. Mastercard (MA)
4. Constellation Software (CSU)
5. Dentsply Sirona (XRAY)
6. TJX Companies (TJX)
7. Rolls Royce (RR.LN)
8. Charles Schwab (SCHW)
9. CarMax (KMX)
10. Liberty Media

They exited positions in Fastenal (FAST), Danaher (DHR), Emcor, Croda, Tiffany (TIF), and Costco (COST).  They've also trimmed stakes in BRK, MA, O'Reilly (ORLY), Waters, and TJX.

They've added to positions in GOOG, Hiscox, Jacobs, Omnicom, and Wells Fargo.  They've also started new investments in Credit Acceptance (CACC) and Royal Vopak, Priceline (PCLN).

They've been concentrating their portfolio a bit more, and their cash levels have gone down some.

Embedded below is Sequoia Fund's Q4 letter:



You can download a .pdf copy here.

For other recent fund letters, we've also posted Greenlight Capital's Q4 letter.

Ruane Cunniff (Sequoia Fund) Investor Day Transcript 2017

Ruane, Cunniff & Goldfarb recently released the transcript from their investor day a few months ago.  Known as the managers of the Sequoia Fund, David Poppe and his team talk about many of their investments.

As of the end of June, their top ten holdings were:

Berkshire Hathaway (BRK A / BRK B) 11.28%
US Treasury Bills & Cash 8.65%
MasterCard (MA) 7.72%
Alphabet (GOOGL & GOOG) 6.5%
TJX (TJX) 5.93%
Dentsply Sirona (XRAY) 5.3%
Carmax (KMX) 5.04%
Constellation Software (CSU) 4.83
Rolls Royce (RR.LN) 4.74%
Liberty Media Corp 4.13%

They talked about what they often find in their top investments:

"Hopefully that gives you a sense of the kinds of companies we want to buy: high-quality enterprises trading at discounts to their intrinsic value, with long-duration growth opportunities.  I would note that every great outperformer we have purchased during my eighteen years here - from Fastenal to Idexx to Mastercard to O'Reilly to Precision Castparts to Sirona to TJX - had something in common.  And it was not a low P/E at the time we first invested.  It was a long growth runway and, most often, a long organic-growth runway."

The transcript that follows touches on their thoughts on Priceline.com (PCLN), the threat of Amazon (AMZN) to various businesses, and some of their holdings like TJX and O'Reilly Auto, as well as other positions like Rolls Royce and Charles Schwab.

Embedded below is Sequoia Fund / Ruane Cunniff's 2017 Investor Day Transcript:




You can download a .pdf here.

For more from this firm, you can view their transcript from last year here as well.

Ruane Cunniff (Sequoia Fund) Investor Day Transcript 2016: Rolls Royce, Valeant & More

Ruane Cunniff Goldfarb, managers of the Sequoia Fund, recently released the transcript from its investor day.  In it, they talk about many of their investments.

Their top ten holdings as of the end of the second quarter were:  Berkshire Hathaway (BRK.A/B), TJX Companies (TJX), MasterCard (MA), Alphabet (GOOG/L), O'Reilly Auto (ORLY), Mohawk Industries (MHK), Fastenal (FAST), Rolls Royce (RR.L), Constellation Software (CSU.T), and Dentsply Sirona (XRAY).

They outline their thinking on Rolls Royce and also address the Valeant Pharmaceuticals (VRX) saga, which they no longer own.

Embedded below is the transcript of Ruane Cunniff's 2016 Investor Day:



You can download a .pdf copy here.

Timothy Hartch: Long Dentsply & Energy Solutions (Value Investing Congress)

At the Value Investing Congress today, Timothy Hartch of Brown Brothers Harriman gave the case for longs of Dentsply (XRAY) and Energy Solutions (ES) in a presentation entitled "Quality and Value".

Be sure to check out all of our notes from the Value Investing Congress.


Timothy Hartch (Brown Brothers Harriman)

Embedded below is his full slideshow presentation:



Dentsply (XRAY): Number one company in the dental industry, trades at a discount to “intrinsic value.” Sells consumables to dentists, equipment to labs, and orthodontists. Very attractive industry. Aging population, rising standard of care in emerging markets, private pay in the US.

Big secular story is instead of pulling teeth in emerging markets, they are saving teeth. Dental is private insurance, or out of pocket, so supply and demand determine prices. Over time, there have been 1-2% price increases on top of volume growth. Very fragmented supply market, XRAY has number one, but fewer than 10% market share, can keep making tuck-in acquisitions. Customers are very fragmented, 2-3 person dental offices- no buying power.

Competitive advantage: scale, dominant brands, 2800 person sales force, customer relationships.

Key risks: macro economic weakness, large presence in Europe, integration of Astra Tech acquisition, still recovering from disruption of Japanese supplier.

Revenue declined 2% in 2009. Average rate is 6-7% growth rate over last 20 years. Stock flat over last 5 years, down from 40 to 32 recently on Europe fears.

Valuation: Currently trades at $32, has a $44 target price, 13x 2012 FCF. He says multiple doesn’t look that low, but for this high quality, steady business, this is a good price.



Energy Solutions (ES): Stock has been in total collapse since LBO IPO’d the company. Number one nuclear waste disposal company in the US. Disposal city an hour outside of Salt Lake City. Near-monopoly for disposal of commercial nuclear waste in the US, 95% of it goes through this site in Utah. It has a 30-year remaining life for the current facility.

May have contracts in Japan for their clean up. They have life-of-plant contracts with 84 of 104 reactors in the US. Other 20 they do business. Doing the dismantling of the Zion plant owned by Exelon. There are 12 waiting to be dealt with, and several plants are closing over the next few years.

Obvious risks: political risk, waste risk. Leverage, but generating 40M in cash flow to pay down debt.

Potential Upside: additional contracts with the other 20. Acceleration in large component removals. International opportunities.

Stock trades at $3, they say value $8+ with low single digit revenue growth, modest de-levering.


Q&A Session:

1. How does XRAY create value? Answer: further small acquisitions they can roll up, and stock buybacks

2. How do they measure/predict intrinsic value? used EBAY as an example, they like it, own it now, say intrinsic value over 40. Steady business is easier for them to value.

3. Why XRAY vs. Henry Schein? XRAY is leading manufacturer, not only distributor. Likes the Henry Schein as well.

4. ES public at $23, now $3, how does it get back to $8? Answer- it was promoted as a growth story and the volumes declined instead of growing. Nuclear industry is under a cloud, but this is actually an opportunity for them.


About Timothy Hartch: He manages the fund that won Lipper 2008 large cap fund of the year in 2008.


You can view our notes from the Value Investing Congress for the rest of the hedge fund manager presentations.