Bill Miller Has 50% of Hedge Fund in Bitcoin: Wealthtrack Interview

Bill Miller of Miller Value Partners recently appeared on Consuelo Mack's Wealthtrack.  His hedge fund, MVP1, invested in bitcoin in 2014 and 2015 and he said it now comprises 50% of his fund.  Here's a summary of the conversation:

His average cost is around $350 and he was buying between $200 and $500.  Bitcoin recently traded around $20,000.  He likened his purchase of bitcoin early to his purchase of Amazon (AMZN) way back in the day.

"One of the things we try to do is to have an open mind, especially about new technologies.  Most of them don't work, so you have to believe you have a high probability of being wrong, and if you have confidence in it, it's likely not going to work.  So it's really a question of assessing risk and reward on a case by case basis."

He says he was aware of it before he bought it but didn't take it too seriously... likened it to an experiment.  He read a book called Digital Gold and he also found it interesting that people he had a high regard for in the venture capital world took an extreme interest in it (Marc Andreessen, etc).

He was convinced bitcoin had a future because it had already passed its biggest stage of risk in the early days.  "There really hasn't been any technological innovation in money... ever.  There's been stages... rocks, to jewels, to gold and silver ... by and large money was a tangible thing.  Governments began issuing fiat currency that was also backed by something tangible."

Miller says bitcoin is uncorrelated as a potential asset to anything else.  It doesn't matter what's going on in central banks or geopolitics.  Another book Miller mentioned was The Construction of Social Reality.  Miller said that the founder of Bitcoin likened the cryptocurrency to 'digital gold.'

Given the risk/reward, he mentioned advice he heard that you could put 1% of your net worth in it and that way if it goes to zero, your downside is limited but if it skyrockets, you've got exposure.

Miller says the problem with bitcoin is you have to store it, and if you store it on an exchange and that exchange gets hacked, then you lose it forever (there was a hack of a major exchange a few years ago).  He says the emergence of futures contracts for bitcoin is a big move and the next step will be exchange traded funds (ETFs).

He pointed out that right now there's about $7.5 trillion worth of gold while bitcoin's market cap is around $290 billion dollars.

If you consider it a currency, he says bitcoin would be the 17th largest in the world right now.  While it won't supplant the major currencies, there's a chance other volatile currencies could see people seek a store of value elsewhere.  The problem, however, is of course bitcoin itself has had wild fluctuations in value.  So it can't really be viewed as a major currency replacement at the moment.

While he has 50% of his hedge fund in bitcoin, he's never run that concentrated before... citing previous top holdings at around 20%.  That said, he's looking at hedging the exposure but isn't ready to disclose how he's going to do that, but he's not selling the long.  He started it as a 5% position and it's grown so much.

He also has some bitcoin cash, which is an offshoot, but he doesn't own any other crypto currencies.  He likened bitcoin to VHS tapes or Bluray, etc were one format became the defacto choice, so the others won't be as relevant.

When asked about risk, Miller quoted someone saying "I wouldn't have anymore money in bitcoin than I was willing to lose 100% of." He thinks the chance of it becoming worthless are far, far less than they were in the early days though.

Embedded below is the video of Bill Miller's appearance on Wealthtrack talking bitcoin:



For more on cryptocurrency, we've highlighted Bart Stephens' presentation on bitcoin from the Invest For Kids Chicago conference a few months back.  Back in 2013 we also posted the Winklevoss twins' presentation on bitcoin from the Value Investing Congress.

Bill Miller Wealthtrack Interview

Bill Miller recently appeared on Consuelo Mack's WealthTrack for an interview.  He's beat the S&P 500 for 15 consecutive years when he worked at Legg Mason.  Then he had a few years of underperformance and has come back with Miller Value Partners, an independent investment advisory firm. 

Here are some of the key takeaways:

-  Looks for stocks trading at a discount to intrinsic business value (present value of future free cashflow): looks for business that are naturally cash generative and buys them when free cashflow yield is 50% or more higher than the market.

-  Noted that typical value investors look for accounting value versus economic value.  Cites them missing Amazon (AMZN) as an example over the past 20 years.

-  Miller looks for "companies that can earn above their cost of capital through an economic cycle."

-  "Where you can really make significant amounts of money is when an industry changes from being one that doesn't generate economic value to one that does."  One example of this he cites is the airlines now.  Now they've had positive cashflow ever since 2009.  He owns Delta (DAL), United (UAL), American Airlines (AAL).  Consolidation has played a huge role.  As we've noted before, Warren Buffett is also now a large shareholder of airlines.

- Also owns Valeant Pharmaceuticals (VRX) equity in one fund and the bonds in another fund.  Notes that Bill Ackman has sold his VRX position.  Miller was buying around $30.  Thinks "perceived risk is way underpriced to real risk."  Thinks it could be a $50-60 stock in 3 or 4 years.

-  Miller thinks Apollo Group (APO) and Carlyle Group (CG) are cheap.  We've highlighted how Tiger Global has been buying APO as well.

-  Miller doesn't think the market is overvalued on a relative or absolute basis.  Especially compared to other asset classes it's cheap.

-  Likes Intrexon (XON), leading company in synthetic biology (think re-writing DNA). 

-  If he had to pick one stock to own for the long-term he'd pick Amazon (AMZN).  Compared it to Alphabet (GOOGL) and Facebook (FB) and their core business is the $500-600 billion ad market which is growing 5% a year.  Whereas AMZN's core business is retail.  US retail alone is $5 trillion so the total addressable market is huge.  Not to mention Amazon Web Services, etc.

Embedded below is the video of Bill Miller's Wealthtrack interview:



For more recent Wealthtrack interviews, we've also posted Consuelo Mack's interview with Joel Greenblatt.

Bill Miller Thinks We're in a Secular Bull Market, Talks Stocks He Likes

Value investor Bill Miller of LMM Investments appeared on CNBC today and thinks we're in a secular bull market that began in March 2009.

"Bonds are unattractive in my view.  I believe we hit a double bottom in bonds in the summertime... 35 year bull market in bonds is over."

"As long as stocks yield more than bonds, stocks are attractive."

Miller is fully invested and says, "Cash earns zero, why do I want something that earns zero?"

He likes One Main Financial (OMF), bought in the spring, still thinks it's 'crazy cheap.'  Thinks smaller financials are attractive, mentioned MGIC (MTG) and Radian (RDN), mortgage insurers. 

Miller also likes big financials as well: Bank of America (BAC), Citigroup (C), JPMorgan (JPM).  Value investor Rich Pzena also likes financials, as he mentioned in his interview last week.

Bill Miller has owned Amazon (AMZN) since the IPO and still owns it today.  He says that was one of the best decisions he's ever made, and one of the worst has been selling any shares of it.  It's his largest position and says people have misunderstood AMZN's valuation from the beginning.  "Amazon's total addressable market is just so much bigger than any other company on earth."

He also talked about Twitter (TWTR), saying he sold half of his call options when it was in the $20s, and thinks it's a unique asset as a 'network of interests.'  He thinks they need a fulltime CEO and suggested they could perhaps switch to a paid monthly platform.  "We own Twitter because of the optionality."  He think it has a floor of $15-16.

Miller also owns various homebuilders such as Lennar (LEN) and TriPointe (TPH).  Feels builders will grow double-digits for the next few years.

On airlines, Miller still owns them and says Delta (DAL) is trading at a 15% free cash flow yield and will generate $5 billion in free cash and return 75% of that to shareholders.  He likes United (UAL) with more upside as the margins are depressed and they've got new management there.

Miller also commented on former hedge fund hotel Valeant Pharmaceuticals (VRX):  "It's probably the most toxic stock in the overall market.  It's blown a hole in Ackman's portfolio, it cost Bob Goldfarb, one of the best investors in our generation his job.  Our cost is from $20-35, we just bought more last week." 

He says they have 2 issues: the legacy issue of transitioning new leadership and then the debt load.  He thinks it doubles in 3 years as the company has a lot of cashflow and will look to sell non-core assets.

He also talked about Netflix (NFLX), noting it's an incredible company and he's owned it twice before, but thinks it's expensive now.  Also thinks Tesla (TSLA) is expensive and most energy plays are as well, especially the integrated players.

For more from prominent investors, check out David Tepper's recent interview, as well as Keith Meister's thesis on YUM China. 

Delivering Alpha Conference Notes 2016: Singer, Dalio, Chanos, Miller & More

CNBC & Institutional Investor's Delivering Alpha Conference is underway and below are some notes.  This post will be updated throughout the day as the various speakers/panels are ongoing:


Delivering Alpha Conference Notes 2016

Paul Singer (Elliott Associates):  Said that it's a "very dangerous time in global markets" right now.  Argued central bank independence doesn't really exist.  Noted that Bank of Japan is basically a top-10 shareholder of various Japanese corporations but the economy hasn't rebounded.  Called it insane, "It's not working, but they keep going."  Feels that investors are careless about inflation threat.  Says sell long-term bonds.    "There will come a time when inflation, despite growth suppressive policies can blow through targets and surprise everyone."  Says we're basically in the middle of close to a 40 year experiment in how leveraged a system can be, and in how many ways.  Thinks gold as a directional asset is underrepresented in portfolios "as the only money and store of value that has stood the test of time that is, in my view, undervalued and underpriced in today's world and sort of is the opposite of confidence in central banks."


Ray Dalio (Bridgewater Associates):  Discussed ways to spur economic growth with Timothy Geithner.  Dalio says, "We're in a situation where central banks want to drive you out of cash and out of bonds."  Called it a dangerous situation, as central banks run out of assets to buy and push investors into riskier assets.  Dalio thinks raising rates is risky as it's not priced into the yield curve.  "There's only so much you can squeeze out of a debt cycle and we're there, globally."


Jim Chanos (Kynikos Associates):  Still short Alibaba (BABA), says they're "buying anything that's for sale, just burning cash."  He's also still short Tesla (TSLA) and SolarCity (SCTY).  Says the two companies combining basically puts TSLA on a path to potential bankruptcy.


Carl Icahn (Icahn Capital): Said he's requesting from the FTC the right to own up to 50% of Herbalife's (HLF) outstanding shares.  Currently has the right to around 35% of the company.  Re: the market, "I think it's very dangerous in the market right now.  If they don't raise rates, I think we're in a major bubble."  There's a problem either way with a dilemma if you raise rates or if you don't.  Says the economy is messed up because of people like Janet McCabe at the EPA.  Also: "I hate to be immodest but I've returned 28% annualized since inception."


Marc Lasry (Avenue Capital):  Said that you can "make a lot of money on direct lending," stepping in for reluctant banks.  On investing - find people who are talented / engaged / who care and invest with and then don't worry about daily/monthly liquidity.


Bill Miller (Legg Mason):  Likes Amazon (AMZN) or Facebook (FB) compared to Alphabet (GOOG/L) due to the growth rates and margins.  Thinks AMZN doubles in 3 years.  Also likes Valeant Pharmaceuticals (VRX) long, one of his larger positions.  His main trade idea was long S&P 500, short 10-year Treasury (dividend yield on S&P is higher).


Robert Bishop (Impala Asset Management):  Best idea was Teck Resources (TCK): improving China demand, management has cut costs, end of metals 5-year downtrend.  Says Freeport McMoran (FCX) still has a worrisome debt picture.


Barry Sternlicht (Starwood):  Real estate in New York City is "a disaster" with rents at the high-end down 15%.  Noted the problem many investors face: "you have to invest in something, you can't just sit in cash."  On Tesla, says he loves the car but would probably be short the company.  Questioned Pinterest's valuation, arguing it seemed like a lot of money for a bulletin board.  Said Doppler Labs could be like the next Oculus Rift.


Mary Erdoes (JPMorgan):  "They're called crowded trades when they don't work and momentum trades when they do work."  Says it's time to weed out the stock pickers who aren't the best. 


Dawn Fitzpatrick (UBS):  Likes merger-arbitrage, argues that bank prop trading desks exiting keeps spreads attractive and wide on bigger deals.  Said short-term alpha is harder and that investors need to be more patient.  Says women are less emotional investors and better at cutting losers.

Delivering Alpha Conference Notes: Richard Perry, Eric Mindich, Bill Ackman, Nelson Peltz, Jeff Smith & More

The 2015 Delivering Alpha Conference hosted by Institutional Investor and CNBC is currently taking place and we wanted to highlight some of the thoughts from top investment managers on the best ideas panel and other panels.  Here's a brief summary of what each manager said:


Delivering Alpha Conference 2015 Notes

Richard Perry (Perry Capital): He feels Puerto Rico could possibly be the 51st state and thinks it's an interesting place to invest; he said GO bonds are safe and will trade at par. Perry argued that Greek bonds trading at 50 cents on the dollar could eventually return to par as there's a 'meaningful possibility' that a Greek bailout would actually be followed through.


Eric Mindich (Eton Park Capital):  He said that it's mostly individual investors in the turbulent Chinese A shares market.  He called the H shares more interesting.  He's a bit troubled by the future of the euro due to the situation in Greece.


Nelson Peltz (Trian Fund):  Peltz talked about his activist investment in DuPont (DD) and noted that he'd "rather be rich than right."  He continues to like PepsiCo (PEP) and thinks the company can deliver earnings growth each quarter but could do better.  Commenting on McDonald's (MCD), he said that the culture needs to be flipped on its head and it could take years.  Peltz feels Pentair (PNR) has the potential to become a platform company.  He said he has two new positions, one industrial and one he's not naming which account for 1/3 of his capital.  We recently highlighted some of Trian Fund's portfolio activity here.


Bill Ackman (Pershing Square): Ackman likes businesses that will withstand the test of time and he avoids tech since it's 'too dynamic.'  He mentioned that a lot of people haven't been talking about one of his newest investments: Fannie Mae and Freddie Mac and he really likes these.  Peltz chimed in that he doesn't know anything about the company but thinks Fannie is his favorite of Ackman's investments.  While some investors like Bruce Berkowitz (Fairholme Fund) have played the preferred shares, Ackman has a large position in common stock.  He says it offers the most upside but also conceded that it has the most downside too.  Ackman also voiced concerns on China, citing leverage and lack of transparency.  He says that almost every company he owns today is some sort of 'platform company' and we've highlighted this concept via Ackman's presentation at the Sohn Investment Conference.


Jamie Dinan (York Capital):  He keeps a lower media profile so it's always good to get his thoughts.  He avoids leverage since he lost a lot on margin in 1987 which was a very valuable lesson for him.  His keys to success?  Go where the action is and respect risk parameters.  Dinan notes that if you're in a position and the rules change, that's when bad trades happen.  York has more than half its base in illiquid credit.  He likes Japan, noting that "The Bank of Japan is your friend" and valuations are good with possible corporate governance changes coming.  He compared Japan now to the US in the 1980s in an economic sense.  He noted they've invested $700 million in Indiana toll roads.  Dinan also said he likes Puerto Rico but not the GO bonds.  He prefers complex infrastructure plays.


Jeff Smith (Starboard Value):  He mentioned a new idea of his, Macy's (M).  He thinks you get the company 'for free' when you take out the EV of its real estate.  He values the real estate at around $21 billion and hopes to work with management as he thinks M is worth $125 per share.


Bill Miller (Legg Mason):  He continues to like airlines stocks, saying they're in a long-term uptrend.  He likes Delta (DAL).  Commenting on bonds, he said that there's a benign bond market.  He also loves Amazon.com (AMZN) which is his biggest position at 6%.  He also likes builders and they're a big part of his portfolio as well, as he thinks they'll earn around 20% a year.


Jeff Gundlach (DoubleLine Capital):  He doesn't think the Fed will raise rates in 2015.  He said he's fond of emerging market debt (dollar denominated) and some high yield bonds (a shorter-term view on the latter).  He thinks high yield bonds will be a 'debacle' in 3-4 years.  Regarding bond rates, he notes they're rising secularly and went on to say that this is a good thing which most people don't realize.  Bond portfolios want rates to rise since you can reinvest at higher rates.  Looking extremely long term, he thinks India is a great place to put cash for the next 50 years.  Lastly, he also mentioned that he's allergic to companies that don't make money (AMZN).  He mentioned he bought Annaly Capital (NLY) recently and is out of his Apple (AAPL) position.  You can hear more from Gundlach in his recent Wall Street Week interview.


Keith Meister (Corvex Capital): He pitched American Realty Capital Properties (ARCP), a name he's presented at previous conferences as well (he owns 8% of the company).  He thinks you're taking 'bond like' risk for 'equity like' returns with this one and that the stock will pop once they reinstate the dividend and sees 25-50% upside.  Our Hedge Fund Wisdom newsletter analyzed the company if you want to play catch up quickly.


Tom Sandell (Sandell Asset Management):  His best idea was Ethan Allen (ETH), a furniture retailer.  He notes the company has practically zero debt and could be an ideal private equity candidate for a takeover.


Paul Singer (Elliott Management):  He likened the situation in China to potentially worse than the subprime crisis.  He thinks that perception of securities there has been impaired and it's just 'wild.'  Authorities there are trying to sustain the market with all kinds of moves but confidence is damaged by some of these rules.  He said the 70% haircut that Argentina forced on bondholders was the most severe he's seen in a large economy.  Singer said his firm essentially manages risk by putting in a lot of effort, a hands-on approach (basically activism).

...

Check back for more updates later.

Great Investors' Best Ideas Dallas 2014 Notes: Ackman, Einhorn, Perry & More

The 2014 edition of Great Investors Best Ideas Dallas took place this week benefiting the Michael J. Fox Foundation for Parkinson's Research and the Vickery Meadow Youth Development Foundation.


2014 GIBI Dallas Notes



Bill Ackman (Pershing Square):  He was positive on Fannie Mae and Freddie Mac (FNMA & FMCC), which have obviously seen volatility as of late.  They own 10% of each and are quite bullish.  They've been buying both and say private property can't be taken by the government.  Pershing owns common versus the preferred and think it's just as good of an investment.  Thinks there's an opportunity for settlement.


David Einhorn (Greenlight Capital):  He continues to like Micron (MU) and Apple (AAPL), and also really likes Greek banks.  AAPL/MU his 2 largest stakes.  Says DRAM has been a bad business for a while and should make $4 per share as the industry is only 3 players now after consolidation.  Likes Greek banks as they're at or below book value.  Also likes shorting French government bonds: Marine Le Pen wants to leave the Euro and bonds yield around 1%.


Richard Perry (Perry Capital):  Based on his pitch that was circulated a few months ago, Perry likes the idea of containerboard sponsored MLPs (they've owned International Paper (IP), KapStone Paper (KS), and Rock-Tenn (RKT)).  He also likes tax loss candidates of AIG (AIG) and Ally Financial (ALLY).  ALLY = Trading below book value but should trade 1x at least.  Government still owns 15%, last sold some @ $25, trades $22.50 now, should finish selling at year-end.  Also says Perry is appealing the Fannie/Freddie ruling and that this particular judge has been overturned a bunch.


T. Boone Pickens (BP Capital): He was positive on Marathon Oil (MRO) and Clean Energy (CLNE) again.  2 of his picks last year were up (FANG and BAS), except for CLNE which is down big.  He owns 20m shares, could be biased "pride of ownership".  Says he thinks we drill too much and US is only place that's growing production.  Likes MRO because it's cheaper on EV/EBITDA than peers like XOM and OXY.  Says we won't see $10 natural gas in his lifetime.


Michael Price (MFP Investors): 2 ideas (1 old, 1 new): Still likes Dolby (DLB, old idea).  55% of the company is owned by kids of the company.  PC sales dropped but have recovered.  Company can see new growth in India/China.  Undervalued stock, attractive to private equity and Apple.  Also likes FMC Corp (FMC), new idea.  Stock whacked on overreaction that company won't be splitting into two parts.  Thinks it trades $120 or so in next few years.


Tom Russo (Gardner Russo & Gardner): They like family controlled businesses.  Look for 50 cent dollars.  Focuses on global consumer stocks.  He was positive on Cie Financiere Richemont SA.


Paul Isaac (Arbiter Partners):  He likes Credit Agricole Regional Banks.  CMO, CRTO, CCN, CAF, CIV, CRSU.  40% price to tangible book value.  Well capitalized and inexpensive on relative basis.  Shorted French 10 yr bonds to hedge as there is euro risk.  Also pitched Japanese General Trading Companies.  8001.JP, 8002.JP, 8031.JP, etc.  Some 70% tangible book value, trading 6x PE.


Bill Miller (LMM): Buy the homebuilders as he likes the sector in general.  Specifically mentioned KB Homes (KBH), Lennar (LEN) and Pulte (PHM).  Market at new highs yet builders aren't even though they've got a nice clean path for earnings growth.  Says employment is the key and housing starts are improving.  He also said he likes Intrexon (XON).   This is a bet on management, who owns a huge chunk of the company.  Big upside but also could lose half your investment.


Ray Nixon (Barrow Hanley Mewhinney & Strauss):  He's positive on Q4 tax loss candidates, noting that many mutual funds end fiscally in October so there's various pressures that month, not to mention that it's one of the worst months historically.  Recommends buying across October, November and into December.  Buy a basket of tax loss names.  Pitched Mattel (MAT):  Stock's down over 30%, losing Disney license in 2016, losing shelf space, missed the past 3 quarters.  He says toy industry is growing 5%, likes the dividend yield, and points to $1b in cash on balance sheet.  They've started buying shares.

Bill Miller on What Stocks He Likes Now: CIMA Conference

Continuing the series of notes from the CIMA Conference (Columbia Investment Management Association), we move on to the presentation and Q&A from Legg Mason's Bill Miller.

Bill Miller on What Stocks He Likes Now

He started out discussing how he is different from traditional value investors. Low P/E, low cash flow not enough. Focus on long-term creation of business value, the future, not just the past. Allowed them to avoid the terrible returns of value investors. How does he invest in tech? There are a few platforms that are locked in long-term. They did do 10-year projections on Amazon. If you think through it carefully, you CAN make long-term projections on tech. (They are doing it with Facebook now).


AMZN example: high growth, high valuation companies, in aggregate, have small chance of maintaining that rate. But some can. What is the probability that this is an exception to the base rate? Once companies get a certain level of market share, it is very difficult for that share to be eroded. (Network effect). True even with low barriers to entry. You want a business with low switching costs that nobody switches from. GOOG/MSFT search example- GOOG has 66%; MSFT has 14%, even with spending. Once you have stable market shares, and large market. It’s judgment, understanding the industry, not just looking at P/E ratios. They are looking at Facebook now.

AMZN: low 20s GMs, and high cost structure. Bezos exploited technology and customer-focus, to achieve critical mass, costs all up front, market would finance it. When stock was down, Bezos said he was focusing on new markets and customer service. They had a dominating presence by then. Issue now is what is the level of OM long term? Bezos says it will still be a double-digit OM business long-term. Bezos said, “I’m not going to make the Steve Jobs mistake of pricing the iPhone to subsidize the rest of the world R&D by pricing it so high.” IPad is priced much more competitively, so they have total share.

Bruce Greenwald says cloud isn’t that profitable because they have to provide capacity when everyone needs it, so it’s not really just using their excess capacity. The device business is bad, too. Miller says the device business is defensive. All of retail is realizing that AMZN is a threat to EVERY segment. AMZN has all the data about what you buy, like, etc. Ease of use. End market is so large. GOOG: internal discipline issue on capital spending.


How he does valuation? Build probabilistic models. No predictions: what does the market believe, what is embedded in the price, what is the trajectory of the business? INTC, CSCO, AAPL, MSFT, good business with reasonable valuations today.

Macro is fading as an important thing for investors. People have adequately discounted the macro risks.


Biggest Lesson He's Learned: if building an investment business, you need to be different, and right. That will attract assets. He went from zero to 75B in assets. Those assets will also fly out when you are different and wrong. To build a business, be different and right, to retain the business, you have to be a closet indexer.

Things change. Understanding and recognizing them is the key. They were late in the game in recognizing how far valuations would be squeezed by the financial crisis. “Don’t rule anything out.” When in a crisis, wait for the global coordinated action.


Stocks Miller Likes Now:

2008 was a lot of permanent loss, 2011 was temporary losses.

1. Bullish on housing already, all data-driven. KBH up 80% for the year! Still lower than it was a year ago. Housing cycle in process of bottoming, orders are up, better business models. Massive cyclical turn, with profound implications for the US economy.

2. Genworth: Mortgage business down, 50-100% gain in 12 months.

3. Financials: C, BAC below tangible book.

4. Insurance companies: below book value.

5. Airlines: Worst industry in the history of the world. Here’s the difference now. Was commodity business, unionization, high regulation, and fuel costs volatile, fragmented. Highest share was 12% in the US. United now 26%, DAL 25%, so story is consolidated business with better pricing. Positive FCF for 3 years straight now. UAL 40% ROIC. $5 FCF, will be investment grade in a year, trades at 3.5x earnings. Small, risky position.

6. Techs: AAPL, largest position. What kind of company is it? Debate is if Apple is just a really good tech company, what’s it worth? Not much, these things change rapidly. If Apple is a recurring revenue company, consumer products company, then it’s radically mispriced. Bill makes the case that it is a consumer products company; the repurchase rate on the iPhone is 95%. Very few SKUs in line-up. Only 375 stores, only in a third of the carriers worldwide. Share in iPhone doubled from a year ago. Stock is 10x eps and low earnings estimates. 90B in cash, dividend possible. In short term, very low risk. Value it at the least, like a cable company. Compare to KO, or NKE.

7. Facebook: actually, the higher it goes, the more the probability of winning. You can’t look at it like paying $85B for $1B in operating profit. That’s what they DID; they’ll do $2B this year, more than AMZN ever had in history, higher margins, less competition.


Q&A Session:

Why banks? How can you trust the B/S? Have to compare categories to overall market prices. Consolidation means top 6 banks are 63% of GDP. It’s impossible for the US GDP to grow without the assets of the banks growing. Banks as a whole are mispriced, but not compared to each other. BAC has 70B market capital; they were earning 40B a year ago pre-tax, pre-provision. Biggest beneficiary of housing recovery. Can’t get comfortable at the micro level on all their assets, but you can get comfortable about the direction of those assets.

AMZN: can it wipe out other business? Way too early to say. No threat to WMT, COST, JCP.

Market: Best thing for the stock market would be for the bond market to sell off; indicates fear about tail events is dissolving. Biggest risk to the market is Israel attacking Iran. Policy errors. Like in 2008, they wiped out capital as they told people to raise capital.


For the rest of the notes from the CIMA Conference, head to these posts:

- Dan Loeb: Lessons He's Learned as an Investor

- David Einhorn Question & Answer Session

- Bruce Berkowitz's Basic Checklist for Investing & What He's Learned

- Distressed Investing Panel (Dan Loeb & Daniel Krueger)

- Long/Short Equity Investing Panel (Whitney Tilson)

- Michael Karsch on Risk Management

- Bruce Greenwald's Market Comments