Sohn Conference New York Notes 2017: Ackman, Einhorn, Meister & More

Below we're posting up notes from the Sohn Conference New York 2017.  It featured top hedge fund managers sharing their latest investment ideas all to benefit pediatric cancer research.  We've also posted up the emerging manager presentations from Next Wave Sohn.


Notes From Sohn Conference New York 2017

Bill Ackman (Pershing Square): Long Howard Hughes (HHC)

He argued strong management and solid real estate locations as the main reasons to own the company.  Note that Ackman is the Chairman of the co.  We've posted up Ackman's slideshow presentation from Sohn here.



David Einhorn (Greenlight Capital): Short Core Labs (CLB)

Cyclical stock, expects earnings to disappoint.  Oil prices won't have a 'v' shaped recovery.  Company's annual report shows 65% decrease in oil prices over two years and then a 100% increase in price, a literal 'v' chart.  Says stock is pricey and that they're exposed to the least desirable parts of the market.  Exposure to international oilfield capex budgets which won't recover.  Fair value could be around $62, or over 40% lower.  Recall that Einhorn has also been short Pioneer Natural Resources (PDX) in pitch at previous conferences.



Larry Robbins (Glenview Capital): Long DXC Technology (DXC), FMC (FMC), Quintiles IMS (Q)

DXC has already doubled over the past two years but he thinks it can double again given the huge increase in earnings power.  FMC purchased businesses that Dow and DuPont dumped as part of their merger.  Thinks FMC benefits as the others had to divest this in order to get their big deal done.



Keith Meister (Corvex Management): Long CenturyLink (CTL)

Thinks the company's merger with Level 3 is a game changer.  Filing a 13D with the SEC today disclosing a 5.5% stake.  Says consolidation in telecom will continue due to more data.  If economy is doing well = more data growth which is good for CTL.  If economy doing bad = a 9% dividend yield versus a 10-year Treasury potentially falling back to 2%.  Would never have invested if it weren't for the merger.  Stock priced as if things are in decline permanently.  Sees 40% upside with dividends in base case, but potential return as high as 50-70% if there's corporate tax reform.



Clifton Robbins (Blue Harbour Group): Long Investors Bancorp (ISBC)

Has seen deposit and asset growth continue, should benefit from less regulations and tax reform as well.  They own around 9.9% of the company and one of their partners just joined the board.  Stock could be worth between $17 and $19.  Fortress balance sheet.  Have grown loans 22% CAGR.  Co has $1 billion in excess cash to allocate.  Could potentially be an acquisition target since it's a strong regional bank.  Has previously pitched this name at another conference a few years ago.  Also noted his firm is focusing more now on the importance of environmental, social and governance (ESG) in investing.



Chamath Palihapitiya (Social Capital): Long Tesla 2022 Convertible Bonds

He called Elon Musk this generation's "Thomas Edison."  Thinks playing the bonds means no money lost as long as the company is worth at least $15 billion.  Argues company will have 5% of car market in the next decade.  They don't spend on advertising or a dealer network, don't have unions, etc.  Very capital intensive.  Called TSLA "unmodelable."



Josh Resnick (Jericho Capital):  Short Frontier Communications (FTR)

Massive debtload and deteriorating EBITDA which is a bad combination.  Has been short for five years, from $4 down to $1.50, longest short of his career.  Thinks company goes bankrupt.  32% of revenue comes from voice (phones) and thinks it declines sharply.  Losing market share to cable as well.



Jeff Gundlach (DoubleLine Capital): Emerging market outperformance (EEM) vs S&P 500

Not very bearish on the US dollar, but also not a bull.  American stock market seems to be overvalued. Questioned the herd mentality around index funds.  Go long EEM short SPY and leverage it up 1x.  Also said he's now on Twitter: @TruthGundlach to fight back fallacious media reports.



Debra Fine (Fine Capital): Long DHX Media (DHX/B on TSE)

Creator, buyer and distributor of children's TV content in Canada.  Thinks fair value is C$20-C$30.  The change in how video is consumed has increased need for children's content.  Says new content buyers like Netflix, Amazon and YouTube are driving up prices.  Notes that children's content drives merchandise and licensing dollars.  Children's content ages well and is usually cheaper to produce.



Davide Serra (Algebris Investments): Short U.K. gilts (bonds), Long UniCredit (UCG:BIT)

Brexit doesn't really help the UK economy, thinks it costs U.K. around 7% of GDP (~$200 billion).  Thinks European stocks are at an inflection point.  Big gap versus S&P 500 over past eight years and that's about to change.  Also talked long UniCredit, thinks Europe is overdue for consolidation efforts.  Italian banks been penalized for high share of nonperforming loans which creates opportunity as the company is fixing this and then added tailwinds of interest rates normalizing.  We previously highlighted Dan Loeb & Third Point's thesis on UniCredit.



Brad Gerstner (Altimeter Capital): Long United Airlines (UAL)

Thinks skepticism of the airline industry that's been pervasive for years is too negative.  Led to lower multiples despite margins that were uptrending.  Sentiment shouldn't be that low.  Millennials are traveling more than their parents did so airlines can be a secular grower.  Altimeter settled proxy contest with UAL last year.  Sees 18% increase in EPS to around $16.75.  More conservative base case is $13 a share by 2020.  Consolidation of the industry cannot be overstated and has basically resulted in an oligopoly.  Planes are full and price wars are long gone so there's pricing power now.  We've also highlighted how Warren Buffett likes airlines now too. Shares could double.



Kevin Warsh (Former Fed Governor):

Thinks a lot about tail risks and tail outcomes.  Feels most assets aren't ready for downside surprise.  Says to watch capex going forward.  If companies are spending, the economy still has further legs.  If there's a cut, not so sure the economy can keep it in high gear to go forward.  Biggest question for him is if lower inflation continues with slow growth.  Thinks institutional credibility rather than the printing press will be biggest asset going forward.



Tal Ben-Shahar (Potentialife): General advice: Do less

If you want to be happier, do less as quantity affects quality.  Reduce multi-tasking and find time for play, for friends, for family.



Sohn Contest Winner Dylan Adelman: Long eBay


Be sure to also check out notes from Next Wave Sohn which featured emerging managers pitching their investment ideas.

SALT Conference Notes 2016: Griffin, Cooperman, Burbank, Chanos & More

The Skybridge Alternatives Conference, better known as the SALT Conference, is taking place in Las Vegas this week.  It's a multi-day affair with many speakers on a broad range of subjects.  We've condensed notes into primarily finance/investing thoughts from various hedge fund managers and investors below.


2016 SALT Conference Notes


Ken Griffin (Citadel):  Talked about how he built Citadel and the importance of culture at an organization.  'Avoid marrying a strategy' and instead focus on building a platform with the best people.  Business really taught him how to delegate and manage people.  On finding good talent: you've gotta be able to sell them on why they should leave and come to you.  You have to go out and find that talent instead of waiting for them to come to you.  The ones that 'knock on your door' aren't the best.  One interesting quote:  "Who is the number five manufacturer of personal computers?  Who cares?  We're in a more and more winner take all world."


Leon Cooperman (Omega Advisors):  He talked about a trend of investors moving from active to passive strategies and says that hedge fund performance can't really justify the fees these days, so fees need to come down.  He said that long-term (i.e. 'permanent') capital is doing good because they don't have to worry about lockups (citing Warren Buffett).  The other winner has been quant strategies.  Pitched the stock First Data (FDC) which recently IPO'd.  Says he's got around ~20% of his fund in structured credit at the moment.  Reiterated his belief that conditions for a recession are not present (a concept he's talked about for a while now).  Thinks the bubble is in fixed income.  Government bonds are a bad idea.  Likes Tetragon Financial, yields 7%, dividend coverage of 4x.  Buying a stock trading at half of book.


Kyle Bass (Hayman Capital):  Implied that investors need to lower their return expectations over the next few decades (5% global real return expectation).  Also agreed that fees for funds need to come down.  Says it's much harder to maintain investors than it is conviction.  Thinks we're in the early part of '07 in terms of credit/equity markets.  Says a hard landing in China is happening as we speak. Argues that China credit system is one of the biggest macro imbalances, something has to give sooner rather than later.  Hong Kong real estate is collapsing.


Roslyn Zhang (China Investment Corp):  Sovereign Wealth Fund.  Disappointed with hedge fund performance.  Compared Chinese retail investors to hedge fund herding.  Criticized those betting against the Chinese Yuan.  Argued that China's economy is still strong and that all of the building is due to the massive population; supply can be absorbed.


Sam Zell (Equity Group Investments):  Cost of regulation has gone up around 5x over the last decade.  Have been big investors in Brazil, Far East, Mexico. 


Ty Wallach (Paulson & Co):  Thinks specialty pharma stocks are oversold.  Specifically pointed out Valeant Pharmaceuticals (VRX) bonds.  Bought at 80cents on the dollar and says the co still has $10bn in equity value.  Could sell one of the many companies they've acquired if they need to cover debt payments.


Jeff Smith (Starboard Value): Activist investor.  Says settled with Yahoo (YHOO), put four new members on the board.  Notes the parts of the company are worth more than where its trading.  Core biz with $4bn in revenue, huge stake in Alibaba, Yahoo Japan, add it all up and it's more than the current market cap.  Said 'we're friendly but no one describes us as passive.'


Scott Ferguson (Sachem Head Capital):  Sold out of Zoetis (ZTS).  We noted how Pershing Square was also selling ZTS recently.  Ferguson was the one that brought the idea to Ackman to begin with (he used to work at Pershing).  Talked about how to change leadership and achieve things on behalf of investors: "Money's a great way to effectuate things" i.e. severance for getting rid of a CEO.  Says things are easier for activists these days and companies are more likely to engage. 


Clifton Robbins (Blue Harbour Group):  Activist investor.  Owns 10% of Investors Bancorp (ISBC), says it's trading at a discount to peers.  Also talked about Xilinx (XLNX), a net-cash semiconductor play; says they have some ideas as to how to utilize the balance sheet.


Michael Lewis (Author of Flash Boys and The Big Short):  Said he was surprised that both Moneyball and The Big Short were made into movies.  Said Christian Bale was dead-on with his interpretation of Michael Burry after just spending some hours with him.


Richard Chilton (Chilton Investments): Sherwin Williams (SHW): makes premium paint and coatings.  Says the company's purchase of Valspar was years in the making and they can repay the price with free cashflow in about 5 years.  Thinks there's a lot of synergies and margin overlap.  SHW does higher margins in paint/consumer and VAL does better margins in industrial coatings.  "You can't buy paint online."


John Lykouretzos (Hoplite Capital):  Takes a bit of an issue with the 'oligopoly' theme of airlines, saying it's still a competitive industry with margin pressure.  Bearish on the industry.  Main threats: excess capacity, union labor wage hikes, and of course higher oil prices.  Says that low cost carriers (LCC's) have basically destroyed the chance for legacy airlines to become a true oligopoly.  Thinks American Airlines (AAL) is the most compelling short play there.  Has some of the highest costs & exposure to rising oil.  High leverage.  Weakest FCF generation of the group.  Thinks that Southwest Airlines (LUV) can still add capacity even at higher oil prices (~$80 or so) and still generate high IRR.


John Burbank (Passport Capital):  Says China won't let outside companies 'win' especially Facebook.  "It's a hard place to win if you're not Chinese."  (While he didn't mention it, just look at Amazon's failed venture there as well).  Burbank owns Tencent (700.HK) with short Chinese Renminbi as partial hedge.  Thinks it isn't as much of a crowded trade as Facebook (FB) is.  His slide also said "Short FXI: Hedge out 'Old China' country-specific risk with China large cap ETF."


Jim Chanos (Kynikos Associates): Still short Cheniere Energy (LNG), calling it a 'pipe dream' and very expensive to peers.  Trades at 11-12x EV/EBITDA using "base case" 2021 EBITDA of $2.1bn.  Peers trading between 5-7x 2020 EBITDA.  Also commented on Alibaba (BABA) saying their accounting is dubious and that you don't really know what they're earning, calls it some of the most questionable he's ever seen. Chanos also recently talked about some of his short positions at the Sohn Conference.


For other recent hedge fund manager thoughts, head to our notes from Sohn Conference New York 2016.

Clifton Robbins' Sohn Canada Presentation: Long AGCO

We're posting up notes from the Sohn Canada Investment Conference 2015 (Capitalize For Kids.)  Next up is Clifton Robbins from Blue Harbour Group.  He pitched a long of AGCO.

Clifton Robbins' Capitalize For Kids Presentation

-    Friendly activist and target $2-10Bn companies
-    Long AGCO, own 7.5%
-    3rd largest equipment manufacturer
-    $4Bn market cap, $5Bn EV
-    Concentrated industry, lots of price increase opportunities
-    Strong network of dealers, 55% of sales in Europe
-    20% market share in Europe, 6% in North America
-    98% of profits from Europe
-    See Europe as a different agriculture industry, more focused on small tractors versus larger
-    Stock has come down on concerns in US market
-    Short term issues in Brazil, only small part of business anyway
-    Attractive valuation, improving margins, 24% ownership of TAFE which is a hidden balance sheet
-    9% FCF yield with trough earnings
-    TAFE (India) worth $7/share
-    AGCO has high earnings power
-    Management targeting 10% operating margins (10 year average of 7.4%), $10Bn revenue or $7.82 EPS
-    They can support more debt, closer to 2x debt/EBITDA
-    Therefore can buy back 17% of stock with the proceeds
-    Interest coverage will remain above 5x
-    Buybacks of 13% of stock over last 6 quarters
-    M&A opportunity being < $5Bn
-    $75-$95/share at historic multiples, from $45 today


Be sure to check out the rest of the presentations from the Capitalize For Kids Conference.

Jeff Ubben & Barry Rosenstein on Activist Investing at Milken Institute

At the Milken Institute Global Conference, prominent hedge fund managers gathered on a panel about activist investors and the search for alpha.  The panel consisted of:

- Jeff Ubben, ValueAct Capital
- Barry Rosenstein, JANA Partners
- Clifton Robbins, Blue Harbour Group
- Chris Teets, Red Mountain Capital

In it, the fund managers talked about the different styles of activist investing.

Rosenstein said that, "I'm happy to be friendly as long as the company does what I want them to do."

Robbins contributed, "I think that there's been a palpable change in the last four or five years generally in the attitudes of boards and CEOS in their willingness to listen to large stockholders."

Ubben took issue with activist investing being 'daytrader fodder' and labeled it as 'bad.'  Ubben revealed he had built an eBay stake at $50 and wanted to buy more but Icahn's involvement pushed shares higher.  He says Carl's a great stockpicker, but the activist situation there was a non-event.

Ubben later noted that he thinks activist investing is too short-term these days rather than building a company over the long-term.  Robbins agreed with him.  However, Rosenstein took the other side of the argument.

Embedded below is the full activist investing panel from the Milken Institute Global Conference:



For more on the subject, head to Mason Morfit's lectures on activist investing (he's part of ValueAct with Ubben).

Clifton Robbins' Presentation on Chico's: Value Investing Congress

We're posting up notes from the 2013 Value Investing Congress in New York.  Next up is Clifton Robbins of Blue Harbour Group.  He presented "Think Like An Owner - Finding Companies Poised To Unlock Value" and pitched Chico's FAS (CHS).

Clifton Robbins' Value Investing Congress Presentation

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KKR guy. Says leverage wasn't the key to PE, it was the good management.

Bullish on Chico's (CHS)

$2.3B EV. 5.8x EBITDA of $400m they filed a 13d, own 6% of stock.

1427 stores, they think they could have 2200 stores.

4 brands. Chico’s is 720 stores. White House is 465 stores. Soma 235 stores. Boston proper only 2 stores.

Soma lingerie business for older women, run by former Victoria Secret people.

"Growth stock trading as a value stock"

Claims Chico’s is gaining share.

Missy's space is loyal customers.

New CEO with strong retail experience.

Debt free. Could do a buy back with cash over time.

Be sure to check out the other presentations from the New York VIC here.

Clifton Robbins' Ira Sohn Conference Presentation on CACI & Akamai

We're posting up notes from the Ira Sohn Conference 2013 in New York.  Next up is a summary of the presentation from Clifton Robbins of Blue Harbour Group.  He presented the long case for CACI (CACI), which he owns 93% of and his second pick was a new position in Akamai (AKAM).


Long CACI (CACI)

Robbins expects a lot of M&A due to cash on balance sheets.  Two longs. CACI. Government Services Contractor. Intelligence, Cybersecurity, etc. Was originally a software company. Strong FCFs. Trades at only 7x EBITDA, valuation implies 30-40% upside.


Long Akamai (AKAM)

He says it's a unique business at crossroads of megatrends. Say it can do better balance sheet optimization, no debt $1B in cash. Says stock up only 18%, while growing faster than comps. Disputes margin pressure problems. Argues stock from today's price of $45 is undervalued by $15. All the cash is in the US. Says they can do accretive acquisitions.


Check out the rest of the hedge fund presentations from the event: notes from Ira Sohn Conference 2013.