Sohn Investment Conference New York 2018 & Investment Idea Contest

The 23rd annual Sohn Investment Conference New York is right around the corner.  It will be held on April 23rd at Lincoln Center from 8 AM to 7 PM.

The Sohn Conference Foundation in partnership with CNBC will see the event raise money for pediatric cancer research.  You can find out more about the event and register for it at their website:  http://www.sohnconference.org/new-york/


Sohn Conference New York Speakers List

Hedge fund managers that will be sharing their latest investment ideas to benefit charity include:

- Larry Robbins, Glenview Capital
- David Einhorn, Greenlight Capital
- Nathaniel August, Mangrove Partners
- Scott Ferguson, Sachem Head Capital
- Jeff Gundlach, DoubleLine Capital
- Bill Gurley, Benchmark
- Glen Kacher, Light Street Capital
- John Khoury, Long Pond Capital
- Chamath Palihapitiya, Social Capital
- Li Ran, Half Sky Capital
- John Pfeffer, Pfeffer Capital
- Seth Stephens-Davidowitz



Next Wave Sohn Speakers List

In the morning, prior to the main event, emerging managers will be pitching ideas in the fifth annual Next Wave Sohn series.  This year's speakers include:

- Alexander Captain, Cat Rock Capital
- Tim Garry, Pelorus Jack Capital
- Scott Goodwin, Diameter Capital
- Rashmi Kwatra, Sixteenth Street Capital
- Patrick McCaney, Oaktree Capital
- Oleg Nodelman, EcoR1 Capital


You can register for the Sohn Conference by clicking here.


Sohn Investment Idea Contest 2018

Submit your investment idea to be judged by a panel of Larry Robbins, Seth Klarman, Bill Ackman, David Einhorn, and Joel Greenblatt.

The winner will present his or her idea at the Sohn Conference to more than 3,000 attendees.  The contest supports the Foundation's mission to treat and cure pediatric cancer and is sponsored by GLG (Gerson Lehrman Group).

Contest Start Date: March 13th, 2018

Submission Deadline: 12pm EST on April 5th, 2018

Rules: Long or short marketable security with market cap above $1 billion.

Click here to enter the contest

Andrew Diaz's Presentation on WebMD (WBMD): Ira Sohn Contest Finalist

Today we're presenting an investment write-up that was a finalist at the Ira Sohn investment contest.  We've already posted up notes from the Ira Sohn Conference where you got to read about investment ideas from top fund managers.

Now, we're posting up some entries that made it to the final round of judging from the investment contest at Ira Sohn that was judged by the likes of Seth Klarman, David Einhorn, and Bill Ackman.  The following is Andrew Diaz's pitch of WebMD (WBMD).


Target Price and Rationale    

$26 - $30 per share 

Base Case:  A DCF valuation was used to determine intrinsic value, which assumed WebMD’s overall market share would decrease from ~40% today to ~20% in equal increments over five years, ~$530 million of revenues per year ($558 million in 2011) and 20% EBITDA margins (33% in 2011). The assumed cost of capital and terminal growth rate were 16% and 4%, respectively. Even in adverse conditions such as a highly competitive advertising environment, online pharmaceutical spending growth more than offsets any market share erosion that WebMD may experience and also builds in the potential for premium ad pricing declines. Advertising dollars continue to shift from offline to online sources.  

LBO:  In December 2011 the board conducted management meetings with several private equity funds but anticipated receiving bids below the Company’s then quoted market price of ~$38 per share. In a hypothetical take-private transaction with the price at $21.85 a PE fund could generate a 5 year IRR of ~20% by buying the business at ~7x LTM EBITDA (~$26 per share), using conservative leverage of ~3x and applying single digit revenue and EBITDA growth.  

Free Options: This valuation excludes (i) ~$250 million (~$5 per share) NPV of federal NOLs, (ii) mobile growth, (iii) international opportunities and (iv) an increase to the repurchase program.   

According to management, the NOLs could remain usable in a tax efficient change of control transaction with a private equity buyer. An important area of growth that was excluded from the valuation was mobile because it is only a small portion of revenues today, but it can one day be a meaningful contributor to revenue. Additionally, this valuation excludes the impact for international opportunities which includes new website launches in Europe and other emerging markets where there is meaningful revenue potential.  


Relevant Comps  

Epocrates (Ticker: EPOC) is a physician platform for clinical content, practice tools and health industry engagement primarily in the mobile space. Epcorates derives $100 million of revenues from 1.4 million physician members. Epocrates trades at ~8x Adj. EBITDA of $13.8 million and does not generate consistent free cash flow. The Company has grown revenue at a ~15% CAGR since 2007. 

HealthStream (Ticker: HSTM) provides internet based learning and research solutions for the healthcare industry. HealthStream derives $87.2 million of revenues from approximately 2.5 million hospital-based healthcare professionals. The company trades at ~30x EBITDA of $17 million and generates ~$10 - $15 million of free cash flow annually. The Company has grown revenue at a ~19% CAGR since 2007.  

Everyday Health (Private) provides online consumer health solutions. The Company offers content and advertising-based services across a portfolio of websites that span the health spectrum. It is estimated that the Company has revenues and EBITDA of $102 million and $2.6 million, respectively.  


Catalysts  

There are several catalysts: (i) Expiration of the shareholder rights plan, (ii) Sale of the Company, (iii) Increases to the authorized stock repurchase plan and (iv) Hiring of a new CEO  

(i)    In November 2011, the board adopted a shareholder rights plan limiting any shareholder to a maximum 12% ownership. The rights expire on November 1, 2012, or approximately 6 months from today. Currently, Carl Icahn and Kensico Capital Management are the two largest shareholders with stakes of 13.1% and 12.9%, respectively. (Both stakes are above the threshold due to the Company’s recent tender offer). These investors may seek to meet with the board and unlock shareholder value through strategic opportunities.  

(ii)    In late 2011, the board of directors engaged private equity buyers for a potential transaction, but the discussions never proceeded to a formal offer as a result of anticipated declines to 2012 results primarily due to its pharmaceutical customer base deferring marketing spend. Given the temporary nature of these declines, the board may re-engage private equity buyers as the poison pill nears expiration and 2013 revenue visibility comes into focus. The stock is currently 42.5% lower than the price when negotiations between potential buyers commenced. 

(iii)    In April 2012, WebMD offered to tender 5.8 million shares at a price of $26.00 per share, for an aggregate cost of $150 million (~10% of the common stock). There is approximately $86 million (~7% of market cap) remaining under the buyback plan authorized in October 2011. Management has indicated an interest in upsizing the repurchase program given WebMD’s $1 billion cash balance and undervalued stock.  

(iv)    Currently, the board is searching for a new CEO to lead WebMD after the CEO resigned in early 2012. A new CEO with relevant healthcare/online advertising experience would enable the Company to better monetize its online assets, 100+ million user base, and strong brand.   


Investment Thesis   

Why does WebMD trade at ~$22 per share today? I believe the main drivers of the recent stock price decline are (i) a failed sales process and (ii) temporary decline in ad spending by its pharmaceutical customer base. 

(i)    Last summer, the board held preliminary discussions of a transaction involving one or more potential private equity buyers. However, neither transaction was pursued in light of the market turmoil. In November 2011, the Company re-engaged discussions with four private equity funds who conducted a due diligence investigation of the Company’s business. The board believed it would receive offers well below the then quoted price of ~$38 per share. On January 10th, after announcing that 2012 would be weaker than previously anticipated, the stock price fell to ~$27 per share. At which point management contacted three new potential private buyers. Once again, the board felt that offers would be lower than the stock price and therefore took the Company off the auction block. I believe management made the right choice by not selling the business at a most inopportune time.  

(ii)    The underlying business value has been overshadowed by a temporary decline in ad spending by pharmaceutical companies. This is due to uncertainty surrounding FDA regulations for healthcare advertising as well as several blockbuster patent expirations. Many pharmaceutical companies have been sued over false portrayal and advertisements. As a result of uncertainty surrounding the FDA’s new standards, pharma customers have temporarily postponed advertising spend. Ad spending currently goes through a rigorous 3-step process including legal, medical and regulatory reviews. However, as customers become attuned to the new approval process, advertising spend should normalize.   


Compelling Long-Term Value 

Media advertising is undergoing a fundamental shift, from print to online, especially in mobile areas such as tablets and smart phones. In the search for alpha, one can find no relationship between the numerous tail risks present in the macroeconomic environment today and the secular growth of online media advertising. As proof, WebMD has grown revenue and EBITDA since 2007 at a CAGR of ~15% and ~17%, respectively.  

Broadly speaking, WebMD is in the business of online media advertising. WebMD markets to 107 million unique consumers per month which collectively generate over 10 billion page views per year. Additionally, WebMD has a professional network that averages ~2.6 million physician visits per month. While WebMD has not yet monetized its mobile customer base, ~11.5 million people have downloaded the WebMD mobile app and more than 2 million physicians have downloaded the Medscape Mobile app. It should also be noted that WebMD derives minimal revenues from abroad, but has recently launched German and French sites for physicians and is in discussions to launch sites in other international markets. International markets could contribute a meaningful portion to revenue growth in the future, but have not been considered for this thesis.  

WebMD has positioned itself to take part in favorable secular trends impacting online media. According to eMarketer, healthcare and pharma advertisers’ US online ad spend is expected to see double-digit growth over the next few years, rising from $1.03 billion in 2010 to $1.86 billion in 2015. This currently represents ~3.5% of the annual $28 billion spent on pharmaceutical advertising. By 2015, eMarketer’s suggests ~7% of total pharma ad spending would be online. WebMD’s is in an enviable position to capture this growth due to its strong brand and 100+ million unique visitors per month. 

Over time a long term horizon, the percentage of online advertising spending should become a bigger portion of the overall spending pie. Cost-conscious drug makers are seeking less expensive marketing strategies. For example, the number of US pharmaceutical sales reps has declined since 2005 and may accelerate further once the Physician Payments Sunshine Act takes effect in late 2013. This law requires all US manufacturers of drug, device, biologics, and medical supplies to publically report physician payments. This should help shift advertising dollars to relatively cheaper and more effective alternatives such as online advertising. Assuming that one day 30% of the total pharma ad spending will be online and suppose that total market gets cut in half due to more cost effective advertising. One could project online pharma ad spending to be ~$4 billion sometime in the next decade.  

As evident by the lack of comparables, WebMD is undeniably the market leader in its niche, representing ~40% of total online pharma ad spending in 2011. One might wonder what the “moat” is and how WebMD can maintain its share of a growing market. WebMD’s value is powerful and stems from its first mover advantage which has allowed the Company to amass a large user base that would be difficult to replicate. Unlike most online advertisers, WebMD offers targeted advertisements to individuals researching a specific topic or condition. Through providing information about therapies available to treat that topic, WebMD’s advertising can be viewed as a valuable source of information provided to a potential prescriber or patient when they are already focused on finding said information. Conversely, other media advertising is focused on diverting the user’s attention away from what they are already doing. I believe this fundamental difference between WebMD and other online advertisers helps to alleviate risks of potential declines to premium ad pricing.  

Selling into a weak 2012 did not make much sense for shareholders and I believe management made the right choice to call off discussions. Instead of selling the business entirely, the Company held a tender offer to repurchase $150 million of common stock at a price of $26 per share which suggests that management is shareholder friendly. I believe directors and management still have a strong incentive to sell the business since they own ~8% of the outstanding stock (~$100 million market value) and would be entitled to receive an additional ~$30 million of compensation in the event of a change of control. The CEO resigning certainly raises some concern, but as previously mentioned, I believe the right CEO could be a positive catalyst. With the poison pill expiring in 6 months and management motivated to sell, I believe WebMD is an attractive takeover target with a strong competitive advantage attributable to its 100+ million user base and strong brand coupled with favorable long term trends for online pharma ad spending.


Embedded below is Andrew Diaz's slideshow presentation on WebMD from the Ira Sohn investment contest where he was a finalist:




Were you also a finalist in the contest?  Please click the contact link at the top of the page and get in touch.  And if you haven't seen them already, check out notes from the Ira Sohn Conference.

Submit Investment Ideas to Be Judged By Seth Klarman, David Einhorn & Bill Ackman: Ira Sohn Contest

For the second year in a row, the Ira Sohn Investment Idea Contest is back. Here's your opportunity to have an idea judged by some of the top investors in the game.

Judges for this year's contest include: Seth Klarman (Baupost Group), David Einhorn (Greenlight Capital), Bill Ackman (Pershing Square), Michael Price (MFP Investors), and Joel Greenblatt (Gotham Capital).

The winner will be selected based on the judges' determination of the most compelling investment idea.


How To Apply: Click here to submit your idea

Deadline: You must apply by Wednesday May 9th at 11pm EST.

Rules: You can choose any marketable security (long or short) with a market cap above $1 billion. The time horizon for the idea should be one-year.

Prize: The winner gets to present their investment idea in front of 2,000 people at the renowned Ira Sohn Investment Conference.


The Ira Sohn Investment Conference was founded in 1995 and proceeds from the event go to organizations dedicated to care and treatment of children with pediatric cancer and life-threatening illnesses.

At the conference, top hedge fund managers present their latest investment ideas and it's one of the best events each year. This year the conference will take place on May 16th from 12pm to 6pm at NYC's Avery Fisher Hall at Lincoln Center. More information can be found at SohnConference.com.

Don't forget to submit your investment idea before May 9th. Good luck!

Ira Sohn Investment Idea Contest

***Update: Be sure to check out our notes from the Ira Sohn Conference for 2011 where we're providing updates on the presentations from top hedge fund managers.


The legendary Ira Sohn Investment Conference in New York has a new twist this year. They are having an investment idea contest before the event to be judged by Seth Klarman, Michael Price, David Einhorn, Bill Ackman, and Joel Greenblatt. The winner gets to present their investment idea at the conference to 2,000 attendees later this month.

The judges are looking for the best investment idea with a one-year timeframe. You can learn more about the contest and submit your ideas here. Deadline for submissions is May 20th.

Here's the details of the conference:

Wednesday, May 25th, 2011
12:15 - 6pm
Rose Theater, 5th Floor, Frederick P. Rose Hall
Broadway at 60th Street, New York City

For more information on the contest and to submit your idea, visit http://www.irasohnconference.com/contest

Market Folly Contest Too

We're having a simultaneous contest for our readers too. Entry is free so simply email your submission to us: marketfolly@gmail.com.

We'll handpick our own winner (totally separate from the Ira Sohn). The winner of our independent contest will receive a free 1-year subscription to our Hedge Fund Wisdom newsletter (a $199 value). The runner-up of our contest will receive a copy of Bethany McLean & Joe Nocera's book, All The Devils Are Here. Good luck and get writing!

2nd Annual March Madness Bracket Contest: Free Entry

It's that time of year again. We're pleased to announce the second annual Market Folly March Madness contest now that the NCAA Men's College Basketball Championship is here. So, fill out your brackets!

It is free to enter. To participate, you will need a free CBS Sports account. Click here to join our free contest.

Group Name: Market Folly Madness
Password: mf

If you signed up last year, your CBS Sports account should have automatically re-joined the contest for this year. You must submit your picks before Thursday, March 17th. Best of luck to everyone participating!

Market Folly March Madness: Fill Out Your Bracket!

We thought that it would be fun to start an annual contest amongst Market Folly readers now that the NCAA Men's College Basketball Championship is here.

This is one of the most exciting times of the year in the sports world and many of you are probably big fans like we are (Rock Chalk Jayhawk). So, it's time to fill out your brackets! We've setup a free group over on CBS Sports and feel free to invite anyone and everyone.

You will need to sign up for a free CBS Sports account in order to play so make sure you do that before trying to join our contest. Once you have an account, make sure to enter the group password & the link below will take you right to our sign-up page:

Group Name: Market Folly March Madness

Password: mf


Click here to sign-up for Market Folly March Madness @ CBS Sports for free!


Best of luck to everyone participating!

$1000 Prize: Guess the Nasdaq Close Challenge

*Update* Entry is now closed! Best of luck to everyone who entered!

Want to win $1000?

Yea, we thought so! Blain over at StockTradingToGo has started a great contest that we wanted to alert our readers to. It's basically a financial blog community battle royale and we think Market Folly readers can take home the big prize.

How do I enter?

The challenge: Write a comment below this post here on MarketFolly with your guess as to what you think the NASDAQ Composite Index will close at on Thursday, April 30th, 2009 (two decimals included: i.e. 1538.64).

It's as simple as that! Please note that you can ONLY post your guess once... you can't run around and enter on other blogs. So, represent Market Folly and post your guess below because its free to enter!

Entries must be posted in the comments section of this post on MarketFolly by Sunday, April 5th at 9pm EST... no exceptions!

Remember, do NOT post your guess anywhere else or you'll be disqualified. ONLY post your guess here at Market Folly. Winner with the correct guess of the Nasdaq close will get $1000 courtesy of Blain and his site.

Good luck everyone!