Bruce Berkowitz & Bill Ackman: Summary of Their Harbor Investment Conference Talk

We're continuing our focus on the recent Harbor Investment Conference that took place late last week and wanted to point out a discussion between Fairholme Capital's Bruce Berkowitz and Pershing Square Capital Management's Bill Ackman. The two interviewed each other on their respective investments.

Below courtesy of our friends at Benzinga.com is a guest post summarizing the managers' talk at the Harbor Investment Conference:

"Berkowitz of Fairholme Capital, was interviewed by Bill Ackman, the conference's Co-Chair, and he discussed why he's been long Berkshire Hathaway (NYSE: BRK-A) and Leucadia National Corp. (NYSE: LUK) for a long time. He bought both of them around 1985, for similar reasons. He liked the company's management, and he specifically liked Berkshire because he said that Warren Buffett was a "smart guy" who ran other people's money. He paid about $2,700 per share for each A share he owns.

Ackman of Pershing Square Capital, asked what Berkowitz's biggest investment error was of his career. Berkowitz responded by saying that his biggest mistake was trusting management, and not verifying them. He said that in order to verify management, you have to try to prove them wrong, and kill their thesis.

He also discussed some of his better investments, like Imperial Metals, which Berkowitz said he has no idea why it's doing well, it just is. He discussed his position in Wells Fargo (NYSE: WFC) in the late 1980's and early 1990's, and said that he really likes the banks now. He believes we are rebuilding now, and a lot of banks are trading below book value, with low valuations, and said that the worse the bank was perceived, the better it will probably wind up being. He owns positions in Goldman Sachs (NYSE: GS), Regions Financial (NYSE: RF), AIG (NYSE: AIG), CIT Group (NYSE: CIT), Bank of America (NYSE: BAC), Citigroup (NYSE: C) and Morgan Stanley (NYSE: MS) in the financial sector. Berkowitz said there is a black box risk to owning banks, but after three years, you can get an idea of who's going to do well. Berkowitz said he would own more of Goldman Sachs if he could, but as a mutual fund, he's forbidden by law.

Regarding AIG, he said that AIG is more respected in Asia than it is here, and he sees tremendous value in the company's remaining assets, which it has so many of. Berkowitz said that former AIG CEO Hank Greenberg was a serial acquirer of assets, and there is tremendous value still there. He said that the current AIG is trading below book value, and it's trading at a single digit P/E. A major reason why he likes AIG is the company won't have to pay taxes for quite some time, as the company lost over $100 billion in market cap."

To read about the rest of Ackman and Berkowitz's talk, we highly recommend heading to the full summary at Benzinga here.

Alex Klabin of Senator Investment Group Likes Valspar (VAL): Harbor Investment Conference

Today we're focusing on the latest investment theses from top hedge fund managers that recently presented ideas at the Harbor Investment Conference. Alex Klabin of Senator Investment Group sees value in Valspar (VAL). Instead of focusing on cyclical businesses, Senator is targeting defensive businesses for the foreseeable future. We had covered some of Senator's investment theses at a previous conference as well.

The following is a guest post from our friends over at Benzinga.com summarizing the hedge fund manager's talk:

"Klabin, who has $3 billion dollars under management, said he believes that defensive businesses are trading at a discount of about 20% to where they should be trading, given historical valuations. He specifically mentioned looking at Merck (MRK), after the drug company missed earnings this week. Klabin said the company is probably full of bloat and there is a lot of fat that could probably be cut there.

Klabin said that expectations for defensive companies are very low, with only about 4% earnings growth, barely outpacing inflation.

The specific name he discusses at the conference is the Valspar Corporation (NYSE: VAL), which manufactures and distributes coatings and paints across the world. Klabin described the company as a combination of Sherwin Williams (NYSE: SHW) and a coating application company.

The company is a global leader in coating applications, with a 40% market share. Valspar makes the coatings on the inside of plastic bottles used for Coca-Cola (NYSE: KO) and other manufacturers. Without it, the acidic acid in the Coke would eat away at the bottle.

In the paint segment of the business, Klabin said he sees the quiet ability to raise prices for paint, and no one would notice."

To read the rest of Klabin's thoughts on the company, head to Benzinga for the full post here.

Mick McGuire of Marcato Capital Likes SFN Group (SFN): Harbor Investment Conference

The Harbor Investment Conference took place late last week and featured a bevy of hedge fund managers sharing their latest investment ideas. Mick McGuire of Marcato Capital Management was one of the speakers and his pick was SFN Group (SFN). Before founding Marcato, McGuire previously worked at Bill Ackman's Pershing Square Capital Management.

The following is a guest post from Benzinga.com with a summary of McGuire's bullish case for SFN Group:

"Mick McGuire of Marcato Capital Management spoke at the Harbor Investment Conference yesterday and recommended SFN Group Inc (NYSE: SFN) to the audience.

McGuire, who is a former chairman of Borders (NYSE: BGP) is an activist investor in the midcap space, and he believes there is significant value in SFN Group. McGuire said that the market cap of SFN is equal to the enterprise value of this U.S. based staffing firm.

He likes SFN because its' normalized earnings power should exceed the historic levels, and it's trading at a lower earnings multiple.

The company owns a variety of different staffing firms, including Spherion and Tatum, as well as others. It staffs different types of employees, from the entry level worker, to a seasoned company executive. The company receives higher margins on higher paying jobs.

McGuire believes that a lot of companies could maintain a high percentage of temporary workers, as he believes that many companies will want to maintain employee flexibility, should unforeseen events occur in the economy.

With an enterprise value of only $550 million, and $100 million in expenses from SG&A removed, McGuire believes the company is poised to increase its value over time. The company also has a significant amount of net operating losses at both the federal and state levels, which should allow the company to double EBITDA over the next year. The only major expense the company has is capital expenditures, and the company recently made a major technology purchase for its systems, which should allow Capex spending to drastically slow down over the next few years. The increase in EBITDA goes straight to the company's free cash flow.

McGuire also mentioned that the company is buying back 5% of its stock, thanks in large part to the increase in free cash flow it's seeing.

McGuire said that he believes SFN has an implied stock price of $20.26 by 2012."

Benzinga has covered the Harbor Investment Conference extensively and we highly recommend reading their coverage of the event:

- David Darst of Morgan Stanley Likes "Global Gorillas"
- Craig Nerenberg of Brenner West Capital Likes CLO's
- Todd Sullivan Sees Value in Audiovox

Harbor Investment Conference: Ideas From Ackman, Berkowitz & More

Want to hear some investment ideas from top hedge fund managers? The Harbor Investment Conference will take place February 3rd, 2011 in New York City and provides the perfect opportunity. All proceeds from the event goes to the Boys and Girls Harbor, so it's a wonderful cause. At last year's event, the 8 stocks that were recommended were up an average of 39% at the end of 2010. There are only 331 seats available so act quickly!

Here are the speakers at the event:

Bill Ackman – Pershing Square Capital Management
Bruce Berkowitz – Fairholme Capital Management
David Darst – Chief Investment Strategist, Morgan Stanley Smith Barney
Alex Klabin – Senator Investment Group LP
Mick McGuire – Marcato Capital Management, LLC
Craig Nerenberg – Brenner West Capital Advisors, LLC
Todd Sullivan – Rand Strategic Partners

Everyone of course knows Bill Ackman and Bruce Berkowitz. However, some of the other speakers should offer great insight as Mick McGuire previously worked at Pershing Square and Craig Nerenberg runs a similar strategy to Pershing Square with a concentrated portfolio. Also, our good friend Todd Sullivan from ValuePlays.net will be speaking as well.

Embedded below is an information and registration sheet for the conference:



You can download a registration .pdf here.

The event is coming up soon and there are only 331 seats available, so sign-up to hear some hedgie investment ideas and support a great cause at the same time.