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.

Great Investors' Best Ideas Conference Notes 2013: Price, Akre, Gabelli, Pickens, Russo & More

Below are some brief notes from the 7th annual Great Investors' Best Ideas Conference in Dallas benefiting the Michael J. Fox Foundation for Parkinson's Research and the Vickery Meadow Youth Development Foundation.


Notes From Great Investors' Best Ideas Conference


Michael Price (MFP Investors): He pitched three ideas:  long Hospira (HSP), long Songbird Estates (SBD.LN) and long Dolby Labs (DLB).  HSP has seen value guys buying it, transitioning away from growth investors as the investor base changes.  The company has good free cash flow and he thinks the stock can hit $60.  His thesis on Songbird is a discount to NAV story (around 30%).  Dolby (DLB) has a ton of cash and no debt with huge royalty streams (80% of revenue).  As tablets and PCs continue to grow, they'll make money.


Chuck Akre (Akre Capital Management):  His picks were Moody's (MCO) which he likes due to its oligopoly position, solid return on equity and pricing power,  as well as O'Reilly (ORLY), the auto parts supplier which recently bought CSK Auto and the integration has gone well and now they're buying back shares.  His presentation also focused on how you should stick with your circle of competence and acknowledge when you're unsure of things. Focus on 3 things in a business:  growth of capital (high ROIC), good management, and solid reinvestment (how they used past FCF).  The price you pay is very important.


T. Boone Pickens (BP Capital):  He pitched Diamondback Energy (FANG) which he likes for its growth potential, no debt and a lot of cash.  He also likes Basic Energy Services (BAS) as excess capacity has been taken out.  He also touched on his picks from last year: National Oilwell Varco (NOV) which he still likes, as well as Pioneer Resources (PXD), almost a double and he likes the Permian basin acres (continues to like this stock as well).


Karen Finerman (Metropolitan Capital Advisors):  She pitched North Atlantic Drilling (NADL.NS) traded in Norway which was a spin-off from Seadrill (SDRL).  The spread between non-Norway rates and Norway rates is very big and many contracts already locked in.  She likes the cheap valuation, big dividend (potential for it to grow), says there's limited downside due to the backlog. There's also a catalyst with an IPO coming for a US listing and it won't be too dilutive. 


Tom Russo (Gardner, Russo & Garnder):  He pitched Nestle (NSRGY) and Berkshire Hathaway (BRK.A/B).  It seems like Russo always pitches Nestle when he speaks somewhere.  He's a global value investor and is looking for companies like See's Candies and invests for the long-term.  They have a lot of European companies in their portfolio and like market volatility as it provides opportunities to long-term investors.  The last major portfolio buys they made were AB Imbev (BUD) and Mastercard (MA) 3 years ago.


Mario Gabelli (Gabelli Funds):  He presented Cablevision (CVC) as a potential buyout candidate with John Malone (and Charter Communications) active and pushing for consolidation.  Will the Dolans sell CVC?  Argues that the company is worth up to $23 in a buyout, versus current levels of around $16.


Caroline Cooley (Crestline Investors):  She's focused on event-driven plays.  She specifically mentioned Macquarie Infrastructure (MIC) which is involved with infrastructure building, has a nice yield and could see it head higher.  It's undervalued because it cut the dividend in '09 and has limited sell-side following. says this story is probably in the middle innings.


Tom Gayner (Markel):  He pitched General Electric (GE).  He pitched the same stock at GIBI in 2007 when it was $40 and now the stock's at $25.  They still own shares and now have a $23 cost basis.


For more conference notes, we also posted up notes from Invest For Kids Chicago (Lasry, Eisman, Cooperman).

Michael Price's Presentation From The London Value Investor Conference 2013 (Video)

Last month, we posted up notes from the London Value Investor Conference 2013.  The event was a big success raising money for the charity Place2Be.  The conference has released video of the presentation from MFP Investors' Michael Price and we've embedded the video below:



For more from the event, be sure to check out notes from the London Value Investor Conference.

Notes From the London Value Investor Conference 2013: Marks, Price, Montier & More

Today we're pleased to present notes from the 2013 London Value Investor Conference.  The event features well known investors presenting investment ideas and insight in order to benefit children's charities The SMA Trust and Place2Be.  Summaries of each presentation are linked below:


Notes From 2013 London Value Investor Conference

Howard Marks (Oaktree Capital): The sweet spot in corporate bonds

Michael Price (MFP Investors): On investment process & 2 long ideas

James Montier (GMO): Latest asset allocation model

Gary Harding (Winton Capital): Key value metrics to focus on

Anthony Bolton (Fidelity China Special Situations Fund): On investment process & China

Gary Channon (Phoenix Asset Management): Long Glaxosmithkline

Richard Oldfield (OldfieldPartners): Long Nokia & long Hitachi

Simon Denison-Smith (Metropolis Value Fund): Long Cisco Systems & J. Smart

Ian Lance & Nick Purves (RWC): Effectiveness of value investing today & 1 long idea

Jeremy Hosking: Long AIG & long US Airways

Richard Titherington (JP Morgan): Emerging market opportunities

Michael Price's Presentation at London Value Conference: Long Hospira & Hess

Continuing our notes from the London Value Investor Conference 2013, the next speaker is Michael Price of MFP Investors.  He talked about his investment process and presented two long ideas: Hospira (HSP) and Hess (HES).


Price's Background

Michael Price first came to London as an investor in 1984. At the time few people in Europe used  a balance sheet focused value approach. Many companies were not covered by an analyst at  all and this encouraged Price as the lack of coverage made him feel that he was discovering new  opportunities. Price said that this was the opposite situation that you find at recent Berkshire  Hathaway annual meetings where 40,000 people focus on one company. He said to find opportunity  you need to get off the beaten track.


Price's Investment Process

Price talked about his investment process. Two-thirds of his portfolio is made up of stocks that trade  below two-thirds of their intrinsic value. The other third are special situations e.g., firms involved  in proxy fights, liquidations or a fight for control. From his 40 years of experience, excluding 2008  - he said we all need to forget about 2008 - that type of value portfolio will weather the storms.

What’s important is to buy cheap and be well diversified with at least 30-70 holdings. When you are  convinced that what you already own is cheap compared to comparable businesses you add to it.  When you have done lots of work and you gain conviction about an idea you can take the stake up  to 3 to 5% of your portfolio. Your top five positions might each be 5% of your portfolio. If you have  conviction you should add to holdings as they get cheaper. He values businesses by asking what a  potential owner would pay for the whole company.

Be prepared to wait patiently. If there is nothing to do, sit with cash. Cash is ammunition. An  investor should spend all of his or her time working on calculating intrinsic values waiting for the  market to throw out an opportunity. The definition of luck is preparation meeting opportunity.

Bad news creates opportunity: wait for bankruptcies, the death of a control person who owns  a large part of the business, litigation, government intervention and accidents. Always look at  the companies whose share price is most down to find value. Price said he also likes investing in  companies where management has built up intrinsic value and made mistakes.

In terms of market valuation today, Price said the market was reasonably priced but there are still  some opportunities to find securities that trade at two-thirds of their asset value.


Long: Hospira (HSP)

Idea: Long Hospira (HSP:NYSE).  Hospira had been a growth story until the FDA shut down one of its largest plants. The share price  went from $45 to $28 overnight. The growth investors sold to the value investors. Price thinks that  the company will have completely recovered in two years.


Long: Hess (HES)

Idea: Long Hess (HES)  Hess is a case where the management have stumbled. Hess is involved in a proxy fight with Paul  Singer’s Elliott Associates. It trades at a 50% discount. Price thinks there is likely to be four or five  new directors. The company with be divided into two parts and share buybacks with be agreed.  Assets will be sold off. John Hess is likely to step down. The outcome of the vote is due on May 16.  It is also possible that Hess may get bought out.


Michael Price said he also likes US banks (not European banks, though). He thinks Berkshire  Hathaway is 20% overvalued.


Book Recommendation

Michael Price highly recommended a book about Peter Cundill’s  investment approach by Christopher Risso-Gill (2011) “There’s Always Something to Do: The Peter Cundill Investment Approach."


Be sure to check out other investor presentations: notes from the 2013 London Value Investor Conference.

Discount to the London Value Investor Conference 2013

We're excited to announce a special discount for Market Folly readers to the upcoming London Value Investor Conference 2013 that benefits children's charity Place2be.

London Value Investor Conference 2013

£100 Discount Code: MARKETFOLLY123 
Click here to register

Market Folly has managed to secure a very limited number of discounted tickets to the forthcoming London Value Investor Conference 2013.  This year's conference takes place on the 9th of May 2013 at Central Hall Westminster with the following excellent speaker line-up:

- Howard Marks, Oaktree Capital - The Most Important Thing
- Michael Price, MFP Investors - The Peter Cundill Foundation Address
- David Harding, Winton Capital - Searching for Value in Data
- Anthony Bolton, FIdelity China Special Situations Fund - Q&A Session
- Nick Purves and Ian Lance, RWC - New Challenges for Value Investors
- Richard Oldfield, Oldfield Partners - Still Simple, Still not Easy
- Plus speakers from smaller, less well known funds (see the full list of speakers here)

As part of their presentation, each of the speakers will give at least one current investment idea.  Winton Capital has also kindly agreed to sponsor a drinks reception after the event, which will be a great opportunity for networking amongst the value investing community.

With 8 weeks to go, the number of delegates attending is already well ahead of the total who came last year.  It is expected that the 2013 conference will be the largest gathering of value investors ever outside of the USA.

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In order to claim your special £100 discount to this conference,
please use the code MARKETFOLLY123 when signing up here.

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The last London Value Investor Conference donated its profits to the children's charity, the SMA Trust.  This year's conference will be supporting the children's charity Place2be.

Are These The Next Warren Buffetts? Wisdom From Klarman, Perry, Chanos & More

Fortune recently republished an article that originally appeared in the 1989 issue of Fortune magazine.  "Are These The New Warren Buffetts?" was written by Brett Duval Fromson and highlights investors from that period who were thought to be talented enough to match the investing acumen of Warren Buffett.  Twenty-plus years later, the article accurately pinpointed some amazing investors.

The article identified the following (at the time) young investors:

- Seeking Subtle Signs of Value: Seth Klarman (Baupost Group)
- The Bargain Hunter: Michael Price (MFP Investors)
- Turning Value Upside Down: Jim Chanos (Kynikos Associates)
- A Formula For Deals: Richard Perry (Perry Partners)
- Pairing Value With Arbitrage: Eddie Lampert (ESL Investors)
- A Freudian Grahamite: Randy Updyke
- The Passionate & The Skeptical: Glenn Greenberg & John Shapiro (Chieftain Capital)
- A Scientist on Wall Street: Thomas Sweeney (Fidelity)
- Mr. Preservation of Capital: John Constable (Constable Partners)
- Mr. & Mrs. Aggressive: Jim and Karen Cramer


Wisdom From The "Next Buffetts"

As you can see, the list highlights some gems.  However, the best part of the article is that each investor shared some rare nuggets of wisdom regarding their approach that we wanted to draw attention to:


Seth Klarman: "Klarman's exceptionally quick and subtle mind allows him to see value in many different guises.  With stocks high, he looks for 'market-insensitive opportunities.'  By that he means companies whose financial performance depends on bankruptcies, announced mergers, liquidations, restructurings, or spinoffs -- corporate events largely independent of the vagaries of the financial markets."  Klarman focuses on the downside, saying: "I focus on what could go wrong.  Before buying, we always ask ourselves, 'what would we pay to own this company forever.' "  For more from this great investor, we've posted up Seth Klarman's recommended reading list.


Michael Price: "I like cheap stocks.  I'm basically a guy who looks at a company's balance sheet and asks, 'what is the company worth? Give me a number.'  If the answer is, 'Substantially more than the price,' then I get interested."


Richard Perry: "His investment approach? E(V) = {P(UPx) + [(1-P) (DPx)]} / (1 + COF).  That simply means he values a deal by calculating the odds that it will go through, how long it will take, and what the investment is worth with and without the deal.  Why all the effort to quantify?  Says Perry: 'There are no lay-ups in the arbitrage business.  This helps us maintain clear, high standards for buying a deal.' "  For more thoughts on this strategy from well-known investors, we've also posted up John Paulson on the risk in risk arbitrage.


Jim Chanos: "Chanos is in truth a perverse kind of value investor.  Using the same techniques as the others, he looks for overvalued stocks.  He stays mainly in large-capitalization issues.  That way there is more liquidity and thus less chance of a short squeeze, which would force him to liquidated his position because he could no longer borrow shares from brokers."  For more on his approach, we've posted up Chanos on the psychology of short selling as well as Chanos on the power of negative thinking.


Eddie Lampert: "Arbitrage helps our value investing.  If we can earn 20% to 25% annualized returns in arbitrage, then for the long term we can buy only stocks that we think will earn comparable rates of return.  Conversely, if deal stocks get overpriced, we will begin investing in companies with good long-term prospects at low prices." 


Randy Updyke: "Investing is about survival.  I stay away from the herd.  I like to buy things for a lot less than I think they are worth.  But to me the psychology and mood of the market are more important than anything."


Thomas Sweeney: "People always panic.  If you study this phenomenon over time, you see that eight times out of ten you make money by buying into a panic."



Be sure to check out the full re-published version of the Fortune article, where you can see Chanos rocking a sweet mustache and other great vintage pictures.

Michael Price on JC Penney, Shantanu Agrawal on Xerox: Ira Sohn Presentations

We're posting up notes from the Ira Sohn Conference.  Michael Price spoke briefly on J.C. Penney (JCP) saying that he just bought shares on the dip today.  Look at the ownership, the board, the assets below it.  "Look at the top lines, the revenues" (that was the problem).  He also said it's too early to get into banks, and to wait it out.

Price then introduced the Ira Sohn Contest Winner: Shantanu Agrawal who pitched long Xerox (XRX).  The judges panel consisted of David Einhorn (who is long XRX), Bill Ackman, Joel Greenblatt, Seth Klarman, and Michael Price.


Long Xerox (XRX): Stock $7.40 now. Uses sum of the parts (SOTP). Core business generates FCF, not high growth, but EBITDA to FCF conversion. Create equity at 14% FCF yield, could re-leverage the business, 21% FCF to equity.

Catalyst is return of cash flow in dividends and buybacks. $9.50 base, upside $11-12. Downside to $6.50. See $10B debt, but $6B associated with equip financing business. So he says net debt, after cash, only $2.7B, or $0,9B. Document related revenues were actually up 1% in 2011, so idea is not collapsing as fast as people think.

Bull case is cheap, FCF high, debt not as high as it looks, core business in slow decline not collapse, and decent risk/reward with $6.50 down, $9.50 fair value, $12 upside.


P.S. - Don't miss other presentations from David Einhorn, John Paulson, Bill Ackman & more: notes from Ira Sohn Conference 2012.