The 24th annual Sohn Investment Conference in New York is fast approaching. Supporting the Sohn Conference Foundation's mission to treat and cure pediatric cancer, this is always a great event and supports a great cause. In partnership with CNBC, the conference features top investors and industry thought leaders sharing investment ideas and more.
You can learn more about the event and register by clicking here.
2019 Sohn New York Speakers List
· Bihua Chen, Founder and Portfolio Manager, Cormorant Asset Management, LP
· Patrick Collison, Chief Executive Officer, Stripe
· Laura Deming, Managing Director, Longevity Fund
· David Einhorn, President, Greenlight Capital, Inc.
· Tim Ferriss, Investor, Best Selling Author, and Top-Ranked Podcaster
· Spencer Glendon, Concerned empiricist and Founder, Probable Futures
· Jeffrey Gundlach, Chief Executive Officer, DoubleLine Capital LP
· Christopher R. Hansen, President and Founding Partner, Valiant Capital Management, L.P.
· Ryan Heslop, Co-Founder & Portfolio Manager, Firefly Value Partners, LP
· Sir Michael Moritz, Partner, Sequoia Capital
· Gabe Plotkin, Chief Investment Officer and Founder, Melvin Capital Management LP
· Larry Robbins, Founder, Chief Executive Officer, Portfolio Manager, Glenview Capital Management, LLC
· Daniel Sundheim, Founder and Chief Investment Officer, D1 Capital Partners
· Josh Waitzkin, Extreme Athlete, Peak Performance Specialist
· Ariel Warszawski, Co-Founder & Portfolio Manager, Firefly Value Partners, LP
· Dr. Joon Yun, President, Managing Member, Palo Alto Investors LP
Click here to register for the conference.
Event Details
When: May 6th, 2019
Where: Lincoln Center in New York City
Next Wave Sohn 2019
In addition to the main event, the conference will again feature the 6th annual Next Wave Sohn segment earlier in the day, which showcases emerging managers presenting their latest investment ideas. Here's the speaker's list:
· Angela Aldrich, Managing Partner & Portfolio Manager, Bayberry Capital Partners LP
· Matthew J. Smith, Chief Executive Officer & Chief Investment Officer, Deep Basin Capital LP
· Parvinder Thiara, Chief Investment Officer, Athanor Capital, LP
· Todd Westhus, Founding Partner, Chief Investment Officer, Olympus Peak Asset Management LP
· Lauren Taylor Wolfe, Managing Partner, Impactive Capital LP
As usual, this figures to be a full day of interesting market ideas and thought provoking discussion, all benefiting pediatric cancer research. If you're interested in attending, we'd recommend signing up quickly before the rest of the seats disappear.
Monday, April 29, 2019
24th Annual Sohn Investment Conference New York
Wednesday, October 31, 2018
Notes From Sohn San Francisco Investment Conference 2018
The Sohn San Francisco 2018 Investment Conference recently concluded and featured hedge fund managers sharing their ideas in order to benefit the Excellence in Investing for Children's Causes Foundation and its beneficiaries, as well as The Sohn Conference Foundation and pediatric cancer research.
Notes From Sohn San Francisco Conference 2018
- Mick McGuire (Marcato Capital Management): 2 Long Ideas
- Shashin Shah (Think Investments): Long Radico Khaitan (RDCK-IN)
- Alex Gleser (TPG Public Equity Partners): Long Philips (PHG)
- Jeff Osher (No Street Capital): Short Trupanion (TRUP)
- Glen Kacher (Light Street Capital): Long Farfetch (FTCH)
- Michael McLochlin (Highland Capital Management): Long Marvell Technology (MRVL)
- Gil Simon (SoMa Equity Partners): Long New York Times (NYT)
- Kevin Oram (Praesidium Investment Management): Long Cornerstone OnDemand (CSOD)
- Jeff Shen (BlackRock): On Asian Markets
- Dan Morehead (Pantera Capital): On cryptocurrencies & blockchain
Next Wave Sohn San Francisco Notes: Emerging Managers
- Marcelo Desio (Lucha Capital Management): Long Talend (TLND)
- Vineer Bhansali (LongTail Alpha): Plays for a rising rate environment
- Daniel Kozlowski (Plaisance Capital): Long Pure Cycle (PCYO)
- Franklin Parlamis (Aequim Alternate Investments): ServiceNow (NOW) trade
For other recent investment conference coverage, be sure to also check out notes from Capitalize For Kids Toronto, as well as notes from Invest For Kids Chicago, and also a summary of Great Investors' Best Ideas Dallas.
Mick McGuire Long Corepoint Lodging & Extended Stay America: Sohn San Francisco 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Mick McGuire of Marcato Capital Management who pitched 2 longs: Corepoint Lodging (CPLG) and Extended Stay America (STAY).
Mick McGuire's Sohn San Francisco Presentation: Two Longs
• Corepoint Lodging (CPLG) – lodging REIT spun off from La Quinta
• Spun off from La Quinta recently so a new company in equity markets
• 315 properties REIT with all La Quinta branded properties and operated by Wyndham
• Some classic dynamics of spin-off at play (Less analyst coverage, noisy financials, atypical shareholder base due to spin)
• Earnings were temporarily depressed and should increase as 1) hotels impacted by hurricanes in Texas and Florida will come back online and contribute to earnings; 2) renovations are completed
• Trading at a discount to peers at 8.3x EV/EBITDA vs median of 10.6x
• Other sources of earnings upside are increased oil and gas activity – have more exposure to oil and gas markets
• Trading at a discount based on hard asset value
• Substantial opportunity to improve hotel level profitability
• If margin improvement doesn’t happen, business likely to be sold (Taxable spin purposefully preserved ability to sell immediately)
• 55% upside based on current price, using 11x multiple and 2019 EBITDA of $232m
• Extended Stay America (STAY) – hotel owner/operator with 599 properties and 27 franchisees
• La Quinta part 2 but at the beginning of the story
• Largest single brand hotel owner and operator in North America
• Longer length of stay, less labor and higher margins versus typical lodging operator
• Company knows current structure is sub-optimal and seems motivated to do something, which could unlock value
• Highest margins relative to peers, strong cashflow profile, positive industry fundamentals, discounted valuation
• Re-franchising less profitable units
• Building new hotels with cash flow
• Last of its kind to separate its hard real estate assets from its brand company
• Capital deployment likely to drive shareholder value: stable cash flow from retained hotels, refranchising less profitable hotels, goes into: repurchasing shares, new hotels, growing franchise business which is minimal cost and high returns
• Attractive valuation: Trading at discount to peers. 8x EBITDA versus peers at an average of 10.7x
• Argues co belongs in a larger portfolio
• 134% upside to $38.12 target price based on 2022E Maintenance FCF/Share of $2.29 and 15x multiple
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Michael McLochlin Long Marvell Technology Group: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Michael McLochlin of Highland Capital Management who pitched a long of Marvell Technology Group (MRVL).
Michael McLochlin's Sohn San Francisco Presentation: Long Marvell Technology Group (MRVL)
• There’s been a selloff in the semiconductor industry due to concerns of slowing global growth
• End markets matter when it comes to semiconductor investing
• Marvell operates in strong end markets – data centers and communications infrastructure which both benefit from high growth, average margins, average competition and high secular growth
• Starboard got involved and took a large position; majority of board and senior management replaced. Since then YoY revenue went from -15.4% to up 3%, gross margin improved 800 bps
• Cavium Acquisition has improved their product offering
• Four key reasons to own: Potential upside to estimates, Strong management team, Compelling valuation (thinks stock is a double), Multiple call options
• Networking and storage are the two key end markets that Marvell plays in
• Solid State Drives (SSD) will drive the majority of growth
• Adoption of SSD growing in other areas (e.g. desktop, enterprise)
• HDD – data center growth offsets decline in client use
• Networking: Beginning of a multiyear growth phase for 5G and they have more components in 5G technology than 4G
• Margin expansion opportunity: Gross margin has gone up 800bps, going forward – more opportunity for margin expansion
• Management exceeding expectations and are strong capital allocators
• Despite best of breed margin profile, valuation trading at a significant discount to peers
• Some call options in the business like cross selling and product expansion that can drive additional upside
• Risks? Economic downturn, HDDs decline quicker than expected, Cavium underperformance, 5G spending slows down/delayed. Mitigants: secular trends in end markets, data center growth offsets, strong management, faster ramp in 5g spending
• Current price: $16.5 per share, upside to estimates = $5 per share, multiple expansion = $10 per share, giving price target of $31.5 per share.
Note that we also posted up notes on Jeff Smith's presentation (Starboard Value) on long Marvell (MRVL) at a separate conference as well.
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Shashin Shah Long Radico Khaitan: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Shashin Shah of Think Investments who pitched a long of Radico Khaitan Ltd (RDCK-IN).
Shashin Shah's Sohn San Francisco Presentation: Long Radico Khaitan
Company
• Long Radico Khaitan Ltd. (RDCK-IN), an Indian spirits company with domestic liquor brands
Thesis
• Indian consumer staples have done really well over the last 15 years; +21% IRR
• Per capita consumption of alcohol of 3L per person in India is much lower than the rest of the world and the world average of 6L per person
• Radico has a 7% market share of the Indian branded liquor market
• Really challenging to sell alcohol in India so barriers to entry favor existing players; in many states – distribution owned by the government
• Magic Moments vodka has very strong 50% market share as the #1 in Vodka in India
• Long runway for growth given vodka consumption (vs. other spirits) is underpenetrated versus other markets
• Expect margin expansion to 20% in ~2+ years versus 17.5% this year (More upside given that industry peers Diageo and Pernod have margins of ~30%)
• More recently have launched premium products that compete with products from Pernod and Diageo and have ability to drive further margin expansion
• Have decreased leverage significantly – expect to be at 0.0x by 2019
• Business is very attractively priced (Attractive valuation – 20x forward earnings, rev growth of ~20%; EBITDA growth of ~40%)
• Management owns 40% of the business and has never sold a share
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Glen Kacher Long Farfetch: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Glen Kacher of Light Street Capital who pitched a long of Farfetch (FTCH).
Glen Kacher's Sohn San Francisco Presentation: Long Farfetch (FTCH)
Company
• Long Farfetch (FTCH), an online personal luxury goods marketplace based in London
• Marketplace model with 1,000 total suppliers: 40% brands, 60% boutiques
Thesis
• Complex supply chains and high end brands do not translate well to Amazon’s scale and price driven business mode
• Compared Neiman Marcus's position in the 1990s as category winner to Farfetch as category winner now in the 2000s
• Also compared similarities to Zozotown in Japan, whose gross profit as a % of GMV increased over time and took EBITDA margins from 25% to 35%
• Personal luxury goods market is large and expected to be $450bn TAM by 2025
• Luxury goods are underpenetrated online versus apparel
• Farfetch runs a lot of the ecommerce websites for large luxury brands (e.g. Shopify for luxury)
• Recent margin decline driven by investment in online sizing technology
• Multiple drivers of success: Increasing TAM (3% to 10%), online penetration (9% to 15%), share of online TAM, take rate increase (from 33% to 38%), and margin expansion (from -19% to 35%)
• Attractive repeat customer spending. Initial purchase: $619 on site, in year 5 same customer spent $2,853 annually
• Believes it is a double over next few years
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Gil Simon Long New York Times: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Gil Simon of SoMa Equity Partners who pitched a long of New York Times (NYT).
Gil Simon's Sohn San Francisco Presentation: Long New York Times (NYT)
• Conventional views: news is a commodity, consumers won't pay for news, advertising only way to scale
• SoMa's view: consumers aware of 'fake news,' will pay up for trustworthy, differentiated content, most info still free but quality journalism worth paying for, direct subscription model better aligns publishers with consumers. Analogous to music industry streaming shift
• At the very early innings of the evolution of the new business
• Company with legacy, credibility and scale and has been around 170 years
• Believes internet will go from headwind to tailwind for high quality journalism
• 2011 – implemented their first paywall (with 20 stories a month for free)
• Shifting business model to creating journalism worth paying for
• Broadening content to deep research, more multimedia content (The Daily by NYT is one of the top podcasts in the country
• Very few publishers have crossed the chasm to monetizing print newspaper content – only FT, WSJ, Washington Post, and the New York Times
• Recently tighter paywall to 5 free articles per month driving conversion to paid subs
• 70%+ subs are digital subs
• 80% of print subs have a digital login
• See more revenue going towards subscription
• Opportunity for margin expansion from ~12% today to 20% by 2022
• Can’t be viewed as a legacy print media company; Underestimating future earnings leverage based on fixed costs of the newsroom
• Believes that it is a double to $40-$50 in 2 years
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Jeff Osher Short Trupanion: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Jeff Osher of No Street Capital who pitched short Trupanion (TRUP).
Jeff Osher's Sohn San Francisco Presentation: Short Trupanion (TRUP)
Company
• Short Trupanion (TRUP), a pet health insurance company
• An insurance company that is looking for a SAAS-like multiple by using software nomenclature and getting coverage by software analysts
Thesis
• Believes that TRUP is an insurance company masquerading as a subscription software business by using software nomenclature and getting coverage by software analysts
• Gross margins of 17% are nowhere near SAAS companies
• Looks more like standard insurance company with policyholders than a subscription company with subscribers. Company drivers are net premiums earned and losses incurred just like other insurance companies
• Company pays potentially illegal commissions through “rewards program” for veternarians based on referrals/sales and may be under regulatory investigation (although nothing disclosed) - Offering paid trips to vets and money to money to hospitals for policy activations = commissions
• Believe they could have an adverse selection problem as they are distributing/selling primarily through vet hospitals and healthy pets do not visit the vet hospitals
• Believes they are in an Inevitable Rate spiral which will result in a death spiral - Premiums have to be increased to offset higher claims and thus healthier pets unlikely to be signed up
• Valuation: Trades at a 9x P/B – way higher than best in class insurance peers like Progressive which trades at 3.6x P/B; Believes intrinsic value is $7.05-10.60 representing 65% to 77% downside
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Alex Gleser Long Philips: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Alex Gleser of TPG Public Equity Partners who pitched a long of Philips (PHG).
Alex Gleser's Sohn San Francisco Presentation: Long Philips (PHG)
• Portfolio has transformed dramatically with spin off of lower margin lighting business and sale of TV/electronics businesses (Went from a diversified conglomerate to a healthcare and personal care company but market still not viewing the company with the right lens)
• Attractive secular growth ( End markets growth at 7%, have #1 or #2 share in their major categories)
• Significant margin improvement opportunity (Diagnostic imaging is primarily where their margins lag and ability to increase their margin here; See 600 bps of margin improvement potential across the segments of the company; Management contemplating 100bps/year of expansion from 2017-2020)
• Management has delivered hitting organic growth targets of 4-6% and 100 bps margin expansion over the last year
• Attractive valuation: Trading at 9.2x EV/EBITDA - lower than peers
• Some optionality in other part of the business
• Strong balance sheet provides a nice margin of safety
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Kevin Oram Long Cornerstone OnDemand: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Kevin Oram of Praesidium Investment Management who pitched a long of Cornerstone OnDemand (CSOD).
Kevin Oram's Sohn San Francisco Presentation: Cornerstone OnDemand (CSOD)
• Leading vendor of talent management software
• Operational changes as a result of private equity involvement ($300 million from Silver Lake in 11/17) at Cornerstone will lead to a meaningful inflection in cash flow growth while also positioning the company for a potential sale to a strategic acquirer
• Leading position in the talent management space
• Cornerstone has salesforce efficiency levels well below industry peers, almost 50% lower
• Constructive engagement with management to drive changes in composition of board and management
• 95% renewal rates, should generate strong recurring revenue and cashflow; more than 3,300 customers with 37 million users
• Positioned to be acquired by a strategic but have not been acquired yet because strategics don’t want to do the work to transform the business
• $90/share potential value versus ~$48 share price today
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Jeff Shen on Asian Markets: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Jeff Shen of BlackRock who talked about the Asian market.
Jeff Shen's Sohn San Francisco Presentation: Asian Market
Co-CIO, Systematic Active Equity at BlackRock. Talked about China capital markets more generally. China is second largest equity market in the world (after US). It is very liquid but a lot more retail investors versus more developed equity markets. ~85% of trading volume comes from retail investors.
China equity markets are opening up to a broader investor base given MSCI decision to include Chinese companies.
Uses machine learning and big data to generate conclusions about the Asian market. Big data + big market = big alpha.
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Dan Morehead on Cryptocurrency & Blockchain: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Dan Morehead of Pantera Capital who talked about cryptocurrency and blockchain.
Dan Morehead's Sohn San Francisco Presentation: Cryptocurrency & Blockchain
Bullish on crypto-currencies and blockchain technology. Believes that blockchain is going to do to finance what VOIP did to telephone monopolies. It’s not only about blockchain and payments but decentralized applications will disrupt many different industries.
Discussed newer stable coins, which are low volatility cryptocurrencies (pegged to USD or similar) that are important for the use of applications requiring consistent and stable value exchange.
Recommends buying a basket of currencies – some will be losers and some will be winners- but asymmetric upside will help the winners outperform the losers.
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Marcelo Desio Long Talend: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Marcelo Desio of Lucha Capital Management who pitched a long of Talend (TLND).
Marcelo Desio's Sohn San Francisco Presentation: Long Talend (TLND)
Company
• Pitched long Talend (TLND) which helps companies integrate and manage data from disparate sources and across a wide variety of environment
• Leading platform that is in the perfect spot to help companies manage data explosion
Thesis
• Believes that data explosion becoming a major problem for companies as historical on-premise solutions for data management no longer workable
• Strong secular trends showing increase in data creation (10 fold rise in data by 2025), 3x growth rate of data experts by 2020, $205Bn spend in public cloud in 2020
• Large addressable market = $23Bn
• Gross Margins: 79-82% long term target
• Operating Margins: 20-22% target
• Strong recurring revenue, over 2000 customers
• Disruptive pricing model by charging on a user basis versus legacy models of charging by data volume
• New enterprise GTM model leveraging free products and trials, 3M downloads, 500k+ online community and outbound marketing = qualified leads
• High quality board and management
• Price target = $105, 70% upside from current price of $58 (Based on 6.5x EV/revenue on CY21 revenue estimate)
• Takeout acquisition candidate at a much higher potential multiple based on comps
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Daniel Kozlowski Long Pure Cycle: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Daniel Kozlowski of Plaisance Capital who pitched a long of Pure Cycle (PCYO).
Daniel Kozlowski's 's Sohn San Francisco Presentation: Long Pure Cycle (PCYO)
Company
• Pitched long Pure Cycle (PCYO), which is an asset-rich, vertically integrated, emerging water utility located in the Denver, CO metro area
• 3 components of the business: 25k acre feet of water, 930 acre zoned master plan community and also selling water for hydraulic fracking and oil and gas royalties
Thesis
• Believes that there is tremendous underlying value in the company’s three businesses/assets that is not recognized by the market given that the company is underfollowed and underappreciated (and not represented in ETFs)
• Value of 25k-acre feet of water = ~$1.6Bn+ based on water connection fees and service fees
• Residential land value = ~$420mm+. Net cash of $20m
• Water for oil and gas fracking = free call option; currently selling water for $100k-200k per well
• Market Cap = $219M versus a total un-discounted value of $2.0Bn+
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Franklin Parlamis on ServiceNow: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Franklin Parlamis of Aequim Alternate Investments who pitched a ServiceNow (NOW) trade.
Franklin Parlamis's Sohn San Francisco Presentation: ServiceNow (NOW)
Presentation called “Volatility Exposure without the burn”. Talked about ServiceNow (NOW) long converts and short stock as a way to play the volatility trade. Focused on in-the-money converts versus in-the-money LEAPs. Said it's cheap because big funds are selling to small arbs.
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Vineer Bhansali's Presentation at Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Vineer Bhansali of LongTail Alpha who gave a presentation on investment ideas in a rising rate environment.
Vineer Bhansali's Sohn San Francisco Presentation
Economic risk globally begins rising, political/geo-political risk
continues to increase. Earnings and momentum strong but being adjusted
lower. Correlations across strategies at all time highs.
Talked about ideas to invest in a rising interest rate and yield environment. Winners in a steepening yield curve environment include banks and financials, small caps with low financial leverage, quality, Two year Treasuries. Generally likes to be long volatility, especially in interest rates.
Losers in a steepening yield curve environment include bond proxies, tech, anyone with excessive financial leverage, low quality and any long duration asset.
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Monday, April 23, 2018
Notes From Next Wave Sohn New York Investment Conference 2018
The annual Sohn New York Investment Conference recently took place and featured hedge fund managers sharing their latest investment ideas to benefit charity. Before the main event, emerging managers shared their ideas in the Next Wave Sohn portion of the event. Here's notes from these pitches. You can also view notes from the main Sohn New York Conference here too.
Next Wave Sohn New York Notes 2018
Dylan Adelman, 2017 Sohn Investment Idea Contest Winner, Student at Penn. Long Vostok New Ventures. (VNV) Listed in Stockholm. Russian classified business. He compared it to Craigslist, which has 90% operating margins and only 40 employees, making $500 million/year in profit. Basically, "the Craigslist of Russia, but run to maximize profit.
Alexander Captain, Cat Rock Capital Management: Long Takeaway (TKWY), listed in Amsterdam. "The Grubhub of Central Europe." He said they looked for stocks that could go up 10x in 10 years, such as AMZN that when up 23x, and MA, PCLN, which went up more than 10x each. Key was three factors: a big market, obvious shift, and winner-take-most economics. He says Online Food Delivery fits these criteria. $50B of a $2T food market, so huge market. Ecommerce for restaurants is an obvious shift, as 80% of orders are still done over the phone now.
Tim Garry, Pelorus Jack Capital: He is predicting a price momentum / Beta crash. Says 40% of market was driven by fundamental investors 10 years ago, and now it's only 11%. Relation to style factors such as momentum is more important than Beta. Says there is a big spread between growth and value, and now quants are all in growth trades. He uses DeMark indicators and was mixing up technical analysis and quant talk. "High beta stocks underperform low beta." Sounded like his pitch was almost be long dividend stocks and short growth stocks (back in 2016 for 2 months, growth stocks dropped 5% two months in a row).
Rashmi Kwatra, Sixteenth Street Capital: Long Bank of Bangladesh (BRAC). She runs a concentrated long only fund investing in Southeast Asia. Bangladesh has a population of 163M, is located between India and China, entire country is the size of New York State. Similar thesis for region - underbanked, rapid growth, etc
Oleg Nodelman, EcoR1 Capital: Long Ascendis Pharma (ASND). Biotech PM, cancer survivor, claims to be "value oriented" Biotech PM, yet less than 10% of biotechs are profitable, and he points out that there is a 90% clinical failure rate. ASND is a "platform company" which is in Phase 3 trials of a new Growth Hormone Deficiency treatment that only needs once a week shots instead of current treatments which are daily shots. He does the math and gets $1.5B peak revenue based on $35k/year and 50% penetration, 8 years duration. Says Big Pharma will buy them out if they are approved, and could pay 4x revenue to get $129/share. They also have Achondroplasia treatment (this is what Verne Troyer had) which he says is worth $111, and something called PTH worth $49. so he argues you could double your money on this one.
Scott Goodwin, Diameter Capital Partners: Short Rallye, the owner of a levered French grocery called Casino, buy the 3 year CDS. He runs a $1.7B credit fund, long/short. This play has all the elements they look for: business with complexity, challenged industry, and similar playbook in other situations. "We want equity risk masquerading as credit risk." Grocers are already under attack, just like they are in the US, but if macro turns down at all, there is no margin for error here at all.
Be sure to also check out notes from the main Sohn New York Conference as well, featuring Bill Gurley, David Einhorn, Larry Robbins and more.
Thursday, October 5, 2017
Next Wave Sohn San Francisco Conference Notes 2017
We're posting up notes from the Sohn San Francisco Investment Conference 2017. First up is the Next Wave Sohn event which features emerging managers sharing their investment ideas to benefit the Excellence In Investing For Children's Causes Foundation.
Next Wave Sohn San Francisco Conference Notes 2017
Vineer Bhansali, LongTail Alpha
- Investing with Multiple Unknown Equilibria
- Volatility indices are at all time lows as are correlations across assets classes, but fear is at an all-time high – 2 potential ways to play this:
Idea/Theme 1: Offensive - Position for rising rates with central bank put still in place
- Sectors: Banks and Financials: XLF
- Outright: Index Call Options (SPX, Nasdaq)
- Structured: Levered Risk Reversals
Idea/Theme 2: Defensive - Position: Geo political volatility that raises risk premiums
Sectors: GLD, OIL
Derivatives (Outright: Put spreads on equity indices, HYG, Structures: Dispersion (Rising Correlations)
Marcelo Desio, Lucha Capital Management
Idea: GoDaddy (GDDY): Misunderstood growth stock, dominant market position, large TAM and low CAC
Business: A lot more than a domain company; domain is an onboarding strategy to sell a range of other services (hosting, business applications); 17mm customers; compete very effectively in the SMB space
Thesis:
1) Incumbency and scale - 80% of SMBs aware of GoDaddy (Share: 19% of the 335mm domains under management)
2) Efficient customer acquisition at ~$67
3) Very attractive unit economics; top of the range versus other SAAS companies
4) Highly sustainable growth runway: Large $23bn+ TAM and ARPU continuing to grow (International is growing high teens based on secular dynamics of internet penetration. Demonstrated ability to take share in new markets like India - Entered 5 years ago and now has #1 domain share)
5) ARPU growth -> incremental margins. High operating leverage that should drive margin expansion from 64% to 68%.
6) Incremental margins drive strong FCF
7) FCF will drive beneficial capital allocation
8) Strong valuation support: undervalued relative to similar companies in the tech space
Valuation: attractive return profile: $76 stock, +75%, 28% IRR through year end 2019
Risks: PE overhang, international growth stalls, DIY becomes a viable competitor (mobile web use drives "appification"), larger well capitalized tech players compete more effectively
Gil Simon, SoMa Equity Partners
Idea: Coupa (COUP)
SAAS category killer you've never heard of. Underfollowed company with significant upside. IPO'd last October, <$2bn market cap. Spend management not a sexy category - helps companies manage their business spending; ~600 customers
Business model: Cloud platform for managing spending (procurement, invoicing, expenses) that all companies do. $159mm in TTM revenue. Allows businesses to consolidate all spending under one platform. Helps customers save money -3-4% on average (Coupa provides visibility which enables cost cutting and negotiating leverage with suppliers. Case Study: Sanofi targeting 10bn euro of annual spend through Copua; replaced patchwork of 22 disparate procurement systems. Big competitor is SAP Ariba. Ease of use is the key competitive advantage versus legacy systems; Also flexibility, free to suppliers and ability to integrate with all ERP systems
Thesis: Partner ecosystem rapidly expanding from 500 two years ago to 2,000 which is a leading bullish indicator. Spend under management is rapidly expanding and expected to reach $350bn by FY18. Expect sustained revenue growth well above consensus. Valuation: Think it's a potential double. Takeout optionality to boot: SAP and Oracle have been aggressive in this space.
Seth Wunder, black-and-white capital
Idea: Lending Club (LC)
Business: marketplace for consumer lending that benefits from diversifed sources of capital including banks, insurance, companies, asset managers and retail investors. Make money from origination fees and servicing fees. Reduced spread versus banks: lenders get more yield and borrowers pay lower rates. Can be very scalable but won't take over consumer lending.
Thesis: Advantages for all market participants including borrowers and lenders (platform investors).
Borrowers: Get lower cost of borrowing, better application experience, NPS score of 78 versus credit card companies in low single digits.
Lenders: Access to short term, unsecured consumer credit, attractive risk adjusted returns, several purchase options (whole loans, fractional loans, securitizations), loan servicing handled by LC
Capital-lite model enables unconstrained growth. Large TAM $1.1T unsecured consumer credit and $1.2T auto loans. Harnessing technology and big data to originate loans. Expect high incremental margins going forward as operational investment needs moderate. EBITDA margins eventually >35%. Management team changed out with seasonal veterans from "fin" and "tech" due to some past marketing issues.
Misconceptions: High leverage - not true; net cash. High credit risk - risk is borne by platform investors. Dependent on Credit HFs to buy loans - not true; traditional banks like Citi provided 44% of funding for loans. Cost of capital disadvantage: Capital comes from investors, not balance sheet
Valuation: LC shares are worth $17, 175% upside. 2.8x EV/2018 revenues - significant discount to peers. 15.0x EBITDA on $468mm gets you to $17 implied share price.
We've also posted up notes from the main event, so be sure to check out those pitches as well: notes from the Sohn San Francisco Investment Conference 2017.
Monday, May 8, 2017
Next Wave Sohn New York Notes 2017
Below we're posting up notes from the Next Wave Sohn New York Conference 2017. This is the lead-in event to the main Sohn Conference and features emerging managers pitching their latest investment ideas to benefit cancer research. We've also posted up notes from the main Sohn Conference here.
Next Wave Sohn New York 2017 Notes
Neal Nathani (Totem Point): Long Xilinx (XLNX)
Sees 70% return in shares. Secular tailwinds in data center and automotive/industrial markets. AI and machine learning the next big opportunity in tech. Strong balance sheet and returns on capital, strategic asset. Thinks they take share from Altera and grow 11% versus FPGA market growth rate of 7%. Also notes if the company levers up it could repurchase over $6 billion in stock over the next few years, around 37% of market cap. 70% upside is achieved via 17.5x CY20 EPS of $5.39 plus net cash.
David Copley (Trafalgar Copley): Short JBH and NZD
Said that if China has a credit problem, then Australia and New Zealand definitely have a big problem. Thinks there's a residential housing supply bubble in Australia
Li Ran (Half Sky Capital): Long Fever-Tree (FEVR:LN)
Expansion to mass market retail has boosted volume. Attractive due to solid consumer messaging and long runway for growth opportunity. Prior to founding Half Sky, worked at Lone Pine Capital.
Jack Franke (Blockhouse Capital): Long MPLX (MPLX)
Thinks volume growth will accelerate due to pipeline additions. Argued stock could return 40% over next two years. Dividend could grow to $3 per share by 2019 and could close valuation gap to peers.
Dave Thomas (Atalan Capital): Long Gigamon (GIMO)
GIMO has 90% customer retention, dominant player in network visibility software. Says the total addressable market for GIMO is multiples higher than sell-side estimates. Thinks it is more of a software company than hardware. Price target $45 or 4x 2018 sales.
Mark Moore (ThornTree Capital): Long Formula 1 (FWONA)
Sport is growing revenue around 4-5% annually. The injection of Chase Carey into the team has helped rebuild the company/brand and invest in the fans.
Be sure to also check out the notes from the main Sohn Conference New York 2017.
Monday, April 10, 2017
Sohn New York Conference & Investment Contest 2017
Since 1995, the Sohn Investment Conference in New York has been the premier investing event. It features top hedge fund managers sharing their latest insights and ideas in order to benefit the Sohn Conference Foundation's work to end childhood cancer.
This year's conference is coming up fast, so be sure to register for the conference before it sells out.
Sohn New York Event Details
When: May 8th, 2017
Where: David Geffen Hall, Lincoln Center, New York City
Sohn New York Speakers List 2017
David Einhorn, Greenlight Capital
Bill Ackman, Pershing Square Capital
Jeff Gundlach, DoubleLine Capital
Clifton Robbins, Blue Harbour Group
Josh Resnick, Jericho Capital
Larry Robbins, Glenview Capital
Davide Serra, Algebris Investments
Brad Gerstner, Altimeter Capital
Keith Meister, Corvex Capital
Debra Fine, Fine Capital Partners
Chamath Palihapitiya, Social Capital
Tal Ben-Shahar, Potentialife
Kevin Warsh, Hoover Institution
To hear the latest investment ideas from these top managers next month, sign up for the New York Sohn Investment Conference here.
Sohn Investment Idea Contest
Also, the Sohn Investment Idea Contest is now live. Pitch your best idea with a 12-month horizon and have it judged by David Einhorn, Bill Ackman, Joel Greenblatt, Seth Klarman, and Larry Robbins.
The winner of the contest will then present their idea in front of 3,000 people at the Sohn Investment Conference in New York.
You can enter the idea contest here.
