Robert Bishop Long Rio Tinto: Sohn London Conference

We're posting notes from the Sohn London investment conference 2016.  Next up is Robert Bishop of Impala Asset Management who pitched long Rio Tinto (LON: RIO).


Robert Bishop's Sohn London Conference Presentation

The macro backdrop is set fair for commodities:

-    Emerging market (EM) demand is improving. If you are going to invest in a mining company you need to believe that EM markets are getting economically stronger because they account for 65% of metals demand and 55% of oil demand. China is the key player and Bishop believes it hit bottom in January 2016.

-    The US and EU infrastructure replacement cycle is just starting. Trump will generate more ‘bang for your buck’ than any previous President.

-    More fiscal stimulus is coming worldwide


The micro background is also positive:

-    The 5 year downtrend in metal prices is over. The longest in 125 years.

-    Metals supply and demand is coming back into line. Copper and zinc already have a supply deficit. Small supply shocks will now lead to bottlenecks in the supply chain and push prices higher.


He believes we are at the start of a new commodity cycle. China will expand construction and infrastructure spending on roads, railways and other forms of transportation. Capital spending in the mining sector is at the bottom of the cycle.

Rio Tinto is the largest miner in the world. It is the large cap, high quality way to play the new commodity cycle. It is the low-cost producer. It lost its way in 2007-2013 with ill-timed acquisitions. Since then it has focused on cutting costs and improving efficiencies. It now has better operating leverage. Capital expenditure has been reigned in and the company is now in a harvesting phase.

Iron ore prices are the key to the Rio Tinto investment.  Prices need to keep going up. Demand has outstripped supply this year. There will be more demand for steel from India, China and the US. The demand for steel in the US and Europe will be driven by fiscal stimulus programmes that will be better for commodities than quantitative easing.

Be sure to check out the rest of the Sohn London conference presentations here.

Delivering Alpha Conference Notes 2016: Singer, Dalio, Chanos, Miller & More

CNBC & Institutional Investor's Delivering Alpha Conference is underway and below are some notes.  This post will be updated throughout the day as the various speakers/panels are ongoing:


Delivering Alpha Conference Notes 2016

Paul Singer (Elliott Associates):  Said that it's a "very dangerous time in global markets" right now.  Argued central bank independence doesn't really exist.  Noted that Bank of Japan is basically a top-10 shareholder of various Japanese corporations but the economy hasn't rebounded.  Called it insane, "It's not working, but they keep going."  Feels that investors are careless about inflation threat.  Says sell long-term bonds.    "There will come a time when inflation, despite growth suppressive policies can blow through targets and surprise everyone."  Says we're basically in the middle of close to a 40 year experiment in how leveraged a system can be, and in how many ways.  Thinks gold as a directional asset is underrepresented in portfolios "as the only money and store of value that has stood the test of time that is, in my view, undervalued and underpriced in today's world and sort of is the opposite of confidence in central banks."


Ray Dalio (Bridgewater Associates):  Discussed ways to spur economic growth with Timothy Geithner.  Dalio says, "We're in a situation where central banks want to drive you out of cash and out of bonds."  Called it a dangerous situation, as central banks run out of assets to buy and push investors into riskier assets.  Dalio thinks raising rates is risky as it's not priced into the yield curve.  "There's only so much you can squeeze out of a debt cycle and we're there, globally."


Jim Chanos (Kynikos Associates):  Still short Alibaba (BABA), says they're "buying anything that's for sale, just burning cash."  He's also still short Tesla (TSLA) and SolarCity (SCTY).  Says the two companies combining basically puts TSLA on a path to potential bankruptcy.


Carl Icahn (Icahn Capital): Said he's requesting from the FTC the right to own up to 50% of Herbalife's (HLF) outstanding shares.  Currently has the right to around 35% of the company.  Re: the market, "I think it's very dangerous in the market right now.  If they don't raise rates, I think we're in a major bubble."  There's a problem either way with a dilemma if you raise rates or if you don't.  Says the economy is messed up because of people like Janet McCabe at the EPA.  Also: "I hate to be immodest but I've returned 28% annualized since inception."


Marc Lasry (Avenue Capital):  Said that you can "make a lot of money on direct lending," stepping in for reluctant banks.  On investing - find people who are talented / engaged / who care and invest with and then don't worry about daily/monthly liquidity.


Bill Miller (Legg Mason):  Likes Amazon (AMZN) or Facebook (FB) compared to Alphabet (GOOG/L) due to the growth rates and margins.  Thinks AMZN doubles in 3 years.  Also likes Valeant Pharmaceuticals (VRX) long, one of his larger positions.  His main trade idea was long S&P 500, short 10-year Treasury (dividend yield on S&P is higher).


Robert Bishop (Impala Asset Management):  Best idea was Teck Resources (TCK): improving China demand, management has cut costs, end of metals 5-year downtrend.  Says Freeport McMoran (FCX) still has a worrisome debt picture.


Barry Sternlicht (Starwood):  Real estate in New York City is "a disaster" with rents at the high-end down 15%.  Noted the problem many investors face: "you have to invest in something, you can't just sit in cash."  On Tesla, says he loves the car but would probably be short the company.  Questioned Pinterest's valuation, arguing it seemed like a lot of money for a bulletin board.  Said Doppler Labs could be like the next Oculus Rift.


Mary Erdoes (JPMorgan):  "They're called crowded trades when they don't work and momentum trades when they do work."  Says it's time to weed out the stock pickers who aren't the best. 


Dawn Fitzpatrick (UBS):  Likes merger-arbitrage, argues that bank prop trading desks exiting keeps spreads attractive and wide on bigger deals.  Said short-term alpha is harder and that investors need to be more patient.  Says women are less emotional investors and better at cutting losers.