In an presentation at Delivering Alpha, a conference presented by CNBC and Institutional Investor, investor Jim Chanos reveals his ‘best idea’ right now: betting against the stock price of a major American manufacturer.
Jim Chanos’ Best Idea: Why I’m Short Caterpillar
i believe that the commodities super cycle which has been built on the back of the chinese construction boom is coming to an end. now, keep in mind that the chinese construction boom shows no sign of ebbing despite the credit problems that are beginning to appear. but if you consider that one company in the dow jones has 30% of its revenues tied to global mining cap x and 50% of its operating profit tied to global mining cap x, and global mining cap x, which grew 8% per year from 1990 to 2001, the first sort of upleg in the global commodities super cycle and then grew in the last ten years or 11 years at a 24% annual clip from $14 billion to about $145 billion annually, when you consider that basically one-third of global mining cap x is equipment, well, that lands you in peoria, illinois, at the doorstep of caterpillar. we are short caterpillar. iconic american company, leader in its class, but tied to the wrong products at the wrong time in the cycle. caterpillar is a cheap stock. trades at 12, 13 times earnings. earnings are not expected to grow reasonably at all in the next few years. the bulls expect cap x to decline in mining, but here is the problem. they expect it to decline gradually, 10% to 15% per year. but if you realize that cap x in the mining area was $30 billion in 2006-2007 and got to $145 billion a couple years ago, the declines they’re talking about are still meaningfully above what were historical levels. 20 years ago it was a couple billion dollars a year. so these are really staggering numbers that the globe has taken on basically to build out the chinese real estate and infrastructure bubble.
Jim Chano’s best short idea: CAT & HPQ
CNBC’s Josh Lipton breaks down the biggest movers from the “Best Ideas Panel.” Chris Hohn’s top picks include EADS, Porsche, and Aurizon Holdings, and Mark Kingdon likes Japanese stocks. Jim Chanos also joins the panel revealing his best ideas starting with Hewlett-Packard and Caterpiller. Bond yields have dropped 2.5 percent for the first time in 2 weeks, top fund manager, Steve Kuhn, Pine River Capital, provides insight to where bonds will go and shares his favorite ideas.
Cooperman’s best ideas
On a special “Halftime” show CNBC’s Scott Wapner and the FMHR traders are live from the biggest investor event of the year, “Delivering Alpha.” Hedge fund titans Lee Cooperman, Mark Kingdon, Chris Hohn, and Jim Chanos present their top investment picks the the “Best Ideas Panel.” CNBC’s Josh Lipton has all of Coopermans’s picks, including Express Scripts, Qualcomm, and Sadridge Enerdy. CNBC’s Steve Liesman has the latest on Bernanke’s testimony.
welcome to a special halftime show live today from the pierre hotel in new york city at the biggest investor event of the year, delivering alpha. we will continue to monitor the fed chairman’s testimony and, of course, the q & a session which can always bring interesting headlines. we’ll bring them to you if there’s anything we think you need to know about. we have an all-star line up with ready to go with one goal in line. to help you deliver more alpha in your own portfolios. within the next hour we’ll be joined by steve cune, head of fixed income for pine river. we’ll also have live and exclusive coverage of 2013’s new best ideas panel where famed short seller jim chanos and leon cooperman will share their top most active traders. our traders will be along in a moment. we want to go to steve liesman. it seems like the goal today is to make sure from bernanke’s perspective that the market starts to understand there’s a difference between tapering and tightening and he’s going to try to hit that home. scott, were you addressing that to me? i’m sorry. i was listening to the testimony. could you repeat it? i think steve part of the point that the fed chairman is trying to make today at least speaking directly to the markets is that there is a difference between tapering and tightening and he’s going to try to hammer that home until the market understands it or not. i think he’s definitely doing that, scott. i think it was interesting earlier on today he was asked a question about the dangers of reducing qe. and he answered that by saying, you know what? we have a lot of tools we can use to affect a policy and the outcome. i think they’re sort of on a track of tapering, scott, with the one asterisk i put next to that is if the july data continues the weakness in june, i think that that may take them you a of that track. but what he wants to say is as you said, we can taper, move up and down qe, but we’re still accommodative in that context, and, b, it does not mean we are raising interest rates. maybe by the market reaction, steve, he’s being successful today in a way that he frankly has been unable to be in the most recent past. he says i think the m are beginning to understand our message and the volatility has obviously moderated. i think that he would not be successful today if not for the — what do you want to call it — communications that we’ve had beginning on may 22nd and culminating with the mber q & a last week. i think his objective was to not make any changes to the market’s understanding of tapering, tightening, or overin all fed policy. i believe he succeeded. thanks so much. i know you will be watching the testimony, the q & a session and you will bring us anything that jumps out from any of those questions and certainly mr. bernanke’s answers. the best ideas panel is under way where hedge fund titaare presenting their top investment picks. let’s get to josh lipton. you heard leon cooperman of omega advisers giving you his ten picks. let’s go through them. he basically broke them down into three different baskets. one he called his quality growth basket. he had express scripts. he liked qualcomm where he said there’s too much pessimism. they got $31 billion of cash on the balance sheet. no they can throw 11% or 12%. and then also thermo fisher. next basket he called his phoenix from the ashes basket. these are basically turnarounds. he would quality corp, a brazilian health care company, baferl he said you get 20% growth for less than ten times earnings. he also talked about sandridge energy. he said that one has the potential to double. and finally his third basket he called growth with high income situations. thes are really financials with