Yesterday the “Delivering Alpha Conference” took place in New York. The top value hege fund managers were at the conference; including Jim Chanos, Bill Ackman (stay tuned as I will post more on Bill Ackman later today), Marty Whitman, and many of the speakers in the panel below.
This panel consisted of six investors with their favorite ideas. They have seven minutes to present and then took questions from the audience.
The panel consisted of Kyle Bass, Hayman Advisors LP founder and principal; Leon G. Cooperman, Omega Advisors chairman and CEO; Philip Falcone, Harbinger Capital Investments founder; J. Tomilson Hill, Blackstone Marketable Alternative Asset Management CEO; Daniel S. Loeb, Third Point LLC founder and CEO; Anne B. Popkin, Symphony Asset Management president.
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Lee Ainslie's Maverick Fund USA enjoyed its "strongest quarter in the fund's history" during the three months to the end of June. According to a copy of the firm's second-quarter letter to investors, which ValueWalk has been able to review, Maverick Fund USA gained 18% in the second quarter. Following this performance, the fund was Read More
Dan Loeb was probably the highlight (he is at the end of this post). I also have the video embedded at the end, if you want to watch the whole presentation.
Stay tuned as I will be posting coverage from other panels, including Bill Ackman’s speech shortly.
Kyle Bass of Hayman Capital
Restructuring is the only one way out of this debt mess, and “restructuring means default.” Kyle Bass, managing partner of Hayman Capital, told CNBC Wednesday.
Kyle Bass presented first talking about sovereign debt issues.
Bass stated that “[The euro zone is] going to have to have 17 different TARPs, we’re not going to have one Super-TARP.” ” That means we’re going to be in recession again.
Leon G. Cooperman of Omega Advisors
His five stock picks: picks: Apple Inc (“I see all of you out there with your iPads,” he said) Boston Scientific, KKR Financial, Qualcomm, and SLM Corp.
Cooperman likes Spectrum Brands because it “focuses on the smart shopper,” and has a global presence.
Cooperman stated that ” “I wouldn’t own a U.S. government bond. I think it is ridiculous.”
“Every manager I had lunch with had 30 to 40% less equity exposure. Then again, maybe this is the fall of the Roman empire again.”
Stocks are the best house in the financial asset neighborhood,” he said.
He doesn’t expect a recession in 2011 or 2012, although, he says, “Things are going to feel bad.”
Cooperman got into politics and stated that if Rick Perry wins the nomination, he will not vote at all. If Mitt Romney wins the nomination, Cooperman would vote for Romney.
Philip Falcone, Harbinger Capital Investments founder
said his top pick is Spectrum Brands. Leon Cooperman also likes Spectrum.
Falcone says that the company is a low Capex company, and is generating free cash flow, and trades at a 15% FCF yield . The company is paying down debt, and plans on paying down more debt. EBITDA multiple is 6.3x versus competitors’ EBITDA of ~9x. The company has a lot of NOLs and therefore won’t be paying taxes any times soon.
J. Tomilson Hill, Blackstone Marketable Alternative Asset Management CEO
Hill stated that his favorite stock is JPM, as a risk adjusted opportunity. Hill defines risk of the possibility of loss and magnitude of loss over a given amount of time. As Bill Ackman mentioned, Hill thinks that the segment of non-performing loans are the best risk adjusted opportunity. He discussed the financial sector and its evolution since the financial crisis.
Hill stated that JPMorgan is the only bank that can hold onto its mortgage services rights. The reason, he explains, is because of its strong Tier 1 capital ratio. Mortgage servicing rights are trading at 2-3x cash flow, but it takes tens of thousands of documents to read through.
Hill joked that if investors want to gain access to purchase mortgaging rights, “they should call him”.
Loeb’s favorite pick is Yahoo. Loeb thinks that Yahoo has great assets, but “one of the most horrendous management teams”, which he has seen in his 16 year history. Yahoo is run by “people who didn’t know what they were doing.”
Daniel Loeb thinks “sexy areas” and get a new management team in. “No one wants to work with clowns onboard”, Loeb stated.
Daniel Loeb added that Yahoo is trading at a huge discount to the company’s value.
Here is Loeb’s analysis of Yahoo’s intrinsic value based on a recent letter which he wrote to the board:
We firmly believe that there is much to be gained from a successful and rapid transition in management, as we are convinced that Yahoo is grossly undervalued. We have followed Yahoo for many years, and our analysis suggests that at a share price of $13.61, with $2.49 per share in tax adjusted net cash, $3.10 per share and $5.24 per share of after-tax values for the Yahoo! Japan and Alibaba Group stakes respectively, core Yahoo is left at an implied value of $2.78 per share or 2.2x 2012 EBITDA. With more effective and focused management, one could realistically envision a re-rating to at least 7.0x 2012 EBITDA, driving a target of over $19.00 per share. When coupled with tax efficient outcomes for its Asian assets, an additional $3.00-4.00 per share stands to be realized. Continued share count reduction via buybacks and other potential capital structure optimization alternatives would further bolster the Company’s stock price. In addition, based on our discussions with industry experts and entrepreneurs, we believe that with new management, there is significant further value in leveraging Yahoo’s globally trusted franchise and platform for a range of new products and innovations.
Focusing specifically on the Alibaba Group, the mid-term value potential for this stake alone could represent another $5.00 per share of upside. The e-commerce interests housed under the Alibaba Group umbrella hold the dominant positions in the “B2B” (63% of 2010 market share according to Marbridge Consulting), “C2C” (85% share) and “B2C” (51% share) Chinese e-commerce markets. Alibaba Group’s Taobao business is essentially Ebay and Amazon on steroids in terms of market share and revenue growth. According to Goldman Sachs, the Chinese e-commerce market was $75 billion in 2010, with a 3 year forward compound annual growth rate of 43% compared to the $193 billion U.S. market with compound annual growth of 14% over the same period. We currently estimate a pre-tax value for Alibaba Group of $25 billion. Given Alibaba Group’s growth potential and market share, it is entirely conceivable that Yahoo’s 40% fully diluted stake in Alibaba Group could double in value over the next 2-3 years, highlighting its tremendous value.
Loeb also stated that Yahoo’s logo “sucks” and that it’s “stupid.”
Anne B. Popkin, president, Symphony Asset Management
Popkin like other speakers focused on the financial sector. She thinks that things have changed since the financial crisis in 2008, including the strength of corporate credit. Popkin believes higher-quality leveraged debt now presents good possible investment. Her idea: short-term corporate loans, and particularly in the retail sector. “We are moving up the capital structure to higher quality and we are staying in short maturity and liquid securities,” she said. “We don’t think you should bet the ranch…Risk management is absolutely crucial here.”