T. Boone Pickens
He believes Natural Gas is very low and that it will increase in price in the next 3 years. He suggested writing a put at $4.50 and buying calls at $5 to $5.50. Therefore, your trade will be profitable when Natural Gas hits the $5.50 to $6.50 window.
Up-and-Coming Small- and Mid-cap Portfolio Managers #MICUS (Morningstar Conference)
Notes from Laird Bieger of Baron Capital, Mark Wynegar of Tributary Capital Management, and Amy Zhang of Alger Funds' presentation from the 2020 Monringstar Investment Conference. Q2 2020 hedge fund letters, conferences and more Up-and-Coming Small- and Mid-cap Portfolio Managers Our manager research team has been publishing its semiannual Morningstar Prospects report for several years. Read More
He believes the currently Saudi Arabia leadership is in bad shape. If Israeli and Iran tensions increase it could significantly increase oil prices.
Ray Nixon of Barrlow Hanley
He believes that changes in product innovation, management, or big picture items matters more than a revision in earnings estimates. Investors don’t realize the drivers of a change in a stock price – big items like corporate strategy and direction matters more than the details. For instance, Jack Welch leaving GE and Sandy Weil leaving Citi.
There are 5 main points he talked about:
-Find discounted investments
-Change moves stock price
-Valuation does not make a stock go up or down
-Individual investors should use time to their advantage
-Most investors cut off the wrong tail (sell winners and hold losers)
His idea: Medtronic: MDT
-new mgmt team from GE
-new product – Ardin for hypertension – $12 billion revenue potential
-$50 is break-up value
-emerging market growth
He believes that business management experience is most important factor on corporate boards.
On corporate boards, there is a high correlation of returns (company performance) and business management experience (versus academic experience)
Boards are forced outsources governance to non-owners (aka governance agencies) and those agencies are receiving fees to rate governance.
The governance agencies and rating agencies need the same level of transparency as the companies they rate.
Corporations need to redeploy capital through share repurchases and dividends
Banks will sell for 3x current market prices when dust settles
His idea is Lowe’s
FCF of 8% and Div Yield of 2% – likes it much more than US Treasuries
Limited Fashion Risk, High Gross Margin, Limited Internet Risk (only 8% of sales have significant internet risk)
PPE net book value is $22 billion which is 65% of EV
Buy back 35-40% of shares in next 3-4 years.
Thesis – 1% ROA = 10% ROE Furthermore, 1/2 Book Value = 20% ROI
B of A has more cash than market cap
The Countrywide and Lender Servicing Business is holding back the stock and the other core franchises and units
B of A touches 80% of the US population
$30-$50 billion of annual cash flow going forward vs a $70 billion market cap.
He believes that the writedowns are capped (at about $50 billion)
No liquidity issues anymore
Similar to Wells Fargo in the early 1990’s that became a 16 bagger over the next 12-15 years.
It is so cheap you don’t have to be exactly right on timing.
He believes Bernanke needs to raise short-term rates – better for the economy
Older workers are delaying retiring
Also, investors are delaying building new plants because they believe rates will remain low for 3-4 years – so why not build later when there is less risk.
Rising oil prices slows economy more than any other factor – since QE3, there has been a 30% rise in oil
He stated that the current fiscal policy of the US is reckless
By having rates so low, the banks are “deadbeat borrowers” – banks are holding assets and not cleaning their balance sheets because their cost to carry land/residential/commercial is very low.
Titanium prices should rise 300% due to production bottlenecks and increase demand
Recommend 2 stocks to buy: ILU:AU Iluka and TROX (Tronox)
Recommends MSG – Madison Square Garden
Knicks worth $700mm and Rangers worth $400mm. Rest of the company is free; however stock has traded up since this initial recommendation. Entertainment Business (owns Forum and Rockettes) and Cable Station (MSG network) is in 8 million households.
Food inflation is greatest threat to emerging market asset class
Hard to improved standard of living with high food prices – food represents 30-40% of spending in emerging markets.
When countries develop, they eat more protein. It takes 7lbs of feed to produce a pound of beef.
China has become a net importer of corn
Buy: Monsanto (MON)
Seed industry consolidating, produces genetically modified crops. New seeds for wheat are soon to hit the market.
Investor day is Thursday Nov 10th
Buy: Olympus – they cook the books but have dominant lab and microscope businesses.
Buy: McGraw Hill – spin-off of 2 parts. Likes ratings agencies and S&P brand name for mutual funds. Price Target: $55-$60
Buy: BPI Bridgepoint $40 Price target – Gabelli smiled on the panel when this name was mentioned
20% short interest and name should pop – $300 million of FCF.
Buy: Abbott Labs and Pepsi
Big H/T to Nomad Fund