Below are the rest of the notes from Invest For Kids Conference 2014 – also see links to other speakers and Lee Cooperman’s 2013 slides at the end of the post
Nehal Chopra – Tiger Ratan
Nehal Chopra founded Ratan Capital in 2009 and boasts average annual returns of 19%. She pitched Acatavis. She was very high on management, especially CEO Brent Saunders who had tremendous success at Forest Laboratories, Inc. (NYSE:FRX) before Actavis plc (NYSE:ACT)’s acquisition and Chairman Bisario. Nehal Chopra called ACT a “new breed of pharmaceutical companies with a platform of generic and brand-name products. She said ACT is strongly positioned across all markets to drive revenue growth. The merger with will lead to margin expansion and cost synergies. She believes 2017 EPS could reach $22-$23/share.
There is also speculation ACT could be acquired by Pfizer Inc. (NYSE:PFE) or they could buy Allergan, Inc. (NYSE:AGN).
Nehal Chopra was also positive on Charter Communications, Inc. (NASDAQ:CHTR) in a bet on management. You are getting expert operator in Tom Rutledge and king deal maker in John Malone. Rutledge has rebuilt management, grew RevPer customers, grew video ARPU, products per suer and digital promotions.
CHTR has great management, a high quality business and material upside. Nehal Chopra has a 2017 target of $210+/share.
Emerging Market Panel with Nancy Prial of Essex Investment Management and Tim Hurd of of BlueSpruce Investments
Nancy Prial is a portfolio manager at Essex Investment Management, a small-cap value fund. She suggests going long iCAD Inc (NASDAQ:ICAD), a medical diagnostics firm. The stock is down 50% since 2004. ICAD has catalysts in place to return to growth. Prial believes ICAD will benefit from the shift from 2D to 3D mammography.
She has a sum of parts valuation of $16/share on this stock that is underfollowed on the Street, has low institutional ownership, and terrific fundamentals. There are 16.3M shares outstanding and has a $170M market cap and trades at 3x revenues.
Tim Hurd is a PM at BlueSpruce Investments where they take a private equity approach to public equity investing. The fund never invests in more than 15 stocks and prefers to hold shares for at least three years. They look for “grinder” stocks with high FCF.
Hurd suggested going long BlackRock, Inc. (NYSE:BLK) for their highly diversified businesses and “gem” iShares ETF product. He said ETF adoption is still in the early to middle innings of development. Hurd debunked the myths that BLK is too big to grow, that ETF fees are too low and that it’s not a good investment at this point in the rate cycle. HE said BLK can achieve mid-single digit AUM growth, performance has been strong, ETF’s offer attractive fees without high portfolio manager costs, and the “great rotation” fears are overblown.
Wally Weitz – Weitz Investment Management
Weitz is a value investor in the model of Benjamin Graham or Warren Buffet. His pitch was long Liberty Media Corp (NASDAQ:LMCA), one of his top holdings. He said LMCA has great assets and its perceived complexity scares people off which allows him to buy shares cheap. He was very positive on John Malone who has “done wonders.” He suggested looking at LMCA like an investment company. LMCA generates FCF, is appropriately levered, buys back shares, and makes sales in a tax efficient manner. He did not put a time on it, but said he thinks LMCA could reach $60/share.
Jonathan Kolatch – Redwood Capital Management
Kolatch is a distressed debt investor who manages $6.7B in assets at Redwood Capital Management. He pitched Puerto Rico Power Authority bonds as he doesn’t think the utility will go bankrupt and oil price declines will produce savings at PREPA. PREPA has $8.6B of debt.
He began his presentation admitting to the problems that plague Puerto Rico. It has been in a recession since 2006 after a tax break was pulled that moved many companies off the island. Demographics are in decline, debt is piling up, and credit was downgraded in 2013. Puerto Rico has $71.4B of debt – 2/3 related to central government and 1/3 in public corporations.
PREPA is the only electric utility in Puerto Rico. Their Return on assets is at the low end of power companies, but is “ok” and the utility is reasonably run. (Note: 18% of bills are not collected because people are stealing their electricity resulting in $150M in lost revenue). In the last twelve months, PREPA went from one of the best credits in Puerto Rico to one of the worst, now trading at 50c on the dollar. So why does the market hate PREPA? Three reasons: There is the thought that electricity rates cannot be raised in PR and need to be materially lower. Current rate is 27c KW/hr vs US average of 11c. Concerns the Puerto Rican government would allow for bankruptcy. Lastly, concerns of increased environmental regulation.
Kolatch believes the utility can achieve savings of 4-7 cents of per KW/hour and that a decent chunk of the savings can be passed along to the consumer. Kolatch thinks the entity can be wholly solvent. If I got it right, he said the company just needs 1.8c per KWH in savings to be solvent.
Kolatch said mistreating PREPA’s bondholders will severely compromise creditor’s willingness to believe Puerto Rico’s other promises to creditors.
Also from Invest For Kids 2014 Ackman Says Country Will “Blow Up” if Gov Takeover of Fannie / Freddie Upheld, Larry Robbins Says eBay Divorce From PayPal Increases Chances Of “Getting Lucky”, Mason Hawkins Reveals Next Big Investing Idea, Sam Zell On The Global ‘Whore House’. Mike Wilkins on two potential frauds, Steve Kuhn Likes Japan’s “Shame Index” As Corporate Governance Improves
