Favorite Equites: Peltz, Ubben, Bronses, Klabin and Herro

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Favorite Equites: Peltz, Ubben, Bronses, Klabin and Herro

Today, the Invest for Kids Conference took place in Chicago. 100% of the revenue raised is given to charity. Additionally, some famous speakers were there. Nelson Peltz, Steve Romick, Jeff Uben, Sam Zell, Kyle Bass, Steve Mandel, David Herro and many others. We will be posting more so come back and check,  below is some of our preliminary notes courtesy of Charles Bossart from Grizzly Rock Capital.

Nelson Peltz – Trian Partners

Idea: Groupe Danone SA (EPA:BN) (PINK:DANOY) (French co.)
  • Trian starts on income statement, as opposed to other activists that focus on the balance sheet.
  • work with management and boards to turn around under performing companies
  • likes food companies given macro risks (domestic and global)
  • trades at half of premium as historically trade
  • great brands, resilient cash flows, high dividends, liquidity
  • Trian owns 1% of Danone SA (EPA:BN) (PINK:DANOY)
  • yogurt 46% of EBIT
  • health and wellness focus
  • 37% infant nutrition
  • bottled water 17 percent
  • 52 percent sales in emerging markets
  • -7 percent free cash flow yield, 14.8x PE, 9.3x ev/ebitda (2013)
  •  trading in line w slower growth domestic peers
  • Bears: European exposure, yogurt high percentage of sales, organic growth slowing.
  • Mitigants: leading global position in yogurt, organic growth is still strong (q3 2012 organic growth was 5%
  • Concerns are temporary
  • Geographic exposure is not static – Asia growing
  • Premium brands
  • Danone isthe  leader in several of the fastest growing categories within global packaged food: milk formula, yogurt, bottled water, and baby food.
  • Long term growth rate should be eight to nine percent per year going forward
  • 94 percent of world pop growth will come from emerging markets
  • Health and wellness is coveted by large cap food companies – this is not a fad it is the future.  Nestle SA (PINK:NSRGY) and PepsiCo, Inc. (NYSE:PEP) are not well positioned here.
  • Multiple should rebound to its 10 year average of 19x PE
  • Trian will advise management to avoid dilutive m and a activity
  • Firm is currently buying back stock with cash
  • Trian thinks margins can be improved
  • Trian believes upside potential = 62 percent

We have Pelson’s presentation in scribd, courtesy of Market Folly



Frank Brosens – Taconic Capital Advisors
Idea – General Motors Company (NYSE:GM)
  • Catalysts in 2013  driven by new Management team
  • New administration will likely sell 32 percent stake they hold
  • Stock can triple from here even if it stays at same valuation multiples
  • Much reduced cost structure following bankruptcy
  • Dan Ackerson has brought on great management team
  • Annual car sales increasing – 15+ million in 2013
  • refresh cycle: 30% of 2013 volumes re engineered, many in trucks (highly profitable)
  • better capital allocation
  • market share artificially low due to trough in product cycle
  • -treasury stake likely sold now that election is over.  Company will likely buy back much of govt stake.
  • -Average vehicle age is over 11 years, pent up demand
  • pre restructure: General Motors Company (NYSE:GM) losing money at 15 million in sales, post re structure, GM profitable at 11 million in sales
  • North American Ebit expected at $7 billion (Taconic)
  • GM has 22 billion in excess cash on its bs
  • Stock still trades like the old General Motors Company (NYSE:GM)
  • In 2015 at current ebitda multiple price will be $67, at current FCF multiple $89
Alex Klabin of Senator Investment Group
  • Seeks credit and equity investments
  • Idea: Rayonier Inc. (NYSE:RYN)
  • Rayonier Inc. (NYSE:RYN)’s REIT
  • rayonier has a timber business, and a performance fiber business (very unique)
  • #1 global producer of “cellulose specialties”, used for a wide variety of products
  • Thesis: firms REIT status may come into jeopardy forcing it to spin off its fiber business, unlocking a lot of value
  • Why is it mispriced? No pure play peers, disparate businesses, REIT structure limits investor base
  • Timber business worth $3.9 or 4 billion
  • Fiber business concentrates on most specialized segment of cellulose market
  • Over next 2 years margins and ebitda will go up as they change their business mix from absorbent materials to cellulose specialities
  • This is not a commodity manufacturing business
  • Sell side thinks the business is worth 2-3.2 billion – which is way off
  • More comparable to favors and fragrances industry than commodity pulp and paper firms.
  • REIT asset test will be blown as fiber business grows, they will the. Likely spin off business – expected in 2014
  • Stock is currently 30-60 percent undervalued
David Herro – Harris Associates
  • Idea: Daiwa Securities Group Inc. (TYO:8601) (Japanese)
  • Macro: last five years asset class inflows have been strongly positive into fixed income and negative into equities , treasury yields near zero, maturities up to 20 years out have negative real interest rates, world GDP expected to grow at around 3.5 percent last year (a rate that allows companies to make money)
  • Stocks as an asset class are cheap, can see by looking at equities earnings yield vs 5 year bond yields
  • Japanese equities are particularly cheap
  • Do not judge a stock by where it is located, judge by its cash flows.  Japan as a location is out of favor.
  • Daiwa Securities Group Inc. (TYO:8601) is trading at about half of book value
  • Other idea: Publicis Groupe S.A. (EPA:PUB) (PINK:PUBGY)
    – leading global advertising agency, it has the leading digital advertising assets
  • Flexible variable cost structure ensures positive operating margins when revenues decline
  • Ev/EBITDA = 8.6 (2013)
Jeff Uben – ValueAct Capital Management
  • Strategic block investing, work with Management to improve business
  • Likes companies with recurring revenue, predictable growth, high free cash flows, small part of cost structure but mission critical part of process
  • They are business model focused not industry focused
  • Idea: Moody’s Corporation (NYSE:MCO) one of two ideas
  • Established position in industry high moat and limited competition
  • Pricing power (small part of overall cost to issue debt)
  • In 2009 the Moody’s Corporation (NYSE:MCO) earned $1.80 despite no transaction revenues (only maintenance relationships)
  • Low double digit revenue growth potential
  • Idea: CBRE Group Inc (NYSE:CBG), Richard Ellis likes this idea more
  • Global market leader
  • Last bastion of outsourcing is real estate
  • Office leasing market outlook looks good over the next several years, as leasing agent CBRE Group Inc (NYSE:CBG) will benefit.  Supply will remain mostly stagnant, allowing for increased pricing.
  • Very cheap cyclical company with very good business – tidal wave of transaction activity coming

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