Sohn Conference Highlights: Ackman, Einhorn, JANA

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The 20th annual Sohn Conference is in the books, and as always, some of Wall Street’s biggest investors took to the podium to share their investment ideas. The folks at Activist Insight noted that this year was an especially big year for activist investors at the conference, calling it “probably the most activist-heavy” in its history.

Activists needed to turn a profit?

Bill Ackman reportedly told Activist Insight that with the markets being what they are now, activists are pretty much a necessity. He believes that there will continue to be demand for activist investors for quite some time.

“Where are a lot of situations where the stocks are not cheap enough, as is—you have to buy them with the hope that change can take place,” he told the magazine. “So it is somewhat of an indicator that to make real profits, you need activists.”

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Sohn Conference highlights: Ackman talks Valeant

One of the biggest activist stories of late is Valeant Pharmaceuticals, which Ackman teamed up with in a hostile takeover attempt of Allergan, which ultimately failed. He continues to like Valeant, however, as he reportedly has about one-fifth of Pershing Square’s portfolio in the drug maker.

Ackman classifies Valeant as a “platform company,” which he says is understood better through their ability to effectively deploy capital rather than multiples of earnings, according to Activist Insight. His presentation at Sohn was aimed at some recent comments made by short-seller Jim Chanos, who has been suspicious of Valeant for some time.

The drug maker is known for its strategy of gobbling up other pharmaceutical companies in order to sustain growth, and Ackman focused on the 2013 acquisition of Bausch and Lomb. Some have claimed that Valeant must continue its serial acquisition strategy in order to maintain growth, but Ackman believes 70% of its revenue is durable through 2020 and beyond.


Sohn Conference highlights: Einhorn goes short on oil fracking

In David Einhorn’s presentation, he recommended that investors sell shares of oil fracking companies in the U.S. short. He stated that oil companies were spending more on capital expenditures as a result of the higher oil prices. Further, Activist Insight reported in this month’s issue that the markets were ignoring the capital depletion in most valuations because they see those expenditures as a benefit but do not discount the short lifespan of the wells.

Einhorn sees Pioneer Natural Resources as being the worst-off, and he suggested that the company’s shares could be worth as little as $78 apiece. The company’s stock has declined significantly since he gave his speech at the Sohn conference, especially over the last couple of trading days. As of this writing, the stock was down 1.43% at $138 a share.

Sohn Conference highlights: Barry Rosenstein on activism

The third investor whose ideas Activist Insight showcased this month was Barry Rosenstein of JANA Partners. Ackman, Carl Icahn and others have recently been airing their thoughts on activism in general, and this year Rosenstein used his Sohn conference presentation to share his thoughts on the topic. He doesn’t think the media understands activist investing.

JANA isn’t known for picking huge PR fights with the companies it targets. One company the firm is currently interested in is Qualcomm. Rosenstein compared their investment in Qualcomm with their investment in Walgreens, which he said was “crying out for an actively engaged shareholder.”

It took time for Walgreens stock to move due to JANA’s involvement, but after putting Rosenstein and another JANA-recommended director on its board, shares have returned nearly 13% so far this year. Rosenstein expects a similar outcome with Qualcomm, and he gave a number of suggestions for the chip maker’s management, like cost-cutting measures, changes to its “non-rigorous” research and development spending, and lack of insider ownership of the stock.

Rosenstein claims that they have already made headway with Qualcomm, although it has yet to be reflected in the company’s stock price.

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