When stocks are soaring across the board, don't get seduced by momentum plays. Real value is found with careful deep research.
That message rang through the 8th Annual Spring Value Investing Congress, which met in Las Vegas on May 6th and 7th. The highly anticipated two-day conference drew investors, analysts and journalists from around the world. There, at the Encore at Wynn, they got show-stopping insights from some of the world's top money managers.
Value investing heavyweight Whitney Tilson came out swinging. He warned that the three most dangerous words in investing are "I missed it."
Tilson is founder of Kase Capital, a respected author, and Chairman Emeritus of the Value Investing Congress. He explained that "the 'I missed it' phenomenon is the emotional mistake of looking into a stock that's moved up a lot and, sometimes subconsciously, saying to yourself, 'Rats, I missed it'."
"Therefore," Tilson added, "anytime you hear yourself saying 'I missed it,' STOP! Re-do your work, ignore the historical price, and focus on the only question that matters: is the stock at today's price, an exceptionally attractive investment? If so, BUY IT!"
Berkshire Hathaway is a prime example, according to Tilson. "I know people who looked at Berkshire Hathaway, after it had run from $100 to $1,000 (and $1,000, to $10,000, and $10,000 to $100,000) who fell into this trap ..." Tilson remains enthusiastic about Berkshire, which he says trades below its intrinsic value of $193,500-per-share. Tilson also endorses AIG (NYSE:AIG) and Netflix (NASDAQ:NFLX). He told the conference he's a fan of Hertz (NYSE:HTZ) and Spark Networks (NYSEMKT:LOV), which owns the popular dating sites Christian Mingle and JDate.
Attendees at the Congress also heard that older is sexy. That case was made persuasively by celebrated investor Steven Romick, co-managing partner of First Pacific Advisors. While headlines are grabbed by Internet start-ups, Romick says people have overlooked the strong fundamentals of veteran tech giants Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL) and Cisco (NASDAQ:CSCO).
In addition, Romick feels too many have dismissed an established firm in the energy sector: Occidental Petroleum (NYSE:OXY). The oil giant has been around since 1920, and was led for decades by the legendary Armand Hammer. However, recent internal struggles had the company stumbling.
Romick insisted that Occidental's drama is ending with the departure of the long-time chairman who succeeded Hammer. Romick believes that will create stability and allow Occidental to maximize its impressive assets. Occidental has the largest oil reserves in the lower-48 United States. The company is also the largest landowner in California, and it's the top oil producer in Texas.
Another highlight of the Value Investing Congress was the Weight Watchers (NYSE:WTW) buy recommendation from Mark Boyar, of Boyar Value Group. The famed asset manager made it clear: slim down your body with Weight Watchers products; bulk up your portfolio with Weight Watchers stock.
That call may have seemed surprising. After all, in the year leading to this Value Investing Congress, shares of the iconic diet company plunged from $60.88 to $41.60. However, Boyar told the audience he was impressed by the company's operations and marketing.
Chris Mittleman told the gathering that Revlon (NYSE:REV) is more than a pretty face. The respected principal of Mittleman Brothers thinks the global beauty company is a long play, praising both actions by CEO Alan Ennis and the long-term ownership of Chairman Ron Perelman. Perelman holds 76% of the shares, with his investment in Revlon going back to the 1980s.
At another session, popular Congress speaker David Nierenberg of D3 Family Funds said Rosetta Stone (NYSE:RST) was proof that money talks. In 2012, the language instruction company got a new CEO who cut ineffective marketing, closed all U.S. kiosks, moved the company to online subscriptions/downloads, and focused on the iPad and other mobile applications.
Shares have more than doubled since early 2012, to over $16. Yet, the stock still has plenty of room to climb. Rosetta Stone has a solid balance sheet and ended the first quarter of 2013 with $139.3 million, or $6.34 per share, in cash... and no debt.
Joe Altman and Chris Kyriopoulos of COMPOUND Capital Management said a terrific value was legendary hot dog brand Nathan's (NASDAQ:NATH). Even though Nathan's is virtually ignored by analysts, this investing team is excited about the company. The brand is recognized internationally, and starting in 2014, Nathan's will get a higher royalty rate for licensing its name.
Investment headlines were seemingly made every hour at the Las Vegas Value Investing Congress. Among the other notable presentations was Geoff Batt of Euphrates Partners, touting Iraq as an emerging economy.
John Schwartz, who is the CEO of the Value Investing Congress, is deeply gratified the event has become global.
"The developing world is growing much faster than the developed world," Schwartz said. "So we have people speaking about investing in all kinds of interesting places, not just places like Canada, Korea and India but some very esoteric places like Iraq and Mongolia. That will be very useful and instructive for people to learn about."
The next stop for the Value Investing Congress is New York City on September 16th and 17th. The must-hear roster includes ValueAct Capital's Jeff Ubben, Marcato Capital Management's Mick McGuire and Atlantic Investment Management's Alexander Roepers, to name just three of more than 20 successful managers who will speak at the 9th Annual New York Value Investing Congress..
For more highlights from the Las Vegas Congress, go here.