@VIC: Top Hedge Fund Picks 9 comments
Mebane Faber
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Portfolio Manager Mebane Faber attended this week's Value Investing Congress on behalf of Seeking Alpha. Here are his notes from the first day:
While some of the most famous hedge funds are getting hammered (letters here), there are still some top investors presenting at the Value Investing Congress. If these managers liked their picks last week, they probably like them even more after the down day Monday.
If you like tracking the top hedge funds, keep an eye out for the AlphaClone beta launch in a couple weeks!
Below are their picks:
DAY 1
Whitney Tilson (presentation here)
T2 Partners
Fairfax Financial (FFH)
EchoStar (SATS)
Berkshire Hathaway (BRK.A)
John Burbank
Passport Capital
LONGS (Foreign and Farmers):
EFG Hermes (EFGZF.PK)
Mosaic (MOS)
Potash (POT)
SHORT:
US Overleveraged (GE)
Bill Ackman (presentation here)
Pershing Square
Wachovia (WB)
Lance Helfert & Atticus Lowe
West Coast Asset Management
QLT (QLTI)
Contango Oil and Gas (MCF)
ATP Oil and Gas (ATPG)
Thomas Russo
Nestle
Ritchmont
Pernod Ricard (PDRDF.PK)
Alexander Roepers
Atlantic Investment Management
Roepers looks for companies with free cash flow yields of around 10%, P/E ratios of around 9-12, and EV/EBIT of around 8-9. He runs concentrated portfolios, and likes:
TNT (Dutch)
Dai Nippon (DNPCF.PK)
Goodrich (GR)
Joy Global (JOYG)
Carl Icahn
No picks, but a good hour of ranting and raving. Highly enjoyable.
DAY TWO
Boykin Curry
Eagle Capital
Boykin started off talking about time arbitrage - namely, that most analysts and portfolio managers have a short time horizon and focus only on the next 12 months, even though the majority of a firm's DCF valuation lies in the future. He considers this a sustainable competitive advantage for his firm.
Long Idea:
American Express (AXP)
Long dated call options:
Newfield (NFX)
Microsoft (MSFT)
Comcast (CMCSA)
KianGhazi
Hawkshaw Capital
Kian looks for high quality, one-of-a-kind franchises that are financially strong with positive free cash flows trading at less that intrinsic value.
Universal Technical Institute (UTI)
Leon Cooperman
Omega Advisors
Described the environment as chilly, with household debt burden reaching a record high. Described the recent climate as the most difficult financial environment he has ever been through. Housing has began to see the end of its decline, stock valuations are reasonable, corporate America is liquid, and the S&P ROE is at high levels. Cash yield on the S&P (dividends and buybacks) is at record records vs. 10-Year T-note yields.
The average bear market decline is around -26%, lasts about a year, and PE ratios decline about 30%. We are near all of those values.
He likes:
Atlas America (ATLS) currently $25, target $57-$77
Parent of:
Atlas Energy Resources (ATN)
Atlas Pipeline (APL)
Atlas Holdings (AHD)
These three are taxed at partnerships, not corporations.
Aaron Edelheit
Sabre Value Management
Has been running Sabre for 10 years with returns near 20%. Uses only 10-15 holdings with no leverage. Sabre's approach is to invest in small cap value that have insider buying, are spin-offs, or are restructuring. His pick is:
Photochannel (PNWIF), $1.9
Trading at 7x earnings with an excellent recurring revenue model. They manage the front and backend of a retailer's website. They get a fixed fee for every picture printed through its system, and clients include Costco, CVS, Sams Club, Kodak China, Tesco, and Wal-Mart Canada. 21,000 transactions a day average in q2, now at 40,000 a day. Retailers represent half of all prints, but only 11.5% of retail prints are uploaded online.
When asked why it is down so much he said that it has no coverage by any large sell side firms, the Small Cap Canadian Index is down over 60%, and some institutions have been forced to sell.
Next pick:
Hemisphere (Toronto: HEM), $2.4
Company develops GPS guidance and auto-steering for the farm. Revenue growing by 50% in 2008 and 25% in 2009. Grain bull markets last on average 10-14 years, and we are only 2 years into the current rally. Trades at 8 times 2009 estimate outside of cash, and 1.2 times sales. Acquisition of competitor values HEM at over $6 per share. Insiders are buying, and company announced a buyback.
Next pick:
Limoneira (LMNR), $165
Largest producer of avocados in the US, and 7,000 acres of prime CA real estate. 500 acres just got entitled for development 10 minutes from the ocean (appraised in 2004 for $1billion). One of only two major projects in Ventura County to be built in the next 10 years. Also owns substantial water rights. Estimates that water alone could be worth near $500million alone without land. Estimates target of $500-$1000.
Next pick:
Digimarc (DMRC/D)
21st strongest patent portfolio in the IT field in the world. $13million in revenue in 2007, $20million in 2008, and $43 million in cash on the books.
David Nierenberg
D3 Family Funds
D3 is a long-term investor focusing on microcap GARP stocks where they look to get consturctively engaged. With average market caps of $400 million, they cap their size at $1.2 billion. They impose a 5-year lockup on investors, and target 10-12 positions. They focus on industries and companies that are seen as "dead money", but also focus on companies with strong balance sheets and cash flows that are leaders in their niche. Often their companies have experienced scandals, accounting issues, or simply simmangement.
His three picks are:
Move Inc, (MOVE) $1.73, target of $10
Electro Scientific Industries (ESIO) $12.46, target of $57-$76
Brooks Automation (BRKS) $7.42, target of $43-$58
MohnishPabrai
Pabrai Funds
Pabrai reviewed one of the strategies from Joel Greenblatt's "You Too Can be a Stock Market Genius" that focuses on buying stocks that have been spun-off. Greenblatt found that they experienced outsized returns, expecially in the second year after the spin-off. Pabrai highlighed one such Portugese company, Sonae Capital (SONC.LS), spun out from Sonae SGPS (SON.LS).
He completed a sum of the parts analysis of all of Sonae's properties, and while the stock only trades at 0.69 Euros, his target is 3.82 - 6.20 Euros. The flagship Troia property bought from the Portugese government in bankruptcy comprises a majority of the estimated value.
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This article has 9 comments:
Let's not forget the original ideas presented too. You either get moldy ideas that go nowhere like BRK or some idea the presenter doesn't know well and lose your shirt like Pzena, Pabrai, or Tom Brown.
Pzena is a statistical analyst, his system works as a diversified system, but you copycat single positions at your own risk.
Tom Brown's banking picks assumed the survival of the banking system. (bad assumption)
other value guys have more mid sized circles of competence than RP and TB.
What this cycle has proven is that you disregard Ackman and other smart value investors at your own risk.
I've made a moldy 15% annualized in BRK with purchases when it was cheap in 2005 and 2007.
It's been cheap this year too.
I'd take a bubble in value over a "confirmed trend" any day.
Value investors lose out early in the decline as cheap gets cheaper, and make money through the trough and into the next cycle.
If you lose less into the trough, you make more over all.
It all comes down to price and value. if you don't get that, give your money to someone who does.
The C.E.O.'s have secured them selves a fortune and screwed the u.s.a people are allies in England and Asia aqnd elsewhere.
And now our allies have been stung by the good old U.S.A. with our banking and investment houses.securitized securities.
'Where do you invest your retirement savings so you can afford to live?
What ever you have left that is?
What if you don't have the time or place to survive
the 10 to 15 years for the world investments to get over this criminal travisity from the american banks and investment community?
O.K. you banking and waqll st wise guys you have got a lot to think about!
How about some real answers.
I didn't work a lifetime of jobs more than one at a time to have you back stab me.
Any any answers from you dirtbags!
They all got millions of years end bonuses, for all the bad loans they gave out so we and the govt that will have to take it from our hides will take from us in the from of deleted benefits we worked for and depend
on to survive our later years.
Vote for someone that will not repeat 8 more years of this illegal travisity.
Ackman's investors in his TGT fund have lost their asses too.
BRK will be destroyed when WEB kicks it. I know we allthink Ajit will do fine and whoever the Chief Inv Officer will be fine but I'd be WEB accounts for 50% BRK value, so let's see how others do operating a monster like BRK w/o WEB's genius.