@VIC: Jeffrey Schwartz of Metropolitan Capital Advisors- Taking What the Defense Gives You

Todd Sullivan attended this week's Value Investing Congress on behalf of Seeking Alpha.

Jeffrey E. Schwarz is the Co-Chief Executive Officer of Metropolitan Capital Advisors, Inc., which he co-founded in 1992. He is the Chairman of the Board of Bogen Communications International, Inc. and a member of the Board of Cyberonics Inc. (CYBX). Mr. Schwarz is a Summa Cum Laude graduate of the University of Pennsylvania’s Wharton School, where he received both his BS in Economics and his MBA.

• Schwarz compared investing to a two-minute drill in the NFL. When your team is behind, rather than trying to score a touchdown on one play with a deep pass against a defense specifically designed to stop that, he says many successful game winning drives are accomplished by taking the shorter passes, the defense is essentially giving up.
• Rather than buying the "flavor of the month" he says the place to make money is in the "unloved and unwanted sectors".
• Avoid renewables (solar, wind etc.) as the sector will experience a "washout".
• The market is insistent on being rewarded instantly "like a small child".
• After the 1987 crash, has not used leverage.
• By using leverage you have to be right twice, both on the idea and time.
• The market always extrapolates current conditions into the future (used $140 oil as an example.
• Likes offshore drillers as they have contractual cash flows locked in (Transocean (RIG), SeaDrill (SDRL)).
• Has invested in rigs that have a 25 year life span.
• Stocks have followed commodity prices down even though contracts in place are not affected by it.
• Presents two ideas:
  
  Golar LNG (GLNG)

• Currently buying at today's prices.
• Has rigs that can transport and then re-gassify LNG.
• The first company in the world to produce these rigs.
• Has contracts to supply these rigs around the world and is paid $100,000 a day for each rig.
• Predicts over $10 a share in FCF in four years and the stock currently trades around $9.
  
   Domtar (UFS)

• Manufacturer and marketer of uncoated freesheet paper and also manufactures papergrade, fluff and specialty pulp.
• Using debt to pay down free cash flow.
• "The world will always need paper".
• Competition is shrinking.
• Successful at implementing price increases.
• Selling non-core businesses.
• Trading at 4 times FCF in a business he feels is relatively recession-proof .
  
  

Disclosure: None

Comments

[transportfan:]

GLNG and SDRLF (Seadrill) are both John Fredriksen companies with good dividends. JF's philosophy is that the shareholder is a co-owner, and the shareholder is always foremost in his thoughts. To that end, he is committed to seeing the shareholder be rewarded with dividends, no matter what.

2008 Oct 08 06:57 PM