Conference picks from hedge fund chiefs

Distressed-debt specialist Steve Kuhn of Pine River Capital looks to equity for one his picks - American Capital (ACAS). Left for dead during the financial crisis (the stock's more than a 20-bagger since the March 2009 low), the BDC has revived itself using massive tax-loss-carry-forwards to shelter income and buy back gobs of shares at a big discount to book value, rather than paying a dividend.

This lack of dividend puts the name in many investors' penalty boxes even though it makes good sense, says Kuhn. The stock's a double over the next three years, he says, when the tax shield runs out and the company resumes a payout on a vastly reduced number of shares.

ACAS repurchased about 13.4M shares (4.6% of the float) in Q3 at an average price of $13.11 vs. June 30 book value per share of $19.28.

Nelson Peltz again declares Mondelez International (MDLZ) poorly run, with a bloated cost structure compared to peers holding the stock back despite wonderful brands, little private-label competition, and a big footprint in fast-growing emerging markets. Operational changes could boost the profit margin 600 basis points to 18%, he claims, allowing a doubling of EPS by 2015. Also: Dump the company name - it sounds too much like a medicine.

Marc Lasry doesn't think J.C. Penney (JCP) is headed for bankruptcy and likes the company's unsecured debt trading at 65 cents on the dollar. September's $800M equity offering gives Penney the necessary cash to get it through 2015 when, says Lasry, new management - by returning to JCP basics - should have the company profitable again.

Full article from Barron's.

Comments (7)
  • king diesel
    , contributor
    Comments (11) | Send Message
    Lasry is about to get the bulls running...
    2 Nov 2013, 11:39 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (11220) | Send Message
    Using options, I'm setting up (ACAS) to be my #2 holding (after cash) by Q3, 2014.


    It is really hard for me to see how the shares trade lower in a year. There is simply no catalyst for a lower share price at this time.
    2 Nov 2013, 02:56 PM Reply Like
  • metal27
    , contributor
    Comments (698) | Send Message
    Agree with your thesis, have a similar position, but why Q3 2014? Do you expect the NOL to be used up by then? I think dividend resumption is the catalyst--are you betting that will happen that soon?
    2 Nov 2013, 03:56 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11220) | Send Message
    NOLs used up by 2015...then a dividend.


    Shares will start moving up quick as the market anticipates a dividend.


    Should trade at 1.1x TBV by mid-2015.
    3 Nov 2013, 10:08 AM Reply Like
  • Jacob Wolinsky
    , contributor
    Comments (465) | Send Message
    More notes


    3 Nov 2013, 08:00 AM Reply Like
  • valueinvest101
    , contributor
    Comment (1) | Send Message
    Invest For Kids Notes: Cooperman, Eisman, Gundlach, Lasry, Kuhn
    3 Nov 2013, 08:53 AM Reply Like
  • Ruffdog
    , contributor
    Comments (3548) | Send Message
    I have made a hefty profit in ACAS; plan on selling half the day they declare a dividend.
    3 Nov 2013, 10:29 AM Reply Like
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