Fund manager Amit Chokshki attended this week's 3rd Annual New York Value Investing Congress on behalf of Seeking Alpha. Here are Amit's notes from the presentation of Scott Bommer, SAB Capital:
- Presentation focused on asymmetric risk and reward whereby focusing on a favorable win/loss ratio combined with high probability can result in impressive returns.
- Look for companies that are cheap, misunderstood, and have catalysts to drive value; SAB provided three long picks:
Endeavor Acquisition Corp (EDA)
- a SPAC that has entered into a merger agreement with American Apparel, a manufacturer and retailer of casual fashions for young women.
- The company is undervalued
against SAB’s estimates and offers a significant growth opportunity
with just 165 stores in operation now:
- Can expand to 700 stores
- Low fad risk and strong same store sales growth can result in
- The bear case is focused on the SPAC structure, uncertainty in terms of closing the merger, CEO risk (1 man show), and fad risk of items sold by American Apparel
Willbros Group Inc. (NYSE:WG):
- onshore pipline E&C with a 100 year history
- SAB believes that energy demand will outstrip supply in North America and that labor shortages, equipment shortages, under investment in U.S. gas infrastructure, and strong project economics at low energy prices are all favorable for WG
- WG looks high against Street estimates but based on SAB’s estimates could still offer upside
- WG is a relative value play and can be hedged by shorting higher valued comps or oil
American Standard/Trane (TT)
- A leading provider of HVAC systems that spun-off and sold various business segments.
- Market is focused on slow residential sales that could adversely impact TT but SAB believes the international segment and growth in TT’s services segment can offset residential declines.
- Company initiated a share buyback that could buy back 15% of TT’s equity
- TT could be sold given that the CEO is retiring at year-end and is a large shareholder
- SAB believes TT offers 50% upside and 20% downside and can be hedged with comps that are valued higher or that have more U.S. exposure.