The Sohn Investment Conference is getting underway. Seeking Alpha will donate to charity any subscriptions to SA Pro made through the conference. Up first will be some macro chatter, with Stan Druckenmiller introducing former Fed Governor and current colleague at Druckenmiller's Duquesne Family Office, Kevin Warsh.
Warsh: The last time he's seen the sort of uniformity of thinking he's seeing now was right before the financial crisis hit. Central banks are behind this current "gilded age," he says. It's been great for the balance sheets of corporations and those individuals and families wealthy enough to even have a balance sheet. Whether it's been good for everyone else and whether it's sustainable is another question.
Warsh: I see risk as highest when market measures of risk are their lowest. Investors should take little comfort from a VIX of 10.
Up next is Corvex Capital's Keith Meister.
Meister: It sounds like he's returning to a telecom infrastructure investing idea (he recommended LVLT at a past Sohn conference). The pitch is for CenturyLink (NYSE:CTL). After the close today, Corvex is going to disclose a position in CTL north of 5%.
Key to his bullishness is the merger with Level 3 - it's a gamechanger, securing CTL's 9% dividend for the long-term. It enhances the EBITDA outlook, including growth through cost synergies. Corvex's base case is 40% upside (including that fat dividend), with 50-70% on the upside.
The best players need to be on the field - he wants CTL's Glen Post and LVLT's Jeff Storey teaming to lead the combined company, with Post gradually transitioning out of the company over a period of a few years, and Storey eventually taking charge. When you buy the New England Patriots, you're going to want to be sure Tom Brady is still going to be QB, he says.
Next up is Debra Fine from Fine Capital Partners. Fine runs a highly concentrated portfolio of value names with holding periods measured in years.
Fine: First up is DHX Media (NASDAQ:DHXM), (OTC:DMQHF). Kids programming doesn't age, says Fine, and DHX buys old kids shows (think Teletubbies). It's currently trading just north of $5 in Toronto, and Fine thinks it could be worth 4x-5x more.
What's the market missing? Repricing of these old kids shows is underway and will need to take into account advertising parity with kids and adult programming. This is going to fall to DHX's bottom line.
Scheduled for 1:25 ET is Bill Ackman.
Ackman: Wants to talk about the "risky" land development business. If you want to find good investment ideas, says Ackman, go to the Forbes 400 and find out where folks in that group made their money. Donald Bren - owner of the master-planned community of Irvine - may be the richest man you've never heard of. But how can we invest in MPCs?
Fans of Bill Ackman won't be surprised to learn the answer is Howard Hughes Corp. (NYSE:HHC) - a company Pershing has been invested in for years (since spun out of GGP in 2010), and in which Ackman happens to be the chairman.
Typical valuation metrics don't work, says Ackman. He prefers a back-of-the-envelope approach. At the current stock price just above $120 per share (and rising since he started talking), investors in HHC are getting major developments in NYC, Hawaii, and 37M square feet of other future development for free.
Breaking until 2:20 ET.
Next up is Palihapitiya Chamath of Social Capital (who last year hit a home run at Sohn with his Amazon pick).
Chamath: He's got a controversial pick, he says ... Tesla (NASDAQ:TSLA). After noting the remarkable achievements, he takes note of the "bad," i.e. the massively capital-intensive investments the company is planning on. Totally "unmodelable," says Chamath.
He compares what Tesla is set on doing with what Apple did for the cell phone - they completely redefined the market for mobile phones and then mobile computing, and became a 10-bagger.
Is Tesla doing same in the auto business? Yes, argues Chamath. Like the iPhone 3, Tesla's Model 3 will break down the final barriers.
Chamath, however, isn't recommending the common equity, but instead the 2022 convertible bonds. They protect the downside, but capture 95% of the upside if Musk pulls it off. Stand shoulder to shoulder with this generation's Thomas Edison, concludes Chamath.
Next up is David Serra from Algebris Investments.
Serra: The United Kingdom is really the Divided Kingdom, he says, calling the U.K. a broken growth model - dependent on imports, weak public finances, high household leverage, stagnant productivity, growing social imbalances.
The takeaway: Go short long-dated Gilts, which currently yield more than 200 basis points less than 10-year inflation expectations. Then there's the cost of Brexit - 7% of GDP over the next few years.
Next up is Clifton Robbins from Blue Harbour Group.
Robbins: Blue Harbour now owns just under 10% of Investors Bancorp (NASDAQ:ISBC). There are multiple ways to win with the stock, currently trading at just 1.35x book value - a signifiant discount to peers at more than 2x book.
Loan growth has been speedy, but at the same time, credit quality has been better than competitors. In addition to being a well-run bank, this lender stands to benefit more than most from lower corporate taxes and regulatory reform.
There's also excess capital (12.9% tangible capital ratio vs. 9% for peers). The bank, says Robbins, is sitting on $1B of excess capital - money that can be used to grow the business and buy back stock (Blue Harbour has board representation). One more catalyst - ISBC makes for an attractive acquisition target. Robbins thinks this $13 stock could be worth $18.50 based on recent comps.
Coming up - Greenlight Capital's David Einhorn.
Einhorn: Core Labs (NYSE:CLB) is the pick, but it's not sounding like he's long. The company has been mistakenly hyped as a secular growth story, says Einhorn. If secular, than why the sharp slowdown in earnings?
Reading the company's annual reports is like reading a time capsule of whatever happens to be trendy at the time, he says. Core, he says, is riding the exploration capex cycle just like everyone else. Where there is opportunity (low margin shale) is not in the area where Core can make a lot of money - deepwater drilling. Far higher oil prices are necessary for that to come back.
The stock is all over the place as Einhorn's initial comments led folks to believe he's bullish, but now - after the day's most entertaining presentation - it's crystal clear he's short. Shares are down 2%.
Jeff Gundlach is on tap for 4:15 ET.
Gundlach: His early comments suggest he's about to shoot a hole in the passive investing mania. He notes the large majorities of active managers that have failed to hit their bogies, and the massive flow of cash into passive strategies. Passive investing is a myth anyway, he says. It's just turning investment decisions over to a committee at S&P, for instance.
U.S. valuations, he says, have gotten out of whack, and markets have already begun to catch on. His recommendation: Go long emerging markets (NYSEARCA:EEM), and go short the S&P 500 (NYSEARCA:SPY).
Sohn idea contest winners coming now.
Wharton student Dylan Adelman is the winner. Introducing him, David Einhorn says he was so impressed with the idea, he wanted to buy it right away. His pick is eBay (NASDAQ:EBAY).
Next up is Brad Gerstner from Altimeter Capital.
Gerstner: The "online-travel king" sounds like he's making a bullish call on the airline industry (NYSEARCA:JETS), noting years of investor skepticism and low valuations despite a material change in prospects. What's happened? Dramatic consolidation. With consolidation comes an end to destructive price wars.
After falling on an inflation-adjusted basis forever, ticket prices are actually on the rise. Airlines have trimmed the fat so much that they'll stay profitable even if prices fall.
His long idea: United (NYSE:UAL) - new management (which Gerstner had a part in) is making all the right moves. He sees a $135 stock in 2020 (80% upside) on a base case, and even higher in a modestly bullish case.
Next up is Josh Resnick from Jericho Capital.
Resnick: His pitch is a short of Frontier Communications (NYSE:FTR). Why short a $1.50 stock that down 70% Y/Y? Because there's a 100% return to be made, he says (he's been short for five years).
The company, he says, is going bankrupt. Step one is the elimination of the dividend (it's already been sizably slashed). Step two will be the breaking of covenants.
Next up and last is Larry Robbins from Glenview Capital.
DXC Technology (NYSE:DXC), FMC Corp (NYSE:FMC), and Quintiles IMS Holdings (NYSE:Q) are his picks. All three are reasonably valued - about 12x earnings - despite big moves higher of late. In DXC's case, the stock has doubled over the last year, but the earnings power has grown even more - the stock could double again.
What's "stronger together" is "weaker apart," says FBR's Bob Ramsey, who fades the action in Astoria Financial (AF +3.1%) with a downgrade to Underperform from Market Perform (he also downgraded NYCB).
He thinks a better offer is unlikely, and the current valuation (now up nearly 6% since its sale fell apart) reflects takeout hopes, rather than fundamentals.
Other serious bidders like Investors Bancorp (ISBC) and People's United (PBCT -0.1%) are now otherwise occupied, notes Ramsey, and activist Basswood Capital today disclosed a reduced stake in Astoria.
Look for Astoria early next year to announce a strategic update with cost cuts, and plans to begin putting money to work.
"Above-average" asset-sensitivity, "outsize" potential benefits from deregulation, and a cheap valuation are behind analyst Matthew Keating making TCF Financial (TCB +0.8%) a Top Pick, replacing Signature Bank (SBNY +0.3%).
Upgraded to Overweight is BankUnited (BKU +1.9%), with Keating noting a valuation discount, but loan growth expectations nearly double that of peers.
Upgraded to Equalweight from Underweight is Synovus (SNV +0.4%).
Downgraded to Underweight are Dime Community (DCOM -7.2%) thanks to its liability sensitivity in a rising rate environment.
Also cut to Underweight is Investors Bancorp (ISBC -1.5%), with Keating also noting its liability sensitivity.
Also on the upgrade list: Cullen/Frost (CFR +1.1%).
Also on the downgrade list: Fulton Financial (FULT -0.3%).