Hedge fund managers discuss their top stock picks

Reuters

(Corrects spelling of Cooper-Hohn, spells out full name of fundin paragraph nine)

LONDON, Nov 1 (Reuters) - Hedge fund managers presentedtheir stock-picking ideas at a conference this week organised bythe Sohn Conference Foundation. The Foundation raises money tosupport initiatives to cure and treat paediatric cancer.

Following are some of the ideas presented:

Masroor Siddiqui, co-founder of London-based Naya Capital,focused on one short and one long position in his presentation.

For the short position, Naya is betting the price of sharesin Essilor, the world's largest maker of ophthalmiclenses, will fall to 60 euros from around 80 currently. Siddiquisaid Essilor's business model faces rising pressure from digitaltechnology that enables buyers to use a computer to createspecific prescriptions.

Siddiqui's long position was Italian fashion house SalvatoreFerragamo. Ferragamo has the opportunity to boost its value ifit tackles underpenetration in Asian markets and labour andsupplier costs, which are higher than rivals, Siddiqui said.

John Armitage, the founder of $11.4-billion strong EgertonCapital, one of London's oldest funds, presented two ideas.

Scandinavian bank Nordea, he said, was incrediblywell capitalised and would benefit from its dominant position inScandinavia, where problem loans remain far lower than elsewherein Europe. He tipped the bank to return 20 percent of its marketcapitalisation over the next few years in dividends.

Armitage also highlighted U.S. mortgage servicing companyOcwen. The company, he said, was picking up business asbanks pull back from chasing delinquent loans amid a weak butgrinding recovery in the U.S. housing market.

Chris Cooper-Hohn, head of activist fund The Children'sInvestment Fund (TCI), highlighted two of his holdings, bothonce state-controlled businesses.

European aerospace giant EADS, he said, woulddouble and then triple its profitability thanks to cost-cuttingand increased pricing power in its core aircraft manufacturingunit. Airlines across the world were also undertaking a massivereplacement of their existing fleet.

Aurizon, an Australian rail freight company whichTCI has owned since its 2010 privatisation, is also improvingits margins thanks to cost cuts and operational efficienciesunder a "killer CEO," Cooper-Hohn said.

Pelham Capital's Ross Turner presented his case for Irishbusiness services group DCC. Pelham runs around $3billion and primarily invests in European stocks.

Turner predicted DCC would continue to grow its market sharein the UK oil distribution market, driven by acquisitions. Hesaid the price of DCC stock could rise to 40 pounds per shareversus their current price of 27 pounds.

The founder of AKO Capital Nicolai Tangen chose to speakabout information services group Experian. AKO runsmore than $9 billion in equity-focused funds.

Experian has scope to expand into new regions and is aidedby its market's high barriers to entry, which include anoligopolistic market structure and difficult to replicate data.

Mala Gaonkar, a managing director at U.S.-based Long PineCapital, spoke about Qualcomm, the semiconductorcompany that produces wireless telecommunications products.

The case for the stock, she said, is based around unitgrowth, price stability and royalty rate stability. Despite thenumber of handsets already available, there remains room forgrowth globally, she said.

Dynamo Capital founder Bruno Rocha focused on brewing giantAnheuser-Busch Inbev.

According to Rocha, AB Inbev has economies of scaleadvantages in a very consolidated market. The brewer benefitsfrom a strong position in mature markets and an even strongerone in developing economies. (Reporting by Tommy Wilkes and Alistair Smout; Editing by JaneMerriman and Anthony Barker)

View Comments