12:04 Robotti will end his presentation soon, and he's giving a great case for Calfrac, pointing to the undervalued nature of the U.S. natural gas industry.
This is it for this live coverage. Scroll below for Einhorn's bull case on Cigna and GM and his bearish take on Chipotle and Green Mountain.
Colleague Chris Barth is also here, and has filed separate stories about Einhorn's positions.
11:46 Robotti, of Robotti & Co., likes to find ugly ducklings posed to become swans. Yet, vast majority of investors are too focused on near-term volatility. Losing money in the short term is a risk worth taking, he says.
He likes Calfrac Well Services, a company listed on Toronto Stock Exchange. It has a long runway ahead, Robotti says.Business is in North and Latin America, as well as Russia.As the name suggests, it primarily does hydraulic "fracking," a controversial method of natural-gas production.
11:39 Another question: Will Green Mountain shares hit $0?
Now is not the time to answer that, he says.
Einhorn walks away, leaving the room to empty out. Especially here in the media bullpen. You have to fell bad for Bob Robotti, the next speaker. His shop focuses on discounted companies that trade less than their intrinsic values. Of course, an intrinsic value is only as good as the investor behind it.
11:37 Someone just asked Einhorn about St. Joe Co.
Beat. Sips his water.
"There's absolutely nothing going on at this company," he says.
(Einhorn came out as short St. Joe a few years back.)
11:33 Einhorn may have made light of the so-called Einhorn Effect, that average investor blindly lunge when he speaks, but today's market certainly reflect it again.
He's bullish on Cigna and GM. Cigna went up 1.7%. GM rallied 1.3%.
He's bearish on Chipotle. That stock is down 5.6%.
Interesting, Green Mountain shares remain in the green today, up 1.7%. Perhaps some relief that Einhorn didn't more fully roast company management. Though, it's clear that his position is unchanged and that he's unhappy with how management reacted to his comments last year.
11:21 Now to Q&A with Einhorn.
What's your performance this year?
Firm's performance is in "he low teens this year.
Is Yum a long?
Some off-setting issues exist, slowing growth in KFC's China business, nothing good at Pizza Hut, means Greenlight is on the sidelines for Yum.
Did GM research uncover any investor stigma about the government? How does the electronic Volt seem?
U.S. should exist the stake should, and the government isn't really running the company, more akin to an institutional shareholder who needs to sell eventually.
Volt isn't a problem. It's a "teeny, tiny" part of GM's business.
Moody's has gone on a streak. Is it a buy now?
Stock has run-up because the credit market, but legal and regulatory risks still there. Some substantial lawsuits will weigh on performance.
Has the Apple position changed?
View is unchanged. Still a buy.
11:13 Chipotle is a short. "It has been a great company, but is on its to being a good company," Einhorn says.
Copy-cats will eventually catch up with Chipotle. The draught isn't helping either.
The biggest problem isn't fast-casual, though. It's resurgent Yum! Brands and its Taco Bell chains. (Einhorn precedes to belt out, voice climbing in pitch, the old Taco Bell jingle.)
"It's much different when a national chain decides to compete with you in 5,600 nationwide locations," Einhorn says.
He likes Taco Bell's new Cantina menu, a new selection of fresh-ingredient products meant to eat away at the distance between Taco Bell and Chipotle.
A survey done by Einhorn's firm shows that Chipotle is in danger of losing frequent customers. "I guess they just really like Mexican," he says. The survey also found that over the next six months, those customers are more likely to cut down spending than increase it.
"Chipotle's multiple does not reflect these risks, and the stock is vulnerable."
11:03 Cigna has great reward potential, Einhorn says, but it's boring. That leaves the stock little covered and without a great deal of investor interest.
"Cigna is our favorite HMO," he says. "It's a better business than most." The valuation, at less than 8 times next year's earnings, is favorable.
Quarter-to-quarter volatility is present, but HMOs show stable returns on equity. HMOs still stand to earn a great deal, even if they're earning less.
And Obamacare's effects can be measured. Actually, Einhorn says, those effects are pretty minimal. Any caps will not cause further earnings reduction.
Cigna's international growth is particularly eye-catching. 20% growth is nothing to sneeze at.
10:52 General Motors emerged from bankruptcy in much better health and cost structure.
GM's pension problems appear over-blown, Einhorn says.
"We think that the consesus forecast is actually too low," for GM, he adds. Models should be refreshed in coming years, driving greater pricing and margins, and Chinese growth looks promising. Europe might turn break-even within three years, down from the $1.5 billion loss today. "We expect to see meaningful improvement...by right sizing the operations."
Einhorn, it seems, is a Cadillac man.
Goverment stake in the car company, a stake of some 500 million shares, is not an overhang. It would cost $15 billion to buyout the U.S., an easy move for this cash-stuffed business.
Einhorn estimates 2014 (fully taxed) earnings per share of $6 a share. Analysts on average predict GM to make $5.06 a share.
10:44 The duration of the joint venture between Starbucks and Green Mountain is unknown, a red flag, Einhorn says.
Capital expenditures/sales is also very high relative to the industry. A headwind, he says, given the competitive industry.
"Even if the account is right then it just means they have incredibly bad spending discipline," he says.
Now that Green Mountain can't operate as a monopolist, it's exposed to pressure from experienced manufacturers. (Green Mountain lost the patent exclusivity to its K-Cup design earlier this year.) Other competitors already have cheaper products available. Pricing wars are just beginning.
"We think there is significant downside risk from here," he says.
Worse still: Green Mountain didn't even generate cash flow when it possessed that monopoly.
10:40 He will give another presentation on Green Mountain. A sequel, he says.
Einhorn is unhappy with the time spent by Green Mountain's audit committee in its investigation. He also criticizes the committee's composition.
"Everything I said then is still true," he says of his presentation on Green Mountain last year. Market has proven him right.
10:35 Einhorn stresses that investor Joe at home should do his own homework before tumbling forward into an investing decision based only on a conference preference. "It doens't make any sense to follow him into a stock," he says. He jokes about what happened last year with Green Mountain Coffee, when he detailed, over 110 slides, the short position.
"I'm told that the stock started sliding before I even cleared my throat," he says.
He calls analysts that suggest stocks based on his picks "touchdown seagulls."
Einhorn is even less affable toward recent media coverage of him, including his investments in biofuel. His policy is that Greenlight does not comment. Vast majority of rumors reported in the media are wrong, he says.
"I suggest you take these reports with a grain of salt," he says.
10:30 Einhorn, rockstar hedge fund manager, takes the stage. The room has filled up. Most of the tables look like they're fully seated now, a change from early this morning.
He will give four picks over 120 PowerPoint slides.
9:58 Roepers has stepped off. Next up is probably the most-watched speaker: David Einhorn.
Einhorn moves markets. His comments, whether a long or short pick, tend to influence Joe at home.
Here's what I wrote as a preview to this week's event:
Consider how Green Mountain stock fared in the last year. It’s down 80% after analysts and critics roasted Green Mountain over concerns about the businesses’ finances and model. The bleating began at last year’s Congress, when Greenlight Capital’s David Einhorn laid out his bearish thesis in a 100-slide PowerPoint.
Einhorn presented on a Monday. The stock would lose more than a quarter of its value by week’s end. “I don’t know if David will is going to be back with a short idea this year,” says the Congress’ organizer, Whitney Tilson, a hedge fund man himself. Safe to assume, though, that Einhorn’s comments, whether a short or long pick, will be worth listening to.
Einhorn speaks in 30 minutes.
9:50 Clariant's business in emerging markets is an important step toward expanding margins, Roepers says.
How does Atlantic win if it won't go to a proxy battle? "We try to show that we're very good stewards of the company," Roepers says. They show companies past investments.
First a meeting with company management where Atlantic will detail its advice. Then a publicly released letter. "If they don't listen, then they might have to deal with much harsher activists," Roepers says.
Atlantic doesn't tend to exit a stake until its multiple reaches 11 times earnings before interest and taxes.
9:42 Why did Energizer not perform up to Atlantic's expectations? An attendee asks Roepers.
Euro weighed on the company. But it has also been slow to respond to opportunities.
9:33 Another Atlantic pick: Clariant. Company is divesting some low growth, low margin assets.
FLSmidth, an Atlantic buy, makes the equipment used by miners. (Roepers clearly mentioned that all miners are suffering from a downturn in capital expenditures in the world's slow growth economy.)
Joy Global is being dangerously underestimated by analysts, Roepers says. Joy had flat earnings in 2009 and will have another this year. But it's a unique company with a predictable cash flow.
9:27 Energizer Holdings, the battery maker, is a top pick of Atlantic's Roepers. A company with top brands that have the potential to widen margins. "They're very much on their way," Roeper says of Energizer. The company recently announced a cost-cutting plan a few weeks ago.
He also likes Rockwood Holdings. Total debt: only $5 million.
9:25 Activists need to be able to get out if need be. All positions need to be kept as liquid as possible, Roepers says.
9:15 Fear about equities have left investors shell-shocked. This leaves the field wide open for activists, Roepers says. These folks flourish in such vacuums.
He'd like to see private equity firms put capital to work, and business take more advantage of low interest rates.
9:12 New speaker: Alexander Roepers of hedge fund Atlantic Investment Management.
He'll dish on what Atlantic sees before jumping in as activists or marking it as a turnaround.
Atlantic, which manages about $1.8 billion, pushes with 2% to 7% minority stakes to begin activism.
9:08 Khaner doesn't think Eddie Lampert is a turnaround CEO. He doesn't own Sears Holdings and isn't a big fan of its real estate situation. The industry is simply too competitive. Probably seeing some benefit from J.C. Penney struggles, he says.
9:02 Khaner doesn't own J.C. Penney, but he does think it's a succesfull turnaround in the making.
Expect volatility, he says And a three-year time span for the turnaround.
Debt is manageable.
"I think ultimately they might have to go back to couponing, because that's retail," Khaner says.
What about new CEO Ron Johnson's lack of turnaround experience? "You don't always need it," Khaner says.
Khaner will initiate a position in a turnaround when he sees low debt/capital (More than 70%? A huge red flag, he says), a CEO schooled in turnarounds and an industry that appears lively.
9:01 Khaner will track turnaround-trained CEOs for years and see where they go, as well as their family trees.
Though, it's probably 50-50, he says, whether a company or a CEO will earn his investment in a turnaround story.
8:59 In the question-and-answer session now, where a conference attendee asked Khaner why Jamba stores smell like a freshly cleaned men's bathroom.
Khaner says he's noticed that and will follow up with management about that.
A tasty, but stinky investing play?
8:55 a.m. While certainly different, both Starbucks and Jamba Juice look like buys, says Khaner Capital's Lloyd Khaner.
Khaner gave us an update on his Starbucks pick from a few years back. He likes Starbucks' new-story growth, its turnaround in Europe and its new Verismo coffee machine. (Sorry, Green Mountain.)
His new pick is small cap Jamba. The stock, which trades near $2, has all the hallmarks of a good turnaround investing play, Khaner says. It has low debt to capital and a CEO experienced with turnaround. Chief James White was trained by Gillete turnaround guru Jim Kilts. Kilts was also responsible for teaching other savvy turnaround artists that art, men like Campbell's Doug Conant.
Moreoever, Jamba's return on invested capital has been improving, an important measure of a turnaround, Khaner says.
(Stay tuned for more stock action, including the much-awaited appearance of Greenlight Capital's David Einhorn in an hour or so.)
Reach Abram Brown at firstname.lastname@example.org.
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