A number of top hedge fund managers gave their best stock ideas on Monday and Tuesday at The Robin Hood Investors Conference in Brooklyn.
Costing $7,500 for a two-day ticket, the exclusive event raises money for The Robin Hood Foundation, a charity aimed at combating poverty in the New York City area. The conference was closed to the press.
Below are some of the ideas and discussions that occured at the conference based on notes from attendees.
David Einhorn (Greenlight Capital): Einhorn pitched German drug-and-chemicals-maker Bayer (BAYRY) as a long for his “best idea.” Bayer is currently in the process of buying agricultural giant Monsanto (MON) for $66 billion. Shares of Bayer have traded lower on the deal news. Right now, the market is waiting for approval of the deal. Einhorn likes both outcomes — an approved merger or a standalone company. As a solo company, Bayer is attractive with key products in growth mode, no big patent cliffs soon, and a good new pipeline, according to the attendee’s notes. Einhorn noted that the pharma business is underappreciated and the company has an attractive animal health business that’s also underappreciated.
Aaron Cowen (Survetta Capital): Cowen pitched Burger King’s parent company Restaurant Brands International (QSR) as a long. He thinks it could be a $75, possibly $100 stock. The company doesn’t own the restaurants. Instead, it’s a 100% franchised business. He likes the business model of collecting checks from francisees. There’s room for growth. Specifically, Cowen thinks there’s an opportunity to expand the Tim Hortons brand internationally.
Jason Karp (Tourbillon): Karp pitched SS&C Technologies (SSNC), a financial services technology company, as a short. SS&C is a hedge fund administrator. There’s been $77 billion in redemptions from hedge funds. It’s been the worst year for start up funds. There’s also been a move from active investing to passive investing.
Samantha Greenberg (Margate Capital): Greenberg, a former partner media/cable/satellite and consumer sector head at Paulson & Co., pitched Disney (DIS) as a long. The stock had fallen from $120 to $98, dragged down by Disney reducing ESPN’s three-year growth guidance. Greenberg thinks that the bear case is “overdone.” ESPN is now available on all existing/pending Internet Pay TV product launches including Hulu, YouTube, Sony Vue, and Direct TV Now. Disney gets 75% of its EBITDA from non-ESPN businesses. Right now, there’s an opportunity to buy the company at a discount to comparable consumer stocks. She gave the stock a price target of $124-$157, according to an attendee’s notes. There are catalysts coming, including “Star Wars VIII” and the Han Solo film, four Marvel movies, the opening of “Avatar” theme park at Disney World, etc. Disney may decide to spin off ESPN, which would drive shareholder value by creating a pure-play sports network company.
Scott Ferguson (Sachem Head): The activist investor pitched Servicemaster (SERV) as a long. Servicemaster’s brands include Terminix and American Home Shield. It’s viewed as a recession-proof business.
Keith Meister (Corvex Capital): Meister, an activist investor and a former Carl Icahn lieutenant, gave Bio-Rad Laboratories (BIO) as a long idea. He noted that it’s cheap with no analyst coverage besides Jefferies and no hedge fund ownership. The company has been implementing a new SAP system which has been costing them at the moment. Right now, the company is under-earning, trading at 7-times EBITDA versus peers trading at 14-times. He thinks the company is trading at half its intrinsic value.
Jeff Smith (Starboard Value): The activist investor pitched Advanced Auto Parts (AAP) as a long. Smith, who is the chairman of the company’s board, explained that cars are getting older and lasting longer and more auto parts will be required. He also pitched Perrigo (PRGO) as a long, which has been under-managed since the CEO left.
Anthony Bozza (Lakewood Capital): Bozza pitched TherapeuticsMD (TXMD) as a short.
Ray Dalio (Bridgewater Associates): Dalio, the founder of the world’s largest hedge fund, spoke during a fireside chat. He discussed a new period of decreasing globalization, higher inflation, and higher bond yields. He noted monetary policy is no longer effective. He also touched upon how pension and healthcare liabilities are growing. There’s a need for more fiscal stimulus. The period is similar to Ronald Reagan, but during that time central banks could lower rates, while right now they can’t. We’ve seen the low in yields. If there’s a 100-basis-point increase in the 10-year Treasury it could mean a bear market.
Paul Tudor Jones (Tudor Investment Corp): The legendary macro fund manager and founder of the Robin Hood Foundation participated in a fireside chat with famed life coach Tony Robbins. He described the period as like 1999 in the NASDAQ where you didn’t know how to value, but you need to ride it. You need to ride this, can’t fight the tape here, according to an attendee’s notes of the discussion. There’s enormous catalytic change. The risk is that Trump is unpredictable.
Whitney Tilson (Kase Capital): Value investor Whitney Tilson reiterated a short and pitched three new ideas, including one long and two shorts. Two years ago, Tilson pitched Exact Sciences (EXAS) as a short at $23.86. The company, which has a $1.7 billion market cap, has a single product called Cologuard — a stool test that detects colorectal cancer and precancerous polyps. The stock fell below $5 after the US Preventative Task Force’s Colorectal Screening Draft Recommendation listed Cologuard as an “alternative test” as opposed to a recommended one. Tilson didn’t cover since his price target was $3. With the stock trading above $15, Tilson believes there’s another opportunity to short Exact Sciences. He’s short because it’s not clear Cologuard is better than the fecal immunochemical test (FIT); there’s a “big false-positive problem”; it’s more expensive than the FIT test; it’s “much messier” than the FIT test; competition is looming; and commercial payor adoption may be slower than anticipated. He expects that Cologuard will remain niche as opposed to going mainstream. Tilson’s other pitches included long Berkshire Hathaway (BRK-A), which he says is trading 20% below its intrinsic value. For those concerned about interest rates on government bonds going up, his recommendation is to short Direxion Daily 20+ Year Treasury Bull 3x ETF (TMF). Finally, he recommended shorting Wingstop (WING), a fast-growing chicken wing restaurant he says has an “absurd” valuation.
Investing blog ValueWalk reported some of these ideas earlier.
If you have notes or presentations from the conference, feel free to send them to firstname.lastname@example.org.
Julia La Roche is a finance reporter at Yahoo Finance.