The Best of the Best From the Value Investing Congress
Earlier in the week was the Value Investing Congress, one of the largest value investment conferences around the world. Several large luminaries on Wall Street, including Leon Cooperman, Bill Ackman, David Einhorn, and Alexander Roepers, spoke and gave some of their best ideas, both long and short.
David Einhorn, of Greenlight Capital, mentioned that he was short Green Mountain Coffee Roasters (NASDAQ: GMCR). He said that he thinks the company is more likely to earn $3.50 per share in a few years, as opposed to the bull case of $9 per share.
The bull case for Green Mountain is 90 million households. Einhorn thinks that the base case for Green Mountain is more like 21 million, not the 90 million the company has cited If that's the case, then Green Mountain has 50% of the market, not 9% or 10%. Whitney Tilson of T2 Partners also disclosed that he is short Green Mountain, but that was coincidental.
Jim Chanos of Kynikos Associates spoke at the conference and mentioned value traps, including the major oil companies, which was a surprise to some.
He mentioned integrated oil companies, and specifically cited Exxon Mobil (NYSE: XOM) as a potential value trap, but said that the same could be said for other integrated oil companies. Chanos also mentioned GameStop (NYSE: GME), for profit colleges such as ITT Education Services (NYSE: ESI), and the larger commodity companies, like Vale (NYSE: VALE).
The last group of value traps were Chinese state banks, which are instruments of state policy, but not necessarily designed to maximize shareholder value. Chanos has been a notorious bear on China, despite the fact he has never been there. Chanos noted that Chinese banks have been recapitalized twice, in 1998 and 2004. He specifically mentioned Agricultural Bank of China.
Alexander Roepers, of Atlantic Investment Management mentioned a series of potential takeover targets in the coming months, particularly when volatility in the markets subside. He mentioned that sectors that have seen increased M&A tend to have deals come in bunches. He said that Energizer Holdings (NYSE: ENR) could be a potential takeover, as it takes market share away from Procter & Gamble (NYSE: PG). Roepers said that Energizer Holdings has become very shareholder friendly, has an attractive valuation, and has a predictable cash flow. He thinks at a takeover value, it is worth $102 per share.
Roepers also mentioned Ashland (NYSE: ASH), the specialty chemical company. He believes it could be worth as much as $105 per share. It could spin off the Valvoline business, sell its adhesive business or the water business to reach this target. He also mentioned Flowserve (NYSE: FLS), which he believes is worth $135 per share over the next twelve to eighteen months. Roepers' mentions also included Accenture (NYSE: ACN) and two foreign companies: MTU Aero Engines and Atos, a French competitor to IBM (NYSE: IBM).
On the second day, we heard from Leon Cooperman, among a slew of others.
Bernard Horn of Polaris Capital Management mentioned some global companies as potential value investments, including Nichirei Corporation, a Japanese frozen food manufacturer, Methanex Companies (NASDAQ: MEOH), a methanol producer, foundation engineering firm Trevi Finanziaria Industriale S.P.A., and Ameris Bancorp (NASDAQ: ABCB), the Georgia-based community bank.
Whitney Tilson and Glen Tongue of T2 Partners mentioned two names, Berkshire Hathaway (NYSE: BRK-A) and J.C. Penney (NYSE: JCP). Tilson called Berkshire the cheapest it has been in the thirteen years T2 has owned it. He also gave JC Penney the potential for $65 per share if the company makes some operational improvements, hopes for new management, and has the potential to realize some of the real estate assets.
Namvar said that under a minimal housing recovery, Fortune Brands Home & Security could be worth anywhere between $18-$27 per share, with the mid point being $22 per share, up 70% from current levels.
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