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 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 XOM as a potential value trap, but said that the same could be said for other integrated oil companies. Chanos also mentioned GameStop GME, for profit colleges such as ITT Education Services ESI, and the larger commodity companies, like Vale 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 ENR could be a potential takeover, as it takes market share away from Procter & Gamble 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 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 FLS, which he believes is worth $135 per share over the next twelve to eighteen months. Roepers' mentions also included Accenture ACN and two foreign companies: MTU Aero Engines and Atos, a French competitor to IBM IBM. On the second day, we heard from Leon Cooperman, among a slew of others. Cooperman, of Omega Advisors, gave a number of ideas, including Apple AAPL, Qualcomm QCOM, Sallie Mae SLM, and Boston Scientific BSX. Bernard Horn of Polaris Capital Management mentioned some global companies as potential value investments, including Nichirei Corporation, a Japanese frozen food manufacturer, Methanex Companies MEOH, a methanol producer, foundation engineering firm Trevi Finanziaria Industriale S.P.A., and Ameris Bancorp ABCB, the Georgia-based community bank. Whitney Tilson and Glen Tongue of T2 Partners mentioned two names, Berkshire Hathaway BRK and J.C. Penney 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. The last major presenter was Pershing Square. Ali Namvar spoke for Bill Ackman, and mentioned Fortune Brands Home & Security FBHS as Pershing's top value pick. 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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