Our friend “Hunter” at the Distressed Debt Investing blog sends this along:
Do not know if these are all over the interweb yet, but a friend sent me a great compilation of notes from the Great Investors’ Best Ideas symposium – an event held in Dallas last week. For an overview, please see this: Great Investor’s Investment Ideas
TRADES: EINHORN, ACKMAN, PRICE, BARROW, HART & GABELLI Einhorn
- Obama’s September speech on financial reform had many good points….he should have relayed them to his policy team.
- Making these institutions (banks) and products “safer” is like making safer asbestos.
- (extremely negative on existence of the banks in their current form, government’s weakness to banking lobby, the pervasive moral hazard our policies have created, and the institutionalization of “too big to fail”.)
- Banks are earning oligopolistic profits on mortgage spreads.
- Romer and others in the administration seem intent on maintaining the fiscal stimulus and cite 1937 as their basis…. But GDP created by fiscal stimulus is artificial.
- Deficit accounting is on a cash basis, if done on a future basis our deficit is in the ~5 trillion range and future obligations are $60 trillion (already committed).
- US fiscal scenario mirrors countries that have defaulted on sovereign debt (citing data from American Enterprise Institute).
- Japan is well on its way to hyperinflation/default.
- Rating agencies continue to lag crisis and they don’t rate sovereign debt any better than they do corporate.
- How to manage risk:
- Long gold, gold related. Does well when monetary policy is poor/vice versa.
- Long dated int rate options US/JAP. Prefer these v. short bonds; limits loss/creates leverage.
Mark L. Hart (partial notes)
- China has not had growth in actual wealth to match GDP.
- Capital flows into China: trade; foreign investment; net speculation…all leads to dilution, further printing of RMB
- Endless cycle of printing RMB and buying foreign treasuries etc; gives appearance of constantly growing foreign reserves.
- To play as individual: Short Chinese ADR ‘s with RMB denominated assets.
- Long idea: NFG
- Own Seneca, 4th largest acreage holder in Marcellus shale.
- 4.4b enterprise value.
- PMV ex-Marcellus = $42
- Don’t buy fat CEO’s, those with Napoleon complex, or high pay v. the industry.
- Bubble Concerns: Speculation in industrial raw materials. Asia Bond Inflows
- 3 Stocks he likes: Cooper Industries (14x dep earnings, 3% yield, infrastructure play); Sysco (4% y, good balance sheet, recovery play); Conoco (Nat gas play, killed by its refining biz, multiple <>
- Blue chips (KFT, DIS, XRX, BHI) are strategically buying and paying 30-50% premiums, thinks this trend will continue, $ is cheap.
- Ride longs even those a bit ahead of themselves from a valuation perspective (eg. EBAY)
- Looks for industries that have been battered, layoffs, etc.
- TV, Newspapers – content is still rich but the medium is the question (paper v. Kindle). Doesn’t know how this will play out.
- Long WPO due to the Kaplan ownership, the paper itself bleeds.
- Would buy NYT but not at current levels.
- Also likes Smithfield Foods (SFD) (13b revs, hog and corn prices becoming more favourable, 2 board members left when they sold stock to pay down debt.)
- Short VNO (smart guys but overvalued at present levels (~$62), the company sold stock at $47, 40% above NAV)
- Entire presentation (with slides) was on shorting Realty Income Corp (letter O).
- With disclaimer that he could be wrong, literally said it cannot go up.
- Operate triple net leases.
- (Pictures of select properties) all complete dumps. Typically “specialty use”, Buffet’s, local video stores, etc.
- Will not disclose ID of tenants (had several excerpts of analyst calls, when a tenant had been determined, the company declined to comment).
- Entire purpose is to “grow monthly dividend”. Reiterate several times, add thousandth of a penny monthly.
- Pays out all cash flow to sustain the dividend.
- If valued at 9.5% cap rate (generous) would fall by half.
- Tenants that are identifiable are mostly junk rated; Ryan’s Buffet’s, Rite Aid’s; some B’s.
- Every time stock reaches 25-26, the company sells.
- Executives own less than 1%, haven’t bot any in 6 years.
- Vesting program accelerates with age; never seen such a thing. Immediate vesting at 60. (CEO is 56).
- Says is borrowable.
- Positive caveats: No debt maturity til 2013, 350mm revolver but if forced to mark to market they would lose access.
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