Four huge names in the hedge fund industry just shared their favourite stock idea at the SkyBridge Alternative Conference in Las Vegas on Thursday.
So lets get to it, here’s who was on stage:
John Burbank III: Founder & Chief Investment Officer, Passport Capital
James Chanos: Founder & President, Kynikos Associates LP
Richard L. Chilton, Jr.: Chairman, Chief Executive Officer & Chief Investment Officer, Chilton Investment Company
John Lykouretzos: Founder & Chief Investment Officer, Hoplite Capital Management, L.P.
Chilton, who said that he’s made his career by “owning businesses rather than renting stocks,” was up first. His idea was Sherwin Williams.
He bought the company during the financial crisis at around $67, now it’s trading at $294.
“It’s a good business because paint is a good business,” he said, pointing out that there are 134 million homes in the US to paint.
“I like knowing when I go to bed at night that their paint is going to peel.”
What’s more, he said, Sherwin is the biggest paint company and manufactures its own paint. It’s also just made a key acquisition and he thinks there’s more room to run there.
Lykouretzos went up next.
“Four words that have cost investors dearly in the past ‘it’s different this time,'” he said.
American Airlines is another example of that. He thinks that competition — especially from low cost carriers — creates a vicious prisoners dilemma for companies in the industry and that labour costs will continue to burden the company.
Burbank presented third, and it was a pair trade.
To understand it, you have to understand the concept of old China vs. new China. Basically, that is the idea that China’s old economic powerhouses are dying, and, importantly, are laden with debt that is also dragging down the banking system.
New China, though, is the growing services sector.
In Burbank’s trade, new China is represented by e-commerce powerhouse Tencent. It’s “more dominant” than Alibaba, Burbank said.
“If you like dominant platforms like Facebook or Apple, you really should own Tencent.”
Old China is represented by the FXI ETF. It’s holding a bunch of the banks that are holding old China’s debt.
Chanos went last, and presented LNG company Cheniere as his short position.
He said that the bulls will tell you that Cheniere isn’t an energy story — so no need to worry about commodities prices tanking — it’s a finance story. That it has fully understood its business. But he says the company is going to be the most levered among its peers in five years, and is being entirely too generous with its cost projections.
Meanwhile it’s increasing its headcount and building more plants.
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