| Lawrence (Larry) Robbins, Glenview Capital Management (Bloomberg) |
When well-known hedge fund managers talk about some of their strongest investment convictions in a public platform, the stocks they tout tend to move, even if only for a day. That was certainly the case on Thursday, when a marathon lineup of 12 hedge fund managers convened at the first-ever Sohn Conference in Canada, being held over two days at the Arcadian Court in downtown Toronto. The managers are presenting one or more of their best investment ideas at the event, held in conjunction with Toronto-based Capitalize for Kids Foundation to raise money for the Hospital for Sick Children, a teaching hospital affiliated with the University of Toronto. Day one of the two-day conference was heavy on long positions in stocks, from the headline makers — casual dining chain operator Darden Restaurants again — to the obscure, like TerraVest, a thinly traded Canadian supplier of oil and gas field products and services.
Nearly all stocks, of course, are down after a bruising October market, but it does appear that a bullish speech can push the price up slightly. Here are a few, though by no means all, of the big ideas that came up during the day and what happened to them between the opening and closing bell.
Lawrence (Larry) Robbins, CEO of New York-based Glenview Capital Management, talked about some stocks you’ve heard about before. Thermo Fisher Scientific sounded familiar to those in the audience who’d heard Robbins speak at Institutional Investor’s Delivering Alpha conference in July — or to anyone who’s closely followed his fund’s holdings over the past couple of years. The $17 billion life science technology company still has cash and is deploying it to buy back stock. Robbins was the first speaker of the day and might have had an impact just as the markets opened; Thermo Fisher opened at around $116 and stayed close to that price all day, up from a closing price of $113.83 on Wednesday.
Robbins likes acquisitive pharmaceutical companies. Another top pick he discussed was Endo International, which specializes in specialty and generic drugs.
“Big pharma is in love with innovation for innovation’s sake,” said Robbins, adding that companies such as Pfizer and Merck are so enthralled with spending to find next big blockbuster that they forget the odds of coming out with another Lipitor are extremely low. He also talked about Actavis, which he called “the white knight for Allergan” in the latter’s battle against being taken over by Valeant. Endo’s stock spiked to $65.77 on Thursday after being on a slide since early in the month, while Actavis went up to $239.18, a high for the week.
Among other big-name companies that hedge fund managers love, Aaron Cowen, chief investment officer of New York-based Suvretta Capital Management, brought up Burger King. “Since I was coming up to Canada I thought I’d talk about the acquisition of a hometown favorite,” he said, referring to Burger King’s planned acquisition of Canadian coffee and donut chain Tim Horton’s. Suvretta has owned Burger King for a long time, and Cowen called the owners, 3G Capital, the best management team in the world.
But if Burger King is successful in its plan to acquire Tim Horton’s, which is on almost every corner in these parts but barely known outside its home country, it will have a company with zero presence outside North America and nowhere to go but up in the rest of the world. Burger King itself has not penetrated global markets the way McDonald’s has, so both entities have a lot of room to grow. McDonald’s stock went up to $30.76, also a high for the week.
Lee Ainslie III, founder and managing partner of Dallas-based Maverick Capital, talked about Qihoo 360, a Chinese Internet company. Hongyi Zhou, the company’s chairman, CEO and founder, is a proven visionary, said Ainslie. And the company has captured 28 percent of the Internet search market in China, an impressive market share, although it hasn’t been able to monetize it so far. As of this week the stock had dropped 21 percent from January, down to $65 from $82.05 at the start of the year.
“We didn’t own it in January,” Ainslie made a point of saying. He jumped in when it became a bargain. On Thursday it rebounded to $69.41 in the hour after Ainslie’s presentation before closing at $68.20.
Jeffrey Smith, CEO and CIO of the New York-based activist firm Starboard Value, came on stage and quipped, “I hope this is going to be a friendlier crowd than some of the groups I’ve been speaking with.” It isn’t always easy to be an activist investor, but Smith, fresh from his victory in which he nominated an entire slate of 12 directors to replace the previous board at Darden and won all 12 seats, couldn’t resist talking about Darden’s potential to unlock value.
He also talked about Yahoo, a company that he said “has to listen to us on the heels of what happened with Darden.” Yahoo has a board that is elected annually, and the nominating deadline for next year is March.
“I’m not telling you if we’re going to do something or not but management can connect the dots,” said Smith. Yahoo stock traded around $42 all day, before and after Smith’s presentation.
Smith also mentioned the packaging conglomerate Meadwestvaco, which he is urging to spin off its non-core specialty chemical and real estate businesses. Meadwestvaco hit a monthly high of $42.
James Dinan, founder of New York-based York Capital Management, also gave a nod to the host country, talking up Molson Coors Brewing Co. After devoting the first half of his presentation to macro factors, he noted that beer companies are not vulnerable to downturns or interest rates. Some consumer products are made to ease the world’s macroeconomic pain. This one, said Dinan, is on the verge of a complicated event that could add about 15 percent to its value. Anheuser-Busch InBev is likely to acquire SAB, which would in turn be forced to divest its 58 percent interest in Miller Coors to secure antitrust approval. “There’s only one buyer there: Molson Coors,” said Dinan. The stock had dipped down to $70 just before Dinan began talking about it, then rose right after his presentation to $71.39, a slight recovery from its mid-October slump at $68.
As for TerraVest, an off-the-radar stock that is a favorite of Guy Gottfried, founder and manager of Rational Investment Group in Toronto, the stock spiked at $5.68 (in US$) around 11:00, immediately after Gottfried’s presentation, up from $5.32 when he started. It finished the day at $5.67
