Some of the world's most successful
hedge fund managers gathered in Manhattan on Monday to share their investing
strategies on everything from the U.S. housing market to when to do business
with Vladimir Putin.
Many attendees at the 19th AnnualIra Sohn Investor Conference plopped down $4,000 a piece to hear tips from
these titans of finance. Here are five top tips you can follow in case you
weren't able to swing that ticket price.
1. Einhorn still hates tech stocks
Billionaire David Einhorn isn't
backing off from his recent claim that soaring tech stocks are in bubble
territory.
The founder of Greenlight Capital
sought to illustrate his point by focusing on athenahealth (ATHN), whose shares
have skyrocketed 120% since November 2012.
The provider of technology services
for medical practices is "caught up in a bubble and could easily"
plunge 80% or more from its recent peak, Einhorn said.
The hedge fund giant draw laughter
by showing a series of video clips that poked fun at Jonathan Bush, the
animated athenahealth CEO and a cousin of former president George W. Bush.
Einhorn said athenahealth's lofty
valuation doesn't match up with its disappointing financial results, and he
knocked Morgan Stanley for overly optimistic expectations for the stock's
performance.
"This is what passes for
conservatism during a bubble," Einhorn said, whose call sent athenahealth
tumbling 12%.
While many investors are slashing
their exposure to Russia, James Grant believes there's good reason to kick the
tires of Gazprom, Russia's state-owned energy behemoth.
In a decidedly contrarian call, the
founder of Grant's Interest Rate Observer told the crowd: Gazprom "may or
may not be a bad company," but low valuations suggest its "many
imperfections seem to be priced in."
Geopolitical concerns have hammered
Russian assets, with investors fearing punishing sanctions from the U.S. and an
escalation of violence. But Grant quoted from Baron Rothschild, who famously
said "the time to buy is when there's blood in the streets."
Related: 3 Risks from the Ukraine Crisis
Grant knocked Gazprom's corporate
governance structure, which gives Russia's government control of 50% of the
London-listed company.
"There is no more reviled
business than Gazprom," Grant said, calling it "Herbalife without
Carl Icahn" and suggesting it's the "polar opposite investment"
of Tesla Motors (TSLA).
Still, he noted Gazprom is the
world's largest gas producer, it owns 17% of global gas reserves and trades at
a hefty discount to average analyst price targets.
3. Oil prices are heading South
Surging U.S. oil production should
send crude oil prices sharply lower in the coming quarters.
That was the message from Point
State Capital's Zach Schreiber, who believes U.S. crude will continue to trade
at a sharp discount to global prices.
"U.S. crude oil is being
drilled for by the same cast of characters that oversupplied the U.S. natural
gas market. We just saw this movie. Why should we expect a different
outcome," said Schreiber.
He noted the bullish oil bet has
become awfully crowded, with a $33 billion net long position in U.S. crude
contracts.
"If you're long, I'm sorry for
you. Maybe this makes you comfortable. At least you've got friends,"
Schreiber said. "Or it could make you feel scared. I'm sure it will be a very
smooth exit when all these clowns get out of the Volkswagen."
Schreiber said he's bullish on
Valero (VLO) and Marathon Oil (MRO) because refiners should benefit from the
wider spreads between U.S. and global crude prices.
4. Housing market bouncing back? Think again
Jeffrey Gundlach believes housing
prices are set to tumble to new lows because affordability is a myth, borrowing
costs will spook potential home buyers and young people may continue to rent
instead of buying.
"This is a generational
preference. Young people were shocked and scarred by the housing
collapse," said Gundlach, founder of Doubleline Capital.
He pointed to the high percentage
of people who moved back in with their parents amid the poor job market and
high levels of student debt.
"The kids aren't
alright," he said. "There are no first-time buyers. Where are
they?"
Related: Housing still a Weak Investment
Gundlach also cited the large
amount of homes that have been purchased with cash by investors and other
speculative buyers.
"This is not exactly
indicative of organic growth in the market from real buyers," said
Gundlach.
Gundlach urged investors to short
the SPDR S&P Homebuilders exchange-traded fund (XHB), which he believes
"looks very tired." He said this ETF should correlate very closely
with lumber prices, which have tumbled.
5. Ackman's still likes Fannie and Freddie
Bill Ackman took a break from his
campaign against Herbalife (HLF) to make the case for keeping Fannie Mae and
Freddie Mac alive despite their enormous crisis-era losses.
Related: Bill Ackman takes another
swing against Herbalife
Instead of unwinding Fannie and
Freddie, Ackman believes it would be far wiser for Congress to reform them. He
suggested jacking up required capital ratios, forcing the entities to exit
risky businesses and improving corporate governance.
Fannie and Freddie have an
"80-year track record, global market acceptance for their paper, a
workforce that knows the business and earnings stream that generates capital
even in bad times," he said.
Ackman said Fannie and Freddie are
conservatively worth $23 and could be valued at as much as $47, compared with
just $4 now (these two do trade, but only "over the counter," not on
a national stock exchange).
"It's time to get off our
fanny," said Ackman, whose hedge fund owns about 10% of Fannie and
Freddie's common stock.
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