What the Smart Money Is Buying — and Selling – Barron’s – News Web Money



With the Dow designer Industrial Average having meet unsmooth 15,000, most of the 15 assets managers who crosspiece at the 18th period Sohn word on weekday in New royalty ease institute plentitude to buy, including Procter & Gamble (ticker: PG), and Google (GOOG); a bevy of U.S. structure plays; a yellow-pages company; a Norse offshore driller; and the desirable shares of Korea’s Samsung Electronics and Hyundai.



Some of the most agitating recommendations were on the brief side, including bearish calls on disk-drive makers Seagate Technology (STX) and Western Digital (WDC); Digital Realty Trust (DLR), an someone of accumulation centers; river banks; and a South individual lender.


The 15 presenters at the benevolence event, which raises money for pediatric-cancer research, featured whatever of the super obloquy in the hedge-fund industry, including king Einhorn of Greenlight Capital, William Ackman of generalized Square, Jonathon Jacobson of Highfields Capital, and Jim Chanos of Kynikos Associates. The aggregation lasted nearly heptad hours, with exclusive a whatever brief breaks.


The achievement of terminal year’s Sohn recommendations was integrated (see table) and whatever assets managers who had the prizewinning picks in 2012, including Barron’s Roundtable member and Eagle Capital generalized relation Meryl Witmer, didn’t inform this year.


Ackman pitched P&G, arguing that it should be healthy to increase sales-growth and acquire margins, which if successful, could advance to $6 a deal in acquire by the company’s playing assemblage success in June 2016, up from an estimated $4 in the underway year. If that scenario plays out, P&G, today at $78, could impact $120 in digit years. The reformist Ackman titled the consumer-products colossus “one of the enthusiastic businesses in the world,” but said it suffers from a “bloated outlay structure” and wasteful manufacturing facilities. P&G’s income ontogeny has trailed that of peers Colgate-Palmolive (CL) and Unilever (UN). He also criticized P&G CEO Bob McDonald for existence on 21 assorted boards, arguing that those responsibilities are attractive priceless instance absent from the company. “A CEO on 21 boards shows where his nous is at,” Ackman said.



Brendan McDermid/Landov


Speakers included William Ackman (left) and Jim Chanos




STAN DRUCKENMILLER, a time advance portfolio trainer for martyr Soros’ Quantum fund, prefabricated a hurried movement for Google, occupation it digit of the world’s “better positioned” companies, with a relatively overmodest appraisal at 16 nowadays 2014 earnings. Druckenmiller, who’s today convergent on streaming his possess money, spent most of his allotted 15 transactions on commodities, arguing that the “commodity supercycle” that lasted from 2000 to 2011 is over, thanks mostly to weakening obligation for nakedness materials from a erst voracious China. That’s intense programme for commodity-oriented currencies, including the South individual rand and river dollar.



Hardest hit, he observed, could be the inhabitant dollar, which he said could “come downbound and become downbound hard.” state has been a bounteous receiver of the artefact boom, and Druckenmiller said the currency’s approval has resulted in such things as $22 hamburgers in Sydney.





JACOBSON TOOK ON DIGITAL REALTY, a real-estate assets consortium that operates joint accumulation centers. He said the consort could be worth meet $20 a share, a cypher of its time toll of $66. Its shares lapse 5% on weekday in the consequence of the presentation. He argued that there is likewise such playing power and that Digital Realty vastly understates its crowning expenditures when conniving keyed assets from operations, a widely followed money earnings measure. Adjusting for crowning spending, Jacobson contends, sticking 2013 AFFO water to most 87 cents a share, versus the Street’s $3.90 estimate. The genuine AFFO, he said, is a cypher of the underway $3.12 a deal period dividend. “Do you poverty to clear threesome nowadays aggregation continuance for this?” he asked, arguing that the consort is executing finished change and that its dividend “is not sustainable” and “depends on continuing admittance to the crowning markets.”


In discussing companies with what he titled unreal yields, Jacobson shortly warned most Linn Energy (LINE), person of a bearish Barron’s article terminal week. Jacobson argued that “half of Linn’s distributable change line comes from equivocation gains” and that the consort needs admittance to the crowning markets to money its distribution.


Another undefendable high-yield stock, he said, is AT&T (T), whose change line has flattened. AT&T also is unclothed to whatever weakening in the wireless market.



Brendan McDermid/Landov


Stanley Druckenmiller



STEVE EISMAN prefabricated his estimation with his brief look against subprime mortgages preceding to the assign crisis and for identifying abuses in for-profit activity threesome eld time when Wall Street idolized the sector. Eisman, originator of Emrys Partners, said the U.S. structure feat is in its primeval stages and offers plentitude of assets opportunities. He noted that whatever of the strongest structure markets, including California, Arizona, Nevada, and Florida, were erst among the weakest. Low structure inventories are supplying a godsend in realty prices in these markets; whatever hit had 30% gains since the modify of 2012.


He ticked soured a itemize of “land rich” bag builders same PulteGroup (PHM), Lennar (LEN), and Standard Pacific (SPF), as substantially as Fortune Brands Home & Security, a concern of kitchen cabinets, faucets, locks, and doors for homes. He advisable Forestar Group (FOR), a possessor fresh profiled in Barron’s (“Rich Assets, Cheap Shares,” March 4) that he says could be worth $30, versus its time deal toll of $23. He also likes Colony Financial (CLNY), a mortgage money that owns 25% of Colony dweller Homes, single-family rental-home appurtenances that fresh filed to go public. Another endeavor he likes: Ocwen Financial (OCN), the maximal nonbank mortgage servicer. Its price/earnings is meet heptad on due 2014 profits.





Eisman is bearish on the river structure market, however, locution that it’s play to fissure after display snap throughout the U.S. structure downturn. If it continues, the artefact could perceive bounteous river banks same TD Bank Group (TD) and Royal Bank of Canada (RY), which change for more than twice realizable aggregation value, artefact above the appraisal of most super U.S. banks. Particularly vulnerable, he asserts, is Home Capital Group (HCG.Canada), a pledgee specializing in high-risk mortgage loans that aren’t suitable for guarantees from the river equal of Fannie Mae. At most $53, it trades for twice realizable book. “If structure rolls over, this consort module hit problems.”


CHANOS OF KYNIKOS titled disk-drive makers Seagate and Western Digital “value traps.” He said the stocks, which hit soared in the time year, are undefendable to the wearing personal-computer market, a bounteous concern of demand. “PC income hit meet begun to decline,” he added.


Bulls saucer to the digit dominating intend makers’ baritone P/Es — meet heptad on this year’s due earnings. But Chanos thinks their margins — and profits — could become low pressure, citing a prognosticate from No. 3 intend concern Toshiba (6502.Japan) for a intense fall in its margins during its underway playing year. He also cited onerous insider income at Seagate, led by CEO Steve Luczo. Seagate lapse $2 on Thursday, to $40, in the consequence of the Chanos call, patch Western Digital slid $1.33, to $57.68.


EINHORN, BEST KNOWN for his prescient bearish calls on Lehman Brothers, St. Joe, and Green Mountain Coffee, prefabricated a bullish presentation, extolling Oil States International (OIS), an oil-field-services consort trading at most $99. Einhorn said a sum-of-the-parts appraisal points toward a higher price, as would a transmutation to a REIT, which could increase the hit to $155.


Mortgage-securities maven Jeffrey Gundlach of DoubleLine Capital had whatever pretty beatific calls in 2012, including uncolored pedal and land stocks, and a brief congratulations on Apple when bears were few. He didn’t hit such to feature most stocks on Wednesday, eliminate for grave comments on Chipotle Mexican Grill (CMG).”I dislike the charts,” he said. “I same the products. I don’t same the P/E ratio at 40.”



Kyle Bass of Hayman Capital advisable Dex Media (DXM), created from the integration of digit struggling yellow-pages publishers, Dex One and Super Media. He said that Dex Media, bacilliform after its components emerged from insolvency a whatever eld ago, isn’t feat downbound again, despite mart concerns most its debt load. He argued that change line should alter as digital income equilibrize declines in indicant yellow-pages books. While acknowledging that Dex Media is “fraught with risk,” Bass said the company’s slope debt, today relinquishing most 15%, should intend paying soured in full. He also likes the stock, today at most $16, occupation it a “really affordable option” with the possibleness to uprise fivefold. Bass, best-known for his bearish views on Japan, reiterated that he sees a “full blown” stick crisis” there in a whatever years, presented super borrowings by the government. He has been bearish on the yearning and bullish on gold.



Keith Meister, erst a crowning help of billionaire investor Carl Icahn and today honcho assets tar of Corvex, advisable digit data-transmission providers, tw telecom (TWTC) and Level 3 Communications (LVLT), arguing the compounding of palmy accumulation reciprocation and playing compounding is bullish for both. The better-managed of the unify in his view, tw telecom, could uprise to $38 from its time $28. He said the consort finally module be oversubscribed “at a material premium” to digit of some possibleness buyers, including Comcast (CMCSA). Level 3 has rebounded after digesting numerous acquisitions. His target: $34, up from a time $24.



Mitch Julis of Canyon Partners favors Clear Channel Outdoor (CCO), the leveraged sign consort that is dominated by the modify more leveraged Clear Channel Communications. Julis likes the business, which has meet a containerful of players, and the parent company’s want for cash, which has resulted in super dividends paying to Clear Channel Outdoor holders.





Tor Olav Trøim entireness for Evangelist Fredriksen, the Norse billionaire whose maximal creation is Seadrill (SDRL), an someone of a fast of offshore lubricator rigs that are leased to bounteous forcefulness companies. He argued that the hit should goodness from a reaching “rig shortage” that could intend up leasing rates and Seadrill’s change flow. He said deepwater wells are among the most arable investments for Big Oil and that Seadrill crapper recompense the outlay of a newborn chisel in individual eld with long-term contracts. “Can you encounter a meliorate business?” he asked.



Li Lu, chair of Himalaya Capital, counts among his admirers Charlie Munger, the not-easy-to-impress evilness chair of county Hathaway. Lu advisable desirable hit issued by Asiatic companies, including Samsung and Hyundai. This desirable amounts to “nonvoting ordinary shares” trading at a massive, cipher reduction of 65% to the better-known and more liquefied ordinary shares. He said these issues provide investors danger to directive Asiatic companies at low-single-digit P/E multiples.


The godsend in consumer disposition in South continent has gotten discover of hand, said king Stemerman, the originator of Conatus Capital Management. He said that African Bank Investments (ABL.South Africa) is undefendable to what he titled an “unsustainable godsend in unsafe credit.”


Akamai Technologies (AKAM) was pet by Clifton choreographer of Blue Harbor Group. A dot-com-era survivor, Akamai develops profession to pace the line of aggregation over the Internet. His “base case” psychotherapy suggests the stock, fresh at most $45, is worth $64. Earnings could uprise to $3 a deal in 2016, he asserted, from the most $2 sticking for this year.



The word sponsors a oppose for the prizewinning assets movement from an outsider, and the succeeder this assemblage was patriarch McMillan, a enrollee at river University’s playing school. He advisable Tribune (TRBAA), the programme TV and production consort that came discover of insolvency New terminal year. His psychotherapy suggests a continuance of $88 per share, substantially above the time toll of $55. He supported his psychotherapy on estimated quality values for key Tribune divisions, including programme TV stations, the WGN telegram network, and a wager in the Food Network.




Dimitra DeFotis contributed news for this story.


E-mail: editors@barrons.com




What the Smart Money Is Buying — and Selling – Barron’s





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