What Will Ackman, Einhorn et al Say This Year? (Value Investing Congress)

By Travis Johnson, Stock Gumshoe, September 30, 2012

I try to make it to the Value Investing Congress in New York every year — it’s a great gathering of smart money managers and value-minded, fundamentally focused investors, and I usually come home with at least a half-dozen compelling ideas.

Some of those ideas make headlines and move stocks, particularly when rock star fund managers like Bill Ackman or David Einhorn speak out forcefully either for or against a stock or reveal some heretofore unpublicized holding or interest, but often it’s the lesser-known managers and analysts that make me think or explore a new idea. This year I also attended the pre-Congress seminar for some more in-depth talk about ideas with Whitney Tilson and Glenn Tongue, and shared my early notes about that with the Irregulars here last night, but the big attention will come to the stocks that are discussed today and tomorrow.

So what will happen this week? Well, I’ll bet that Bill Ackman will get a lot of testy questions about JC Penney, his focus last year and the year before and a stock that has been crushed over the last six months or so … and I’d have to bet that David Einhorn will tear apart a new stock and drive it down by 20% that day, as all the attendees at the conference frantically trade away on their iPhones as he speaks. Other than that, I hope to get some ideas that aren’t on the front page of the Wall Street Journal the next day, and that I can share with the Irregulars and take some time to think about with you.

As I prepare for the conference, which starts a little later this morning with a presentation by Guy Gottfried, I’ve been looking back over my thoughts from last year and wondering how some of those ideas have done so far. I’ve unlocked these older comments, so anyone can see them now (I posted them originally just for the Irregulars — folks who pay to support the site and send your friendly neighborhood Gumshoe to such conferences, after all, deserve a little extra).

Gottfried, coincidentally, caught my attention last year when he recommended a Canadian retailer called The Brick (BRK in Toronto, BRKQF on the pink sheets), and that one has done quite well, up about 50% since he talked it up as an underappreciated value. This year they’ve scrubbed the published agenda a bit cleaner, so I can’t tell from the titles of the presentations which stocks they’ll be talking about … but some of the best value investors in the world will be there, so I’ll definitely be listening. Incidentally, John Mauldin, who recently launched a newsletter called Yield Shark that’s targeted to individual investors like you and I, will also be presenting — I expect he’ll be talking big picture for the most part, but I’ll be curious to see what he says about any of the high-yield picks his newsletter has been teasing of late.

What else stands out, other than the fact that Bill Ackman and Whitney Tilson’s love for JC Penney (JCP) has gone quite poorly over the last year (particularly for those who bought it after last year’s Congress)? Well, Tilson’s other idea — Berkshire Hathaway, continues to do well — though in all honesty, it has tracked right along with the S&P 500 over the past year. I own Berkshire and would still buy more if it gets below 1.2X book value (when it gets down to or below 1.1X book value, as it did a month or so before last year’s Congress when I last bought, Buffett’s likely to kick in with buybacks).

And to be fair, JC Penney is now back to just about where it was when Ackman’s Pershing Square was building a position, in mid-2010, maybe even up a bit — and Ackman still controls almost 18% of JCP, so I’m sure we’ll hear more about how he thinks it’s going with CEO Ron Johnson, who, in typical American fashion, was brought in as a savior who could do no wrong and has become, over the past year, the dumbest person in the world. At least if you listen to CNBC (which you shouldn’t, really — it’ll rid your brain of any sense of perspective.)

Ackman made his name as an activist, albeit a quieter one — an investor who can really get the attention of management and make them right their ship, so I’ll be curious to see how he thinks the turnaround is going and what discussion that launches. Attending a value-focused conference like this is a great way to help yourself think outside the bounds of daily price movements, but the audience is still going to be filled with people who have to beat the S&P or they’ll lose their jobs, so there will probably be some back and forth.

Actually, two other Ackman-related stocks had interesting years, too — last year he briefly talked up the UK-listed “blank check” company that he was heavily invested with, Justice Holdings, and that fund ended up using their capital back in August to merge with Burger King and take them public (again — the ticker this time is BKW). From a quick look at Burger King’s performance and the share of the company that Justice bought in the deal, it looks like that buy has probably been nicely profitable for those who bought Justice at 900 pence or so, but not shockingly so … and BKW now looks pretty expensive to me, given their past performance, but is going to be an interesting one to watch as we see if they can reinvigorate with investments in expansion in India and Brazil, particularly (the new Burger King has a hefty Brazilian ownership).

And the other pick I noted from Ackman was actually from one of his Pershing Square analysts, Ali Namvar — they touted the value in spun-off Fortune Brands Home & Security (FBHS), which was immediately off to the races and has doubled in the past year. It never gave back that near-20% jump it enjoyed immediately after the presentation, so I never did follow up on them and take a closer look as I had been intending, but it sure looks like I should have done so. It’s probably not a coincidence that Ackman’s slot at the Congress this year will take place while the markets are closed, early Monday evening.

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So this year, as usual, I’ll be keeping my ears open — trying to get some perspective, background and opinion from the “big picture” presentations that I can use to become a better investor (and, perhaps, to write better stuff for you), and sniffing around some good undervalued investments that are presented to see what might be worth sharing with you. For what it’s worth, the two “Idea of the Month” picks that were directly inspired by presentations at past Congresses, Ferrovial (FRRVY on the pink sheets) and Flowserve (FLS), have both beaten the market average quite handily since I wrote about them, and neither got all that much attention in the press after they were suggested by presenters here.

If you’d like to see the other comments I shared during the Congress last year and the year before, they’re all here and I’ve unlocked most of them so you don’t have to be a paid member to read them. I actually didn’t get to write quite as much as I wanted to last year thanks to a visit from the flu bug, but hopefully this time I’ll stay healthy for the whole conference and be able to post some additional notes and commentary. And hopefully, as I have in the past couple years, I’ll come out of the meeting with some good new ideas to research as “Idea of the Month” candidates for you. Stay tuned!

P.S. If this value investing stuff bores you silly and you’re just dying to get back to teasers about the next big thing or the next overhyped promise … don’t worry, I’m sure the flow of teasers will keep rushing over the dam, and we’ll be back to business sniffing ’em out as usual later in the week.



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September 30, 2012 11:33 pm

RE: P.S.
I consider these posts (on the Value Investing Congress) to be very intriguing. It certainly adds to the already great content and perspective contained in this web site. I’ll be looking forward to your next post on the subject. Keep up the great work!

dave alan
October 1, 2012 5:00 am

would like to hear the reco’s.

October 1, 2012 10:39 am

Where have you posted the comments from last year’s VIC that were originally for the paying members, rather than the moochers (like Yrs. Truly)?

No, I’m not ashamed of my moocher-dom. It’s part of the Value Investor thing.

👍 16173
October 1, 2012 12:03 pm

I know you are going to be busy with the conference and several issues resulting from that, but have you ever written about BDC’s like MAIN or Private Equity like Carlyle Group?

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October 1, 2012 12:16 pm

a note to anon above……..no doubt you are a careful investor, but I am pretty bloody tight when it comes to investing myself and it took me less than a month to get my $200 back from Travis’ advice and my portfolio is rather small at about $50k.
A few well spent bucks can multiply very quickly.
I estimate that since plunking down my $200 I am about $1500 ahead using the Gummies’ advice and should be doing better after passing on a few ideas I should have run with.
My $.02 and thanks a lot, Travis.

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