Investment conferences can be one of the most underrated ways to uncover new investment ideas. Here are the highlights from this year’s Invest for Kids conference in Chicago.
One of the more underrated investment conferences is Chicago’s Invest for Kids conference, which raises money for local children. It’s an up-and-coming conference that held its fifth installment last week.
A couple years ago, in 2012, ValueAct Capital pitched Moody’s Corporation (NYSE: MCO) and CBRE Group Inc (NYSE: CBG). Those stocks are up 100% and 80% since then, respectively.
That same year Lone Pine Capital called out VeriSign, Inc. (NASDAQ: VRSN) as a buy. Shares are up more than 50% in the two years since.
Then in 2013, Trian Fund Management highlighted Mondelez International Inc (NASDAQ: MDLZ) and TPG-Axon Capital pitched Hitachi, Ltd. (OTCMKTS: HTHIY). Both have performed quite admirably in the year since.
This year’s conference brought investors another star-studded cast of hedge-fund heavyweights. And once again, the ideas were all over the map. Those included going long Japanese stocks and a Puerto Rico utility company. Charter Communications, Inc. (NASDAQ: CHTR) got two nods, one from Tiger Ratan Capital and another from Weitz Investment Management.
But let’s dig a little deeper. Here are three of the major standouts from the conference:
No. 1: eBay Inc (NASDAQ: EBAY)
Larry Robbins of Glenview Capital touted eBay. We profiled Larry Robbins over the summer, and at the conference he noted that the spinoff of PayPal would be great for both companies.
Robbins has been pushing companies to use its excess cash to grow shareholder value. He’s also implored companies to take advantage of the low costs of borrowing to raise even more cash. eBay could be a great candidate for both — putting its cash flow to work and increasing leverage.
The PayPal spinoff will allow the company to put its extra cash to work. But Robbins notes that it could also allow eBay to increase its leverage by two to three times.
Billionaire Dan Loeb also touted eBay earlier this year in his third-quarter investor letter, noting that eBay is a “highly cash-generative” business. Loeb thinks eBay can buy back a third of its shares outstanding in the next two-and-a-half years and up to half its shares in five years. And with that, Loeb thinks eBay could be worth twice its current value.
But if you buy now, you’ll be getting two great businesses at a cheap price, or so Robbins says. eBay could also be attractive to other players in the industry, making it a potential buyout candidate as well once the spinoff takes place.
No. 2: BlackRock, Inc. (NYSE: BLK)
Blue Spruce Capital highlighted BlackRock. Blue Spruce runs a concentrated portfolio of 10 to 15 stocks, focusing on those that generate high levels of free cash flow. BlackRock, the private equity manager, offers a 2.2% dividend yield.
Blue Spruce notes that the BlackRock business is highly diversified, with a large number of clients. It’s America’s largest asset manager, offering various fixed income, equity and alternative asset products.
But one of the big growth drivers for BlackRock should be its iShares business. There’s a big rotation into ETFs and BlackRock should be a big beneficiary of that trend since it offers equity and fixed-income ETFs. That should allow the company to grow its assets under management and collect more fees.
No. 3: Level 3 Communications, Inc. (NYSE: LVLT)
This was Mason Hawkins of Southeastern Asset Management’s pick. Southeastern looks at undervalued stocks with a long-term focus. Level 3 is a major player in the fiber optic space and will benefit from the growing amount of bandwidth traffic.
Over the summer Level 3 bought up TW Telecom, thus increasing its scale in the enterprise business. Its enterprise business was already a big winner given businesses’ shift to the cloud. With TW Telecom, Level 3 has an infrastructure that would cost over $45 billion to build, compared to its $15 billion market cap.
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