HIGHLIGHTS-IRA SOHN: Ackman recommends Fannie, Freddie; shares jump
NEW YORK May 5 (Reuters) - Influential activist hedge fund manager William Ackman has joined a growing number of distressed-equity investors, including Bruce Berkowitz's Fairholme Capital Management, Richard Perry's Perry Capital and John Paulson's Paulson & Co., in betting on the revival of Fannie Mae and Freddie Mac.
Ackman, speaking at The Sohn Investment Conference, one of the most highly anticipated annual gatherings of hedge-fund managers, said on Monday that Fannie and Freddie have "enabled a very strong housing market apart from the bubble and the bubble bursting." Shares of Fannie Mae and Freddie Mac jumped following the remarks by Ackman, who is the chief executive of Pershing Square Capital Management. Shares of Freddie Mac were up more than 6 percent, and shares of Fannie Mae were up 3 percent.
Their "core business is a phenomenal business," Ackman said, citing their geographic diversity and low liquidity risk. They're also senior guarantors, so "it's a very low-risk business," he added.
Below is a compilation of the main investment ideas presented at the conference:
JAMES GRANT, GRANT'S INTEREST RATE OBSERVER
IDEA: Buy Gazprom
Grant recommended Gazprom, which accounts for 17 percent of the world's gas reserves, saying the Russian energy producer is "Donald Sterling with a London ticker," a way of saying the shares have little downside from here.
"What could possibly go right?" Grant asked. He said Gazprom shares are very cheap - both after taxes and "after stealing," he joked. The stock trades around 48 percent its average price target and the yields are still cheaper if you look at asset value, he said. Gazprom trades at around $1.39 a barrel versus more than $17 for ExxonMobil. Gazprom may or may not be a bad company, but at 2.5 times earnings, it's imperfections would seem to be priced in, Grant said.
MICHAEL NOVOGRATZ, FORTRESS INVESTMENT GROUP
Novogratz said Brazilian President Dilma Rousseff will lose her re-election bid, sparking a rally in the country's stocks and bonds.
"There will be a major rally in Brazilian assets," particularly equities, Novogratz, the principal of Fortress Investment Group LLC, said. He said Brazil "is in for a long dark period" if Rousseff wins, while Rousseff's two main rivals could be more market-friendly.
The race for Brazil's October presidential election has tightened, according to a poll released on Saturday, which also showed high disapproval for Rousseff and widespread dissatisfaction with the stagnant economy.
LARRY ROBBINS, GLENVIEW CAPITAL MANAGEMENT
IDEA: Buy WellPoint Inc., Humana Inc and Monsanto Co
Robbins, founder and chief executive of hedge fund Glenview Capital Management, said he saw significant value in health maintenance organizations and favored WellPoint and Humana.
He also said he likes Monsanto.
Robbins, whose hedge fund oversees $7.5 billion, said that Humana could see 30-40 percent growth, while Monsanto could see 15 percent base growth. He said he was excited about Monsanto over the medium-term.
On Humana, Robbins said his bet is about old people and Medicare Advantage, a Medicare health plan offered by private companies. Robbins said it is a high-margin product for Humana and is a growing business.
"There's an alarming outbreak of old people in the United States, I'm not sure if people have noticed this," he joked.
CHRIS SHUMWAY, SHUMWAY CAPITAL
IDEA: Buy Moody's Corp.
Shumway, the founder and managing partner of Shumway Capital, said Moody's Investors Service could see significant revenue growth opportunities in coming years.
Moody's, one of the two biggest credit rating agencies in the United States, "is a great business," he said, and he called the company's management shareholder friendly, noting stock buybacks.
Shumway also suggested investors short the Chinese yuan using forward options. "They have limited options within China to deal with their slowing growth," he said. "Our view is they're growing at 6 percent and decelerating. They either need to add stimulus or the simplest way to do it is through currency depreciation."
IDEA: Buy Liberty Global Plc
Laffont recommended Liberty Global, saying that fresh demand in broadband services will help boost growth at the company.
Laffont said Liberty's shares, now trading around $40 a share, could "easily" rise above $100.
He said the huge popularity in video streaming service Netflix will force homeowners to upgrade their broadband. Laffont described Liberty Global's business as "awesome" and praised the company's chief executive, John Malone.
Laffont said he sees a chance that Vodafone could buy Liberty Global, saying: "We think that merger will happen, it is just a question of time." He said it would be a good geographic fit, saying the companies would complement each other in Europe.
JEFFREY GUNDLACH, DOUBLELINE CAPITAL
IDEA: Short homebuilders
Gundlach said investors should bet against the SPDR S&P Homebuilders ETF because he does not see the expected rebound in single-family housing occurring.
Gundlach said that problems dogging the housing market included expected rises in mortgage rates and the amount of student loan debt carried by young adults, which makes saving for a down payment more challenging.
Gundlach said renting has become "massively more appealing" while home ownership would continue to decline. He said there was a "generational" preference for renting and that young people in particular were "shocked and scarred" by the housing collapse.
If mortgage financiers Fannie Mae and Freddie Mac were wound down by the government, mortgage rates would rise, he said. (Reporting by Luciana Lopez, Sam Forgione and Svea Herbst-Bayliss; Editing by Leslie Adler)
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