By Sam Forgione and Steven C. Johnson
NEW YORK May 8 High-profile money managers
raised red flags about the loose monetary policies taking place
around the world at the annual Sohn Investment Conference, a
closely watched charitable event, on Wednesday.
The event, which raises money for pediatric cancer research,
is where big-name hedge fund managers come to share their "best
ideas" with other wealthy investors.
The Federal Reserve's monetary policies, with its monthly
purchases of $85 billion in Treasuries and mortgage securities,
came in for sharp criticism. Money managers touched on a wide
variety of investment topics.
Managers are gathering at a time the hedge fund industry is
again underperforming the broader market. The average fund is up
about 4.4 percent through April, compared with a 14 percent gain
for the Standard & Poor's 500 index.
History also has shown that some of the best ideas of
managers don't look so good a year later. A case in point is
Apple, which Greenlight Capital's David Einhorn praised
last year but has fallen 17 percent since last year's
Here are selected comments from the conference:
DAVID EINHORN - Hedge fund manager Einhorn, of Greenlight
Capital, this year offered another long recommendation, this
time on Oil States International. "OIS's offshore
products are technologically advanced, highly engineered and
some are considered must haves," Einhorn said.
Einhorn said the average peers of OIS are trading at four
times earnings before interest, taxes, depreciation and
amortization. OIS trades at 6.9 times, but if the company were
broken up, the sum of the parts would trade at 8.6 times EBITDA,
he said, adding that the OIS share price would be $118, compared
with the current price of $95.
He noted that Jana Partners in late April reported that it
had taken a 9.1 percent stake in OIS.
STEVEN EISMAN - Eisman, the founder and portfolio manager of
Emrys Partners, who is known for shorting securitized subprime
home mortgages, said he is positive on the U.S. housing market.
Eisman said he likes Lennar Corp, Forestar Group Inc
and Standard Pacific Corp. He said he is also a
fan of Ocwen Financial, calling it "completely
mispriced" and the "most powerful" play on housing in the entire
Eisman's short idea was Home Capital Group, which
trades in Canada. "If housing rolls over, this company is going
to have serious problems."
PAUL SINGER - Singer who founded the $21 billion Elliott
Management hedge fund and is a big contributor to Republican
political candidates, said the Fed's monetary policies are
distorting the prices of long-term bonds and the global
"Everyone wants a safe haven," said Singer. "There is no
such thing in today's markets and that's one of the elements of
He said a number of developed countries are facing
"long-term insolvency" and the monetary stimulus will not fix
that. Singer said the ultimate question for a fiat money regime
is, At what point does confidence in money disappear?
KYLE BASS - Bass, of Hayman Capital Management, called Japan
In April, the Bank of Japan said it was likely to purchase
over 7 trillion yen ($75 billion) of long-term government bonds
a month, an aggressive monetary policy to end years of deflation
in the world's third largest economy.
Bass said he likes Dex Media Inc., a marketing
services company, because a transformation is taking place at
the company that published the yellow pages directories. Shares
of Dex Media briefly soared 27 percent after Bass spoke.
WILLIAM ACKMAN - Ackman, the founder of The Pershing Square
Capital Management, talked up the prospects of Procter & Gamble
Co, in which he took a $2 billion stake last July when
the shares were trading around $59. The stock is now trading
around $78, or roughly a 30 percent gain. Ackman said on
Wednesday that P&G could hit $125 per share in two years.
STANLEY DRUCKENMILLER-- Druckenmiller, who founded Duquesne
Capital Management, said the Fed's monetary policy is the "most
inappropriate" in history. He also said commodity prices are at
the end of a supercycle.
"We're betting that the move down there is not a correction,
that this is the end of the big supercycle in commodities that
started 10 years ago," he said.
KEITH MEISTER - Meister, of Corvex Management, who was
activist investor Carl Icahn's right-hand man prior to founding
Corvex, said he likes telecommunications companies TW Telecom
Inc and Level 3 Communications Inc, pushing up
their share prices.
The Corvex managing partner said a telecom marriage between
TW Telecom and Level 3 is likely down the road. "One day these
two companies could be together," he said.
Meister said he likes Level 3 for its accelerating revenue
growth and the direction of its chief executive, Jeff Storey.
JAMES CHANOS - The founder and managing partner of
short-selling firm Kynikos Associates said hard-disk drive
companies are likely to decline.
Chanos, noted for predicting the downfall of Enron and a
vocal bear on the Chinese economy, said the hard disk drive
business is a "value trap" that is nearing a downturn similar to
that of the personal computer business. As examples he cited
Seagate Technology and Western Digital Corp.
Western Digital was down 2.5 percent in after-hours trading,
while Seagate Technology lost 3.4 percent.
JONATHON JACOBSON - The founder and both chief investment
officer and chief executive of Highfields Capital Management LP,
an $11 billion investment management firm, said investors should
be wary on AT&T Inc and Linn Energy.
Jacobson said Digital Realty Trust Inc, a global
operator of data centers, is a good short idea, noting that his
"smoking gun" on Digital Realty was in 2011 when "they changed
definition of nonrecurring capex to include maintenance
Shares of Digital Realty were last down 6.6 percent at
$64.44 after the bell. Jacobson said fair value is $20 per