NEW YORK May 5 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
"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
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
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
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
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
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
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)