(Corrects spelling of Cooper-Hohn, spells out full name of fund
in paragraph nine)
LONDON Nov 1 Hedge fund managers presented
their stock-picking ideas at a conference this week organised by
the Sohn Conference Foundation. The Foundation raises money to
support initiatives to cure and treat paediatric cancer.
Following are some of the ideas presented:
Masroor Siddiqui, co-founder of London-based Naya Capital,
focused on one short and one long position in his presentation.
For the short position, Naya is betting the price of shares
in Essilor, the world's largest maker of ophthalmic
lenses, will fall to 60 euros from around 80 currently. Siddiqui
said Essilor's business model faces rising pressure from digital
technology that enables buyers to use a computer to create
Siddiqui's long position was Italian fashion house Salvatore
Ferragamo. Ferragamo has the opportunity to boost its value if
it tackles underpenetration in Asian markets and labour and
supplier costs, which are higher than rivals, Siddiqui said.
John Armitage, the founder of $11.4-billion strong Egerton
Capital, one of London's oldest funds, presented two ideas.
Scandinavian bank Nordea, he said, was incredibly
well capitalised and would benefit from its dominant position in
Scandinavia, where problem loans remain far lower than elsewhere
in Europe. He tipped the bank to return 20 percent of its market
capitalisation over the next few years in dividends.
Armitage also highlighted U.S. mortgage servicing company
Ocwen. The company, he said, was picking up business as
banks pull back from chasing delinquent loans amid a weak but
grinding recovery in the U.S. housing market.
Chris Cooper-Hohn, head of activist fund The Children's
Investment Fund (TCI), highlighted two of his holdings, both
once state-controlled businesses.
European aerospace giant EADS, he said, would
double and then triple its profitability thanks to cost-cutting
and increased pricing power in its core aircraft manufacturing
unit. Airlines across the world were also undertaking a massive
replacement of their existing fleet.
Aurizon, an Australian rail freight company which
TCI has owned since its 2010 privatisation, is also improving
its margins thanks to cost cuts and operational efficiencies
under a "killer CEO," Cooper-Hohn said.
Pelham Capital's Ross Turner presented his case for Irish
business services group DCC. Pelham runs around $3
billion and primarily invests in European stocks.
Turner predicted DCC would continue to grow its market share
in the UK oil distribution market, driven by acquisitions. He
said the price of DCC stock could rise to 40 pounds per share
versus their current price of 27 pounds.
The founder of AKO Capital Nicolai Tangen chose to speak
about information services group Experian. AKO runs
more than $9 billion in equity-focused funds.
Experian has scope to expand into new regions and is aided
by its market's high barriers to entry, which include an
oligopolistic market structure and difficult to replicate data.
Mala Gaonkar, a managing director at U.S.-based Long Pine
Capital, spoke about Qualcomm, the semiconductor
company that produces wireless telecommunications products.
The case for the stock, she said, is based around unit
growth, price stability and royalty rate stability. Despite the
number of handsets already available, there remains room for
growth globally, she said.
Dynamo Capital founder Bruno Rocha focused on brewing giant
According to Rocha, AB Inbev has economies of scale
advantages in a very consolidated market. The brewer benefits
from a strong position in mature markets and an even stronger
one in developing economies.
(Reporting by Tommy Wilkes and Alistair Smout; Editing by Jane
Merriman and Anthony Barker)