LONDON (Reuters) - Top hedge fund managers picked stocks as diverse as News Corp, holding company Porsche, and cosmetics maker L‘Oreal on Monday at a hedge fund event seen by investors as revealing the industry’s top stock picks.
The Ira Sohn Conference, being held for the first time in London, attracted such speakers Chris Cooper-Hohn, the media-shy founder of The Children’s Investment Fund Management (TCI), Kynikos Associates founder Jim Chanos, Egerton Capital’s John Armitage, and Muddy Waters’ Carson Black.
Cooper-Hohn named Porsche and News Corp as two stocks that were being unfairly marked down by the market.
The trader, well known for taking activist stakes in companies, said that Porsche trades at a 40 percent discount to net asset value, while Volkswagen, of which it owns nearly one-third, is also cheap.
“VW is on five times earnings. With Porsche you get it at a p/e (price to earnings ratio) of three,” he said. “It’s a discount on a discount.”
He also said that legal claims by hedge funds against Porsche are likely to be dismissed or settled for around 1 billion euros. Net claims amount to around 5 billion euros, he said.
Investors accuse Porsche SE of concealing a move in 2008 to acquire VW, and of covertly amassing a majority interest in Europe’s biggest carmaker.
Cooper-Hohn also favors News Corp, despite market concerns over a telephone hacking scandal that prompted it to close Britain’s News of the World newspaper.
“People think it’s a cyclical business with lots of advertising. It has lots of steady fees,” he said. “It’s a business with massive pricing power. It shouldn’t be trading at four times EBIT (earnings before interest and taxes).”
The conference, a charitable event that raises money for paediatric cancer research, is seen in the United States as a must-attend event for wealthy investors.
Egerton Chief Investment Officer John Armitage named News Corp, Samsung, Apple, Richemont and Volkswagen as his favorite positions.
Nicolai Tangen, founder of $5.8 billion AKO Capital, said French cosmetics group L‘Oreal will benefit from aging populations spending more on cosmetics, and said the stock was at the low end of its historical value range.
He added that his firm’s research showed that L‘Oreal products continue to increase market share.
Meanwhile, Algebris head Davide Serra was upbeat on the outlook for so-called “CoCos” - contingent convertible bonds, which bolster a bank’s capital in times of trouble.
He said Lloyds was his largest position. “You’re paid 10 times the risk-free rate. It’s an absolute no-brainer.”
Reporting by Laurence Fletcher; Editing by Peter Galloway