Good Ideas From Young Guns

 | May 06, 2014 | 12:00 PM EDT
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It's almost time for the annual Sohn Investment Conference where investment luminaries get together for a wonderful cause and also share investment ideas. The conference got under way on Monday, and included the inauguration of Next Wave Sohn, a sort-of mini conference that highlighted five next-generation fund managers.

To keep your appetite whet, I'll reserve the main highlights from the heavy hitters for tomorrow. But consider these young guns who are hungry not only to prove themselves, but also to show their investments can go toe-to-toe with marquee names.

John Khoury, founder of Long Pond Capital gave his bullish case for American Homes 4 Rent (AMH). American Homes 4 Rent is a California based real estate investment trust that buys and rents single family homes. Presently, AMH carries a market cap of $3 billion and a yield of 1.2%. At the current price of $16.60 a share, the company trades for book value, which may or may not mean much given the assets are single family homes purchased during the past several years.

AMH was founded by Wayne Hughes, the same founder of Public Storage (PSA), a $30 billion self-storage real-estate investment trust (REIT). Khoury sees 40% upside in AMH citing the company's 95% occupancy rate and an average rental term twice the national average. Founder Hughes also owns over $1 billion in equity of AMH. Recent reports suggest that the rental market is coming back as rental prices are now starting to become cheaper than home ownership. Indeed, AMH is not the only player in town: Blackstone has spent billions on thousands of homes in order to rent them.

While the equity market hasn't paid much attention to AMH, the credit market is creating a new asset class in rental bonds, or securities backed by rental income. That could prove to be a big deal.

Another pick was JetBlue (JBLU). Will Snellings, founder of Marians Fund, believes that JetBlue is a solid airline in an industry that is going through a lot of structural change. Indeed, in the past several years, the majors have consolidated so that now four airlines dominate 85% of the routes. Snellings cites that JBLU (recently at $8.36) trades for less than 9x 2015 earnings -- despite having a very young fleet of planes and a much tighter airline market. Indeed, round-trip flights have increased significantly in the past few years. More so, according to Snellings, JBLU has a fleet with no premium seats and the company is upgrading to add premium seats. As a result, profit margins could swell.

I try to look at stock ideas irrespective of the investor -- for the most part. Obviously, Buffett, Klarman, Icahn, Ackman and Berkowitz get a lot deserved recognition. But many young relatively unknown investors are in the background clocking in impressive returns. So in this heated market, any reasonable sounding idea should warrant a closer look.

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