The 21st annual Sohn Investment Conference -- where billionaire activists often make market-moving calls -- had no shortage of bearish views Wednesday in New York.
But investors should be careful not to overlook numerous long trading ideas that presenters offered, which numerically outweighed the conspicuous short calls, most notably a dismal outlook by Muddy Waters' Carson Block on The Bank of the Ozarks (OZRK) that sent shares lower on the day.
Sometimes it can pay big -- monetarily and reputationally -- to go long at the Sohn Conference, as billionaire activist Bill Ackman learned the hard way at last year's event, when he urged investors to buy shares of Valeant Pharmaceuticals (VRX). He described the Canadian drugmaker as an "early stage" Berkshire Hathaway (BRK.A, BRK.B). Valeant shares have since fallen 84% over the past 12 months, marking Ackman's Pershing Square hedge fund's worst investment flop to date, as Real Money reported.
So as a reminder to investors, here's a look at Real Money's 10 bullish takeaways from the 2016 Sohn Conference.
1. TripAdvisor (TRIP): Nick Danaher
Domando Capital's founder said the travel website is a "game-changer," citing 350 million mobile-active users and 320 million reviews. Danaher projects that an increasing trajectory of engaged users will stimulate a "virtuous circle" of new advertisers coming to the site, from hotels and restaurants to enteratinment venues. (TRIP shares are down 26% on the year.)
2. Kraton Performance Polymers (KRA): David Rosen
The former SAC Capital investor expects healthy cash flows from the Houston-based chemical producer, noting that the firm's fundamental value has become lost under misleading GAAP accounting metrics (GAAP is a standard bookkeeping system overseen by the Financial Industry Regulatory Authority). He emphasized that Kraton has established itself as a supplier for the materials used to make a range of everyday household products such as toothbrushes and kitchenware grips. Based on his valuation, Kraton could trade as high as $97 a share, with a $64 baseline case. (Kraton shares are up 55% on the year.)
3. Royal Dutch Shell (RDS.A, RDS.B): Nick Tiller
The former SAC Capital manager who now runs Precocity Capital, values shares of Royal Dutch Shell, which he characterizes as "the oldest of old-school oil stocks," at up to $100. He basis his predictions on a 10% compound-annual-growth rate for next three years vs. 8% consensus forecasts. The rebound of oil is only likely to add to the firm's substanital free-cash-flow outlook, which could mean a "very fat dividend to shareholders," he said. (Royal Dutch Shell shares are up 10% on the year.)
4. Hyatt (H): John Khoury
Long Pond Capital's John Khoury argued that shares of hotel giant Hyatt have a long way to climb as investors are overly concerned by Web-rental rivals such as Airbnb. He argued that Hyatt has a strong balance sheet and that a fundamental valuation of the company unveils a strong moat against competition. Khoury added that shares could jump as high as $79 over the next year. (Hyatt shares are up 5% on the year.)
5. Amazon (AMZN): Chamath Palihapitiya
In opening his presentation at the conference, venture capitalist Chamath Palihapitiya kidded the audience by saying that his big pick for the year was Valeant Pharmaceuticals, recalling Ackman's disastrous long view outlined in last year's conference. He quickly turned to a detailed analysis of Amazon, noting that the ecommerce giant has formed somewhat of a monopolistic position in Silicon Valley as many tech companies are increasingly electing to use its proprietary cloud, Amazon Web Services.
"If you believe in the Internet, you have to believe in Amazon," he said, saying the company has become a "multi-trillion dollar monopoly" hidden in plain sight. (Amazon shares are down 2% on the year.)
6. Depomed (DEPO): Jeffrey Smith
Jeffrey Smith, CEO of activist hedge fund Starboard Value, highlighted his firm's stakes in drugmaker Depomed and packaging-manufacturer WestRock at that conference. He cited the likelihood of a takeover after a much-needed management reshuffle that Starboard is hoping to foist upon the company this year.
"The company could be, and should be, extremely attractive for a strategic acquirer," he said, noting combinations will spell substantial earnings-per-share growth in a combined entity.
7. WestRock (WRK): Jeffrey Smith
On WestRock, Smith said the market is failing to consider the strong demand for packaging materials in North America, which represents 80% of the company's revenue exposure. He also noted that container-board prices would need to fall by $125 per ton -- an "unprecedented" decline -- for shares to be further weighed down. (Shares of Depomed and WestRock are down 9% and 13%, respectively, on the year.)
8. General Motors (GM): David Einhorn
Greenlight's David Einhorn -- a Sohn favorite after unveiling his 2007 short position in Lehman Brothers -- highlighted the upside prospects of General Motors, emphasizing that strong global demand for cars in underdeveloped countries far outweighs investor concerns over the rise in electric cars and ride-sharing apps such as Uber. Einhorn said he predicts strong cash flows to translate into hefty buybacks that will boost the value of current stock holdings. (GM shares are down 10% on the year.)
9. AbbVie (ABBV): Larry Robbins
Glenview Capital Management's Robbins -- who was generally bullish on the U.S. financial system Wednesday, urging investors "to hang on" through uncertainty -- reiterated his firm's bull position on drugmaker AbbVie, noting strong fundamentals and undue media and market pessimism towards Big Pharma. Robbins forsees earnings growing at a 29% annual clip. (Abbvie shares are up 4% on the year.)
10. Crude Oil: David D'Alessandro
CMDTY Capital's David D'Alessandro sees crude oil rebounding, far above its roughly $45 levels, based on U.S. benchmark West Texas Intermediate, emphasizing hype around oversupply are unfounded given a meaningful wind-down of rig counts. He also said fears of cooling global demand do not take into account the development of India and that economies of some major producers, such as Venezuela, are struggling to sustain such low prices.
Meanwhile, on the reverse side of the Sohn Conference, the notable short positions on the day included Einhorn's case against Caterpiller (CAT), citing an unlikely comeback in iron and coal prices. Meanwhile, Stanley Druckenmiller was perhaps the most bearish, saying the whole market is at risk for a major collapse becuase a "stumbling" Federal Reserve has "no end game" to stimulate a debt-fueled U.S. economy.
-- Real Money's Carleton English contributed to this report.