It's been nearly three weeks since hedge fund managers gathered in New York to share their market outlooks and the occasional stock pick at the Sohn Investment Conference. The overall mood was more cautious than in prior years due to a challenging first half to 2016, as well as some of the negative sentiment surrounding the hedge fund industry. The net result for the conference was more broad commentary than immediately actionable investment ideas with well-known names, so let's check in on some of the standout picks.
Carson Block of Muddy Waters Capital presented a short case for Arkansas-based Bank of the Ozarks (OZRK). Central to Block's thesis is the risk inherent in the bank having a high proportion of real estate and construction loans, while major markets such as New York City and Miami are facing a downturn. Shares of Bank of the Ozarks are down 3% since the conference and down 24% since the start of the year.
The hotel industry may be losing market share to Airbnb but John Khoury of Long Pond Capital sees hope in one name -- but not the whole industry. Hyatt Hotels (H), which caters to the higher end of business and leisure travel, is managed for the long term by the famed Pritzker family. Shares could go as high as $79, Khoury says. But it may take some time to turn around; shares are down 8.5% since the conference and off by 3% since the start of the year.
In an enthusiastic presentation, Chamath Palihapitiya of Social Capital said that Amazon (AMZN) could become a $3 trillion dollar company in the next 10 years. (The company's current market cap is $331 billion.) While most people think of Amazon as a place to buy goods cheaply online, Palihapitiya points to the company's Web services unit, which could be worth $1.5 trillion alone, he says. Shares of the company may be on their way there: shares are up 3.9% since the conference and 4% this year.
Activist investor Jeffrey Smith of Starboard Value took a break from Yahoo (YHOO) to present two other investment ideas: DepoMed (DEPO) and Westrock (WRK). Smith has a 9.2% stake in DepoMed, a specialty pharmaceutical company that focuses on pain relief drugs. Last month he criticized the company's corporate governance in a letter addressed to DepoMed CEO James Schoeneck and requested a special meeting to overhaul the board. Shares are up 14% since the conference and 10% for the year. On Westrock, Smith says that shares of the packaging manufacturer could go as high as $71 by next year. (They currently trade around $38.) Shares are down 8% since the conference (partly due to a spin-off earlier this month) and are down 17% for the year.
Each year, the Sohn Conference sponsors the Sohn Investment Idea contest in which new investors have their ideas judged by a five-person panel which includes Pershing Square Capital's Bill Ackman and Greenlight Capital's David Einhorn. This year's winner was Mark Grow, a first-year student at Columbia Business School, who presented his short case for Dexcom (DXCM). Grow believes shares of the medical device company could fall to $20 due to the company's declining market share in insulin pumps. Shares of the company are flat since the conference -- trading around $63 -- and are down 22% since the start of the year.
David Einhorn presented two ideas at the conference: a short position on Caterpillar (CAT) and a long position in General Motors (GM). Of Caterpillar, Einhorn said that the slowdown in coal and iron ore is likely to continue and that shares of the company could bottom "somewhere around half its share price" in 2018. Shares currently trade around $70 and are down 9% since the conference and are up nearly 3% for the year. Of General Motors, Einhorn says that too much attention is being focused on the decline of car ownership in urban areas, while ignoring the need for car ownership in the rest of the country. Shares of General Motors are down 2.5% since the conference and are down 10% for the year.