David Einhorn, president of Greenlight Capital Inc., castigated the Federal Reserve Board and its leader, Ben Bernanke, for hooking America on “an addictive, comatose-inducing, jelly-doughnut diet” of low (or no) interest rates.
Any economic sugar surge turned into procrastination long ago, he says. “Mr. Bernanke has effectively brought Walmart’s everyday low pricing to central banking, except at these rates, there’s no rollback if things deteriorate.”
Raising interest by 2 or 3 points would add a sense of urgency.
Since Einhorn sees no chance of this happening, he’s recommending gold even at its meteoric price.
Einhorn’s remarks were the most roundly applauded of the 10 speakers who shared their ideas with 1,000 attendees at the fifth annual GIBI at the Winspear Opera House in downtown Dallas.
This positive reaction was a marked contrast to last year’s GIBI, when raising interest rates was far more feared than encouraged.
T. Boone Pickens, a perennial speaker, gave his perennial pitch for natural gas. “I’m like the West Texas farmer who at the end of the day said, ‘Well, we’re one day closer to good rain.’ We’re three years closer to higher gas.”
His recommendation: Buy natural gas futures for delivery in 2015 or 2016.
His reasoning: Demand is coming up fast, and oversupply will moderate as more U.S. activity shifts to drilling oil. The global price of natural gas is three to four times of that in the United States. That gap will close as the United States starts exporting liquefied natural gas.
“You now have the cheapest energy in the world in the United States — both oil and gas. So you should have industry coming back to us instead of going away from us, which will mean an increase in demand.”
A common theme was to look for companies with fixable problems and that are undergoing real change. Another was to look for companies whose parts are worth more than the whole and might be ripe for spinoffs. Here are highlights from the other eight panelists’ presentations:
Ray Nixon
Portfolio manager, Barrow, Hanley, Mewhinney & Strauss LLC
His advice: Work time to your advantage in a way that institutional investors, who live and die by monthly or quarterly reports, can’t.
His big idea: Medtronic Inc.
His reasoning: The world’s largest medical technology company has been “a real pig of a stock” for five years, thanks to mediocre management, lawsuits and worries about Obama health care. But Medtronic has a new superstar CEO from General Electric Co. and a promising product that reduces hypertension.
Lisa Hess
President, SkyTop Capital Management LLC
Her big idea: Iluka Resources Ltd., an Australian company that mines titanium, and Tronox Inc., the world’s third-largest producer of titanium dioxide that is emerging from bankruptcy.
Her reasoning: “Titanium is the most amazing metal — strong, flexible, lightweight and doesn’t react unfavorably with other metals and has no known substitute.” There are shortages in the basic ores and in titanium dioxide, used for pigments, paints, plastics and coatings.
John Kleinheinz
Founder and president, Kleinheinz Capital Partners Inc.
His big idea: Monsanto Co.
His reasoning: Emerging market consumers are eating more protein. It takes multiple pounds of grain to produce a single pound of chicken, pork or beef. Monsanto makes an engineered grain that allows farmers to generate more bushels of grain per acre.
Bruce Berkowitz
Managing partner, Fairholme Capital Management
His big idea: Bank of America Corp.
His reasoning: “The stock is depressed and it appears to be worth more dead than alive, but Bank of America is a critical component of our financial system.” He likes CEO Brian Moynihan.
His worries: Since making his BofA investment, the stock has plummeted. “Let me emphasize this is a long play.”
Michael Price
Managing partner, Price Family Foundation Inc.
His advice: Take advantage of mass-market hysteria. “I love that others are worried about the world imploding. This European mess that everyone’s so focused on makes it easier to buy things cheaper.” Look for companies buying back stock. He also likes companies with fixable problems.
His big idea: Olympus Corp., the Japanese camera and medical equipment maker that cooked its books for years. “That stock’s down to a quarter of what it had been, but its businesses are still pretty good.”
Bill Ackman
Chief executive, Pershing Square Capital Management LP
His big idea: Lowe’s Cos.
His reasoning: The stock is cheap and the company owns a lot of real estate. It’s hard for Internet companies to compete since it’s hard to deliver lumber and most of the products the do-it-yourself retailer sells. And management plans to buy back 35 percent to 45 percent of the company’s shares over the next few years. “That’s a nice tailwind for your investment.”
Brad Martin
Chairman, RBM Venture Co.
His advice: Look for boards with independent, successful businesspeople who own the company’s stock and act like owners. He sits on a number of such boards, including Dillard’s and FedEx.
His big idea: FedEx Corp.
His reasoning: “The largest and fastest-growing economy in the world is the economy of global trade. If we’re going to coexist, global trade will be the glue that connects us. FedEx is the heart of global trade.”
Mario Gabelli
Chief executive, Gamco Investors Inc.
His advice: Look for companies that have been recently spun off and whose true values haven’t been calculated.
His big idea: Madison Square Garden Inc.
His reasoning: It was spun off from Cablevision in February and has three dynamic businesses.
