Mayfair’s leading bulls and bears stepped into the spotlight at the annual Sohn London Investment Conference last week. The annual charity event, raising money for Great Ormond Street Hospital, yielded 11 long ideas and three shorts. Here, Spear’s rounds up the calls from some of the $5trn hedge fund industry’s leading lights and rates the performance of last year’s pitches…
Saga: Long
For UK equities specialist Kernow Asset Management, its Cornish name is not just a branding exercise – its main office is situated in Helston, deep in Poldark country. Alyx Wood, CIO at Kernow, pitched a long position in Saga, the cruise operator with an extremely large and loyal following among the retired. That ‘silver pound’ factor – as he put it – meant shares could rise almost fivefold, despite having roughly trebled already in the last three years. Low analyst coverage is contributing to the discounted share price, according to Wood, who said: ‘This is market inefficiency personified and I love it.’ His thesis was bolstered by a successful cruise with the company taken by his parents, the first of many. ‘My parents have donated my inheritance to this stock and I want some of it back.’
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Snowline Gold Corp: Long
Renowned short-seller Carson Block grabbed attention at the start of his presentation by promising to share ‘a deep dark secret I’ve hidden for years.’ After the build-up, the Texas-based investor behind Muddy Waters Capital, famous for several high-profile short bets over the years, revealed he occasionally went long on companies – and pitched his bull case on Snowline Gold Corp. The Canadian mining company had made a ‘breakthrough, first of its kind’ discovery in the Yukon, potentially unlocking a new gold-rich region of deposits. Snowline will likely attract takeover bids in the next three years as a result, said Block.
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Iron Mountain: Short
With Block relinquishing his role as short-seller-in-chief – for the time being at least – it fell to lesser-known names to pitch shorts. Three of the 14 presentations were short, maintaining the ratio from last year, the most notable coming from Gotham City Research, which focuses on ‘due diligence-based investing.’ The US information services company had gone from ‘Melting Ice Cube, to a House on Fire,’ according to a presentation by co-founders Daniel Yu and Cyrus De Weck. They predict the market is about to wake up to the ‘manipulative accounting, massive leverage, secular decline, exploitative business practices’ and more which has, in their view, been perpetrated. They foresaw a 54–74 per cent downside from current price levels in the S&P 500 constituent.
Workspace and Pantheon International: Long
New York activist manager Boaz Weinstein has ruffled feathers this side of the Atlantic with his campaign centred on the UK investment trust sector. The Saba Capital Management founder, who has had mixed success in his efforts to reform a sector filled with trusts trading at deep discounts to NAV, is doubling down. His portfolio holdings have moved from a 95 per cent US to a 60 per cent UK focus. His Sohn presentation highlighted Workspace and Pantheon International, two trusts with share prices trading at discounted levels to their reported net asset values (NAVs).
Japan Post: Long
James Smith, the founder of London-based activist firm Palliser Capital, previously led the Hong Kong office for Elliott Management, one of the world’s largest hedge funds. He stuck to the region with a long call on Japan Post, the largest employer in the land of the rising sun and major operator across banking and insurance (not just parcels). Palliser is a Top-15 shareholder in the company with a holding worth in the region of $150m. Its strong prospects rest on a “well-underpinned” shareholder yield, large cash balance and ample Tokyo real estate holdings.
S&P 500: Long
Rather than an individual stock, senior strategists from US manager Hudson Bay Capital Management pitched their long case on US stocks. With market fears rampant over tech valuations and an AI ‘bubble,’ the timing was interesting.
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But ‘tech trumps tariffs,’ said Jason Cuttler, senior markets and derivatives strategist, and Nouriel Roubini, senior economic strategist, who called recent advances in AI and other technologies the ‘most important in human history.’ Cuttler said he had a 9,000 price target on the S&P 500, with market fears of a sell-off ignoring huge structural shifts holding greater upside. Foremost among those factors was the biggest wave of inheritance in human history which is soon to start – and the new generation of recipients far likelier to invest in stocks than previous generations.
Boom or bust – how did last year’s calls perform?
Elf Beauty
Pitched short by Carson Block, Muddy Waters The US cosmetics firm is now down by almost half on its trading level 12 months ago, but it’s been a bumpy ride, with shares falling then reviving over the summer. A recent plunge over below-target sales delivered for shortsellers.
Rating: 6/10
Cargojet
Pitched short by Edgar Allen, High Ground Investment Management Allen’s bear case against Cargojet, a Canadian freight airline, was entertaining last year, but was it profitable? In short, yes, with the share price, again, down almost half on the level 12 months ago.
Rating: 7/10
Spotify
Pitched long by David Semenza, Islander Capital Partners Semenza’s biggest holding at the time of his pitch, in which he called the Swedish music subscription service a proven disruptor which had beaten expectations. Shares are up almost 20% on a year ago, delivering a healthy stream of gains.
Rating: 8/10
