Value Investing Congress Blog

Rich Pzena at the 3rd Annual New York Value Investing Congress 11/07 by Marcelo Lima

Richard Pzena, the “smartest man he knows” according to Joel Greenblatt, recently took his Pzena Capital Management public.

His long idea was Freddie Mac, which he called a simple business with outstanding earnings power. He believes Freddie’s problems are temporary and that it’s rational to expect that its earnings power will return. One key point is that you can’t look at what Fannie & Freddie do on a GAAP basis. The way to do it is to think of them as hedge funds, to look at their portfolio and how much money they make on it.
In addition, Pzena thinks Freddie has written down its portfolio to levels that already reflect more gloom than he thinks is realistically possible given his analysis of its credit profile.Pzena believes Freddie’s 2012 EPS is $3.75 on a low case, $6.25 on a base case, and $9.25 on a high case. He went as far as to call it the cheapest stock he’s ever seen in his entire investing career – which certainly says a lot.

Lee Cooperman at the 3rd Annual New York Value Investing Congress reported by Marcelo Lima

Lee Cooperman of Omega Advisors gave a great talk on Henry Singleton, the CEO of Teledyne Corporation.

According to John Train’s The Money Masters, as quoted by Lee, “Buffett considers that Henry Singleton of Teledyne has the best operating and capital deployment record in American Business. […] The failure of business schools to study men like Singleton is a crime, he says. Instead, they insist on holding up as models executives cut from a McKinsey & Company cookie cutter.”For a long time, while Teledyne’s stock was inflated, Singleton used it to acquire other companies – about 130 of them. When value caught up with price he changed course and pioneered stock repurchases, shrinking his capital from 40m shares to 12m. Singleton also pioneered the spinoff as a value-enhancing exercise for shareholders. The result is a tremendous track record of increase in intrinsic value per share, one that must be studied by all who want to learn about efficient capital allocation.For those interested in learning more, Lee recommended the book Distant Force by George Roberts (the word Teledyne is an amalgam of “distance” and “force” in Greek).

Lee mentioned that Jim and Larry Tisch of Loews have a great record of doing stock repurchases.

Towards the end of his talk, Lee recited a litany of statistics to drive home the point that America is on sale.In March of 2000 the S&P was 1527. It’s 1430 today. So it’s declined 6% in 7 years. Yet in these 7 years, the long term bond rate dropped 31% from 6.2% to 4%, gold is up 175%, silver is up 181%, copper is up 276%, wheat is up 280%, crude oil is up 250%, the median home price of 7 years ago is up 40%, the Case-Schiller home price index is up 93%, the Euro is up 50% against dollar and the British Pound is up 29% against dollar – you’re going to see a lot of strategic activity coming to the west.

Whitney Tilson and Glenn Tongue, co-portfolio managers of T2 Partners, presented on November 29, 2007 at the 3rd Annual New York Value Investing Congress to a standing- room-only crowd at Rose Hall in the Time Warner Center. This link will take you to their presentation, which also argues that Berkshire Hathaway is somewhat undervalued but offers an immense margin of safety. To learn more, click on http://www.valueinvestingcongress.com/download/T2_VIC07.pdf.