5th Annual New York Value Investing Congress Day 1: Part 3

Julian Robertson, Founder, Tiger Management
Question and Answer Session

Investing legend Julian Robertson took questions for a half hour; an extremely pleasant surprise for this Congress.  Here are some of Robertson’s thoughts:

Concerns about the current state of affairs:

• Big concern is that we are still spending more than we earn, which is not sustainable. 
• Debt must be paid back, and we are not even thinking about that. 
• More focused on borrowing more from the Chinese, and hoping they won’t decide they have better things to do with their money.

On Energy:

• Although bullish on oil stocks, he is impressed by advances in solar energy. 
• Believes that solar will continue to improve, wind power too, and this will ultimately help the environment and hurt oil companies.

On China:

• Might be a bubble
• Consumption not enough to pull the world out of recession

On Gold:

• An anti-gold bug-”none has been used since it was discovered”

On Norway:

• The most prosperous/sound country in the world

Companies he’s bullish on:

• Visa, Mastercard, Ryanair, Intel

What He’s Learned/Best Advice:

• Never be overconfident
• Don’t get overly enthusiastic about your business

Lloyd Khaner, Khaner Capital
The Key to Turnarounds

First time presenter at the Value Investing Congress, Khaner, who has compounded 445.4% since 1991 (versus 295.2% for the S&P 500), looks for the following attributes in potential investments:

• Unique management
• Strong decision making ability
• Avoid value traps
• Debt/Equity less than 70%
• Avoid dying industries
• Franchise companies with manageable debt

Khaner is a big believer in the concept of “CEO family trees,”placing value on those that have been trained or worked under other successful CEO’s.

Khaner listed the signs of a successful turnaround, including:

• Cutting unprofitable sales
• Cutting headcount
• New senior managers
• Fix customer relationships
• CEO sets plan within 3 months
• Gross Margin up
• SG&A down
• Focus on Return on Capital
• Restructure Debt-Push out maturities.

One of Khaner’s favorite ideas is Starbucks (SBUX):

• Slowing new store openings
• Improving service
• Expects positive comps fiscal 2010
• ROIC growth 100-200 bps next 3+ years
• FCF $500-$750 million 3+ years

 

Jonathan Heller, CFA