Value Investing Congress Blog

Leon Cooperman, Omega Advisors

Cooperman his presentation with a somewhat optimistic (or “realistic” as he called it”) view of the current state of the markets. Cooperman believes that the bulk of the damage has already been done to the markets, and was hopeful for several reasons:

• Evidence that housing is finally bottoming
• Residential investment is at recession lows
• Housing affordability is improving
• Equity valuations are reasonable, if not better
• Price to replacement cost book values are at below average
• ROE for S&P 500 is near historically high levels
• More companies (13% of S&P 500) are yielding more than 10 year Treasury—most in 15 years
• Yield curve is positively sloped
• Corporate America is in good shape from a balance sheet perspective- Debt to capital near 30 year lows
• Liquidity is high (although there is fear to use it)
• Inflation expectations are receding.

Cooperman likes Atlas America (ATLS), which owns three other publicly traded MLP’s (Atlas Energy Resources (ATN), Atlas Pipeline (APL), and Atlas Holdings (AHD). Currently trading at $23, Cooperman believes the entire package could be worth $30-$77.

Aaron Edelheit- Sable Value Management

Edelheit presented at the Value Investing Congress West last May, and his deep passion and conviction for value investing was equally apparent in New York. Edelheit pointed out the outstanding returns from the small cap value area of the market since 1970 (16.2%), but noted the disinterest here from many investors. He cited the following reasons for this situation:

• Small Cap Value can be very boring to investors
• There may be long periods with no news
• Illiquidity associated with SCV companies scares investors
• Too much volatility
• Little or no analyst coverage

One of Edelheit’s favorite ideas is Photo Channel Networks (PNWIF), which provides online digital photography solutions for retailers.

• At $1.50 per share, trades at 9 times eps (7 times 2009)
• Rapidly growing, revenue up 250% last quarter
• New customers Sam’s club, Costco, Kodak China
• Digital printing business growing rapidly (64% last year)
• No analyst coverage

Jonathan Heller, CFA

Disclaimer: I have no positions in any of the companies mentioned

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.