Value Investing Congress Blog

Bill Ackman, Pershing Square, LP

Hedge Fund legend Ackman laid out an interesting case for Wachovia. While many investors may believe that this company is dead money, Ackman suggested that there’s a lot more to Wachovia than meets the eye.

Ackman’s analysis broke Wachovia into several parts, and put a valuation range on each part. Ackman’s analysis was thought provoking, and well constructed. When all was said and done, Ackman came up with a total value for Wachovia shares of between $7 and $19 per share.

Ackman’s sum of the parts valuation was intriguing. Of course, Wachovia’s fate is still up in the air between Citi’s initial bid and Wells Fargo’s subsequent offer, but Ackman, for one has purchased a lot of Wachovia shares—180 million in recent weeks, and currently owns about 8%.

Atticus Lowe and Lance Helfert , West Coast Asset Management

Lowe and Helfert run very concentrated portfolios, and look for: Margin of safety, catalyst, management quality and strong cashflow.

Lowe and Helfert also espoused the following

• Prioritize the margin of safety—i.e., what’s the worst that can happen?
• Base investment decisions on what you see, not on what you hear
• Good ideas are hard to come by, so bet big when the odds are in your favor

One of Lowe and Helfert’s ideas was energy company ATP Oil and Gas (ATP)

• $475 million mkt cap
• Enterprise Value: $1.8 billion
• Selling off $600 million in assets
• Estimated 2009 CF: $700 million
• Oil: 200 million barrels
• Currently trading at $12.50, could be worth $75-$88

Jonathan Heller, CFA

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

Noven Pharmaceuticals (Nasdaq: NOVN) recently made significant changes to its board of directors and senior management. The company hired a new CFO, accepted the resignation of its long time Chairman and CEO Robert C. Strauss, and appointed Wayne P. Yetter as its new Chairman. We applaud these actions and believe a tremendous amount of value will come from the changes.

The Chairman and CEO roles are now separated, and Mr. Yetter has an outstanding reputation and track record. He is the former CEO of Novartis Pharmaceuticals and Astra Merck, and also served as the COO of IMS Health, all large and successful companies. Interestingly, Mr. Yetter was the CEO of Novartis at the time it established the Novogyne joint venture with Noven. For a company with an enterprise value of only $250 million, Noven has an impressive leader at the helm.

Noven has appointed Jeffrey F. Eisenberg, Senior VP of Strategic Alliances, as Interim CEO and expects to announce a new CEO shortly. We believe that a well recognized industry leader with a proven track record will be appointed. Noven presents an outstanding opportunity for a top notch executive to take charge of a profitable company with a very flexible balance sheet, at a time when its stock is extremely depressed and its opportunities are abundant. In our opinion, prior management did not aggressively exploit Noven’s drug delivery platform or utilize its overcapitalized balance sheet.

The company has best-in-class drug delivery technology and a deep pipeline of products – both proprietary and with market leading partners – in various stages of development. In addition, Noven’s strengths play into the key challenges faced by Big Pharma today. Its patented Dot-Matrix technology differentiates products and extends patent life, while requiring a short timeframe for regulatory approval and a relatively small amount of development capital. In addition, Noven has outstanding proof of concept via its Vivelle-Dot patch for Estrogen Therapy and its Daytrana patch for ADHD. Both are market leading products with no close competitors.

We see tremendous value in Noven, which should become apparent to the market as new products are approved and a new management direction takes hold. We believe Noven’s 49% ownership of its Novogyne joint venture alone is worth 40% more than its current enterprise value, and that does not attribute any value to its four additional approved products or its robust product development pipeline. At present, we believe Noven’s stock is selling for $0.38 on the dollar. A significant share repurchase would be extremely accretive, and the pursuit of strategic alternatives would likely catapult the stock. Regardless of the means, we are confident that the gap between Noven’s share price and its intrinsic value will be closed over the long term.