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5 Big Ideas from the Sohn Conference

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A group of well-known hedge fund managers, academicians and other thought leaders participated in the seventh annual Sohn San Francisco Conference this week, providing investment ideas and market outlooks in a series of 20-minute presentations. The Sohn Conferences raise money to fund the development of educational opportunities and life outcomes for under-served youth, as well as support innovative initiatives to cure and treat pediatric cancer.

Most retail investors, including many of our readers, are on the lookout for good investment ideas. Indeed, there are no easy ways to find stock market bargains in today’s environment, but hedge fund conferences such as the one discussed above can provide investors with a treasure trove of useful information. With that in mind, we decided to delve into five of the investment ideas presented at the recently-held Sohn San Francisco Conference, three of which come courtesy of hedge funds that we track.

At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).


ValueAct Capital’s Bullish Thesis on Morgan Stanley (NYSE:MS)

Mason Morfit, a Partner and the President of Jeffrey Ubben’s ValueAct Capital, recommended investors go long Morgan Stanley (NYSE:MS) in his presentation at the investment conference. It is already known that the activist hedge fund initiated a 38 million-share stake in Morgan Stanley in mid-August, arguing that it was the market, not the company, that had it wrong. According to Mr. Morfit, the diversified financial services company has three defined units and seven defined revenue units. By conducting in-depth research to understand each unit’s economics, he determined that 75% of the company’s revenue and 85% of its profit come from asset light fee-based businesses rather than capital intensive businesses. On that note, Morgan Stanley has been successful in maintaining or even increasing its share in wealth management and investment banking advisory according to Mason Morfit. All in all, the President of ValueAct Capital said that Morgan Stanley’s long-term business growth looks positive.

Although the number of hedge funds in our system with equity stakes in the bank decreased to 49 from 52 during the second quarter, the overall value of those stakes rose by 67% quarter-over-quarter to $2.93 billion. Morgan Stanley’s shares are up by 1% this year. Clint Carlson’s Carlson Capital reported ownership of 4.95 million shares of Morgan Stanley (NYSE:MS) during the 13F filing period for the June quarter.

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The next two pages of this article will discuss four other investment ideas presented at the Sohn San Francisco Conference.

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