Billionaire Julian Robertson Looks (Moderately) Bullish Right Now

Billionaire Julian Robertson’s Tiger Management was one of the best-known hedge funds, both for its investing success and for its ability to spawn “Tiger Cubs”- employees of Tiger who have gone on to manage their own successful funds. Robertson has retired but his investments are still reported in 13F filings (research his recent quarterly reports) and he occasionally comments on the markets in the media. Recently, in an interview with CNBC’s Maria Bartiromo, Robertson suggested that he liked and disliked the following stocks:

Ryanair Holdings plc (NASDAQ:RYAAY) was one of the stocks that Robertson mentioned owning in the interview. The “lowest cost producer in the world” has two big red flags attached to it that will scare off investors: it is a Europe-focused airline. Budget air carriers are trading at premiums to the major carriers in the U.S. and Ryanair actually carries moderate multiples as well: it trades at 14 times trailing earnings and 13 times forward earnings estimates. Robertson apparently believes that Europe will recover and that Ryanair’s pricing will drive earnings growth. During the second quarter earnings were down 29% from a year earlier, though revenue was up. We’re skeptical here- why not pay considerably less for a major U.S. airline as the industry consolidates, potentially driving up prices?

In an interview about a year ago with CNBC, Robertson had recommended credit card stocks, singling out Mastercard and Visa (read our discussion of Robertson’s picks). Apparently he’s carried out a balance transfer: in this interview he named Capital One Financial Corp. (NYSE:COF) out of all the credit card stocks. Capital One, quantitatively, looks like a very good investment: its revenue and earnings were each up at least 35% in the third quarter versus a year earlier, and yet the stock carries a trailing P/E of only 11. Wall Street analysts expect substantial earnings growth in 2013 as well. We’d compare it to other credit card stocks first to make sure it’s the best one, but on an absolute basis it seems like a buy.

Ocwen Financial Corporation (NYSE:OCN) was another stock that the hedge fund legend named. Ocwen is a $4.8 billion market cap mortgage loan servicing and asset management company. Its stock is up 156% in the last year as the mortgage business appears to be recovering. Its second quarter results showed a doubling in revenue versus Q2 2011, which contributed to a 70% rise in net income. It trades at 9 times forward earnings estimates and a five-year PEG ratio of 0.6, indicating that the sell-side is projecting strong earnings growth over the next several years. We’d want to study the company more closely, but it looks like an interesting find. Billionaire Leon Cooperman’s Omega Advisors owned 3.6 million shares of the company at the end of June (find more stocks that Omega owned).

Robertson also recommended against steel stocks, including United States Steel Corporation (NYSE:X) and AK Steel Holding Corporation (NYSE:AKS), declaring them overvalued barring a very strong economic recovery (something he doesn’t foresee, though his Ryanair pick in particular seems to indicate he is ruling out a sustained European and global recession). Both companies are unprofitable on a trailing basis, but both are expected to rebound next year with analyst consensus implying forward P/E multiples of 10. As such, the market seems to be skeptical as well- players are trading these stocks as if the analysts are being too optimistic. With revenue down in their most recent quarterly reports, and betas in the 2.3-2.4 range, our impression is that Robertson’s interpretation is right: buy them if you are extremely bullish, don’t buy them if you’re not.

For the most part we like Robertson’s picks here. The one that we are struggling with is Ryanair, as we continue to be impressed by the low multiples at airlines such as Delta, US Airways, and United Continental; even Spirit offers cheaper pricing for investors and revenue growth with exposure to the Americas rather than Europe.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!