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2019 Sohn Conference New York Recap

Sohn Conference is my favorite hedge fund event. I haven’t missed an event since 2013. This doesn’t mean that every stock pitched at the conference is a great investment opportunity and will beat its benchmark. A few weeks ago we took a look at the performance of the stocks pitched at the 2018 Sohn Conference and found that these stocks outperformed their benchmarks by 3.2 percentage points.

We got pitched more than a dozen investment ideas in 2018. We didn’t tell our subscribers to invest equal amounts in each of those picks. Who does that anyway? A rational investor listens to all of these ideas, identifies a few promising ones, does his/her in-depth analysis, and then decides to pull the trigger on maybe 1 or 2 of these ideas. That’s what I did. One idea particularly stood at for me. I spent a few weeks analyzing that idea and decided to recommend it in our monthly newsletter. Our monthly newsletter tries to identify the “best stock picks of the best hedge fund managers”. We launched this strategy a little bit over 2 years ago and our stock picks managed to return 64% and beat the S&P 500 Index by nearly 40 percentage points.

How did we do it? By identifying the best stock picks of the best hedge fund managers. Guess which stock we recommended from the 2018 Sohn New York Conference? Ascendis Pharma (ASND). The stock was trading around $63 at time of Oleg Nodelman’s presentation. By the time I recommended it and our subscribers had time to buy the stock, the share price increased to $65. The stock’s price didn’t move much for several months.

I usually don’t give away my best stock idea but once a year we run a promotion and I give something valuable back to the subscribers who are powering Insider Monkey. Last October we published a free special issue of our monthly newsletter and send our 160,000 subscribers an email with the title “My #1 Top-Ranked Stock in the World”. You can still download the sample issue here.

My “#1 top-ranked stock” in October was Ascendis Pharma (ASND). It was trading at $63 at the time. Today, it is at $122. Investors who read our free report and bought the stock in the following few weeks returned more than 90% in 6 short months.

We are going share this year’s best investment idea again in the May 2019 issue of our monthly newsletter. If you subscribe to our monthly newsletter and aren’t satisfied with the performance of our stock pick, I will give your money back.

Below I am going to provide a complete recap of this year’s presentations. You can try to identify this year’s best idea by yourself or you can subscribe to our monthly newsletter and read a fully transcribed version of the presentation.

Next Wave: This is the part of the Sohn Conference where less known fund managers present their stock pitches. I usually like this portion of the Sohn Conference better because these “newer” fund managers try to build a name for themselves are more likely to present their absolute best ideas.

9:05 Lauren Taylor Wolfe, Managing Partner, Impactive Capital LP: Lauren Taylor Wolfe is the founder of Impactive Capital, an activist hedge fund with an ESG tilt. Previously she was Managing Director and Investing Partner at Clifton Robbins’ Blue Harbour Group. She focused on technology, consumer, business and healthcare services sectors at Blue Harbour. Before that, she cut her teeth at SIAR Capital focusing on small-cap stocks, private companies, and outside investment managers. Lauren Taylor Wolfe has an M.B.A. degree from The Wharton School at University of Pennsylvania and a B.S. from Cornell University.

Idea: Long position in Wyndham Hotels & Resorts (WH)

Benchmark: S&P 500 ETF (SPY)

Lauren Wolfe Wyndham WH Sohn 2019

Lauren Taylor Wolfe’s WH Thesis

Thesis: “Wyndham is a newly public $5 billion market cap company that’s the result of a spin merger that occurred nearly a year ago. Wyndham Hotels spun out of the time share company and just before completing the spin it acquired La Quinta Suites. La Quinta is a leading mid-scale hotel franchise company. You may be surprised to hear that Wyndham is now the largest hotel franchiser in the world with over 9000 franchise hotels in 80 countries and it enjoys 40% market share with the branded economy and mid-scale segment,” said Wolfe. Since WH is targeting the lower bottom (mostly economy and mid-scale) of the spectrum, its business is actually recession resistant. WH experienced 2% organic room growth during the 2008 financial crisis (impressive!). This segment of the market also experienced lower supply growth over the last 15 years according to Wolfe. The average room rate for this segment is also below $121 per day and Wolfe believes this mostly shields WH from online competition from the likes of Airbnb. Wolfe believes WH is a high quality company trading at a discount and she can add value through activism. Her base case scenario assumes historical growth rates plus synergies from the La Quinta merger driving the stock price all the way up to $89 in 3 years. She also thinks that Wyndham can double its EBITDA by taking on environmentally friendly cost saving initiatives. In this case she believes the stock price can exceed $110 in 3 years.

Background: In 2018 Sohn Idea Content winner talked about Wyndham and La Quinta. Please email meena@insidermonkey.com if you’d like a copy of this presentation.

You can read the summary of other presentations on the next page.

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