4 Long Ideas From the London Value Investor Conference

Insider Monkey readers and other stock market participants are surely on the lookout for good investment ideas at all times. Indeed, there is no easy way to find stock market bargains in today’s environment, but hedge fund conferences may provide investors with a treasure trove of useful information. Billionaire Howard Marks of Oaktree Capital Management and other widely-known names in the industry presented valuable insights about value investing and pitched investment ideas at the fifth annual London Value Investor Conference last Thursday. The conference had some of the world’s leading investors such as Jean-Marie Eveillard and James Montier sharing valuable insights about value investing, so let’s have a look at four long ideas which were pitched at the conference.

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Metropolis Capital Shares Bullish Thesis on Budget Carrier Ryanair

Jonathan Mills of Metropolis Capital pitched Dublin-based budget carrier Ryanair Holdings plc (ADR) (NASDAQ:RYAAY) at the London conference, saying that “Ryanair is a gold nugget in a muddy river”. Mr. Mills, the founder of the aforementioned U.K-based investment management firm, believes the low-cost giant is the Amazon of the airline industry, as it represents the largest and lowest cost producer that generates the highest margins. But how can Ryanair Holdings plc (ADR) (NASDAQ:RYAAY) have the lowest short haul fares in the entire industry and enjoy the highest margins at the same time? Mr. Mills argues that the company has achieved this phenomenal accomplishment by bringing down costs and being exceptionally efficient. Moreover, the Irish carrier could significantly increase its market share in Europe, as its current share stands at roughly 13%.

As for the dangers that could impact the business and performance of Europe’s largest budget carrier by traffic, Mr. Mills believes the exit of Ryanair’s Chief Executive Officer Michael O’Leary represents the biggest risk. Similarly, terrorism and the not-so-distant crash of an EgyptAir jet could reduce demand for travel and put significant pressure on airfares. There were 24 asset managers tracked by Insider Monkey with long positions in Ryanair at the end of the March quarter, which amassed nearly 7% of the company’s outstanding shares. Ryanair shares are up by 1% thus far in 2016. Leonard A. Potter’s Wildcat Capital Management acquired a new stake of 5.65 million shares of Ryanair Holdings plc (ADR) (NASDAQ:RYAAY) during the first quarter of 2016.

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Bullish Views on Animal Health Leader Zoetis

Michael Keller, co-manager of Brown Brothers Harriman’s fund BBH Core Select, shared his bullish views on both Zoetis Inc. (NYSE:ZTS) and Perrigo Company plc (NYSE:PRGO) at the aforementioned conference. Let’s begin by laying out some thoughts voiced by Mr. Keller regarding the leader in the discovery and development of animal health medicines and vaccines. The co-manager of BBH Core Select believes that secular trends in animal healthcare are durable, so Zoetis Inc. (NYSE:ZTS) is anticipated to enjoy mid-single digit revenue growth. Moreover, the animal health industry does not suffer from a lack of government reimbursement issues faced by human healthcare according to Mr. Keller. Michael Keller, along with Tim Hartch, the other Core Select co-manager, also discussed their firm’s investment in Zoetis in a fresh update on how the Core Select portfolio companies performed during the first quarter of the year, saying that “the company continued to make solid progress against its operational efficiency goals and new product launches while operating in a resilient industry with healthy end-market demand”. Shares of Zoetis are flat year-to-date. Steven Cohen’s Point72 Asset Management reported ownership of 3.94 million shares of Zoetis Inc. (NYSE:ZTS) in its latest 13F filing.

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On the next page of this article, we’ll discuss two other investment ideas which were presented at the London Value Investor Conference.

Long Investment Thesis on Perrigo Company

Let’s now refocus our attention on Michael Keller’s views on Perrigo Company plc (NYSE:PRGO). Mr. Keller outlined three drivers for the consumer goods and specialty pharmaceutical company’s business in the foreseeable future, which include the positive impact of the aging population on the pharmaceutical industry, the company’s store brand products, as well as the shift of prescription medications to nonprescription over-the-counter status, known as the “Rx-to-OTC switch”. The co-manager of BBH Core Select asserted that Perrigo’s stock performance has been weighed on by the departure of its long-time CEO Joseph Papa, who recently joined embattled Valeant Pharmaceuticals Intl Inc. (NYSE:VRX), pricing pressure in generics, and the not-so-successful acquisition of Omega Pharma Invest. However, the price weakness is well behind the firm according to Mr. Keller. Perrigo has seen its market value drop by 33% since the beginning of 2016. John Paulson’s Paulson & Co. has 2.64 million shares of Perrigo Company plc (NYSE:PRGO) in its equity portfolio as of the end of the March quarter.

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Go Long Royal Bank of Scotland Says Nick Kirrage

Last but not least, let’s have a look at the bullish view on Royal Bank of Scotland Group PLC (NYSE:RBSshared by Nick Kirrage of Schroder Recovery Fund. Mr. Kirrage believes the situation at Royal Bank of Scotland has been slowly getting better in recent years after the bank’s $66.5 billion taxpayer-funded bailout in 2008, but that the investment community has barely noticed the improvement. The bank’s loans have halved since 2008, while its investment banking arm has been nearly closed down. More importantly, Mr. Kirrage claimed that customers have not changed banks, partially due to laziness, while the retail banking business is believed to have great long-term returns, with returns of equity that could exceed 10%. Royal Bank of Scotland Group PLC (NYSE:RBS) plans to cut 450 service jobs amid a shrinking of its operations in the United Kingdom, part of the company’s plans to focus on retail and commercial banking in the country. RBS shares have lost 21% of their value in 2016. Jim Simons’ Renaissance Technologies owns 1.25 million shares of Royal Bank of Scotland Group PLC (NYSE:RBS) as of March 31.

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