5 Big Ideas from the Sohn Conference

Short-Seller Presents Bearish Thesis on Tutor Perini Corp (NYSE:TPC)

Carlson Block, the founder of Muddy Waters Capital, presented his short investment thesis on small-cap construction contractor Tutor Perini Corp (NYSE:TPC). The short-seller claimed that the builder’s accounting and business practices were “quite aggressive,” mainly focusing his presentation on the company’s accounting of the so-called change orders (change orders are a common occurrence for contractors). Moreover, Carlson Block discussed the construction contractor’s lack of cash flow and weak balance sheet, saying that “We really question how much more runway the banks are willing to give Tudor Perini. We think there is a real risk that banks pull their revolver…This is a business that has so little liquidity, it doesn’t really take much to push it over the edge.” Additionally, the short-seller said that Tudor Perini’s loan agreement has been amended six times in five years to adjust for its weak EBITDA, claiming that “these kinds of changes are typical of a credit facility with distressed or CCC rated credits.”

The hedge fund sentiment towards Tudor Perini declined in the second quarter, as the number of asset managers in our system with equity stakes in the company fell to 12 from 16 quarter-over-quarter. Tudor Perini’s shares are up by 26% year-to-date. Ken Griffin’s Citadel Advisors owned approximately 63,000 shares of Tutor Perini Corp (NYSE:TPC) at the end of June.

Harvest Capital’s Bullish Thesis on Echostar Corporation (NASDAQ:SATS)

Jeffrey B. Osher, a portfolio manager at Harvest Capital Strategies LLC, presented his firm’s bullish investment thesis on Echostar Corporation (NASDAQ:SATS) at the Sohn San Francisco Conference. Harvest Capital’s sum-of-the-parts valuation of the global provider of satellite services, video, delivery solutions, and broadband satellite technologies yielded a target price of $71.76, about 50% higher than the current share price of nearly $47. The portfolio manager of the San Francisco-based hedge fund discussed the company’s Hughes segment, which provides broadband satellite technologies and broadband services to households that cannot get wired broadband. Echostar Corporation is focusing its efforts on growing its Hughes consumer revenue by maximizing utilization of its existing satellites while planning for new satellite launches. According to Harvest Capital, EchoStar’s 2016 satellite launches will drive 50% revenue growth for the Hughes segment within three years. Given incremental margins, the segment’s EBITDA should nearly double according to Harvest Capital’s portfolio manager. EchoStar’s Hughes segment had around 1.03 million broadband subscribers at the end of June.

There were a total of 23 asset managers tracked by Insider Monkey which held stakes in EchoStar on June 30, hoarding up 10% of the company’s common stock. Nathaniel August’s Mangrove Partners had 1.36 million shares of Echostar Corporation (NASDAQ:SATS) among its holdings at the end of June.

Disclosure: None