The Sohn and Next Wave Sohn Conferences took place in San Francisco last week, shining the spotlight on several growing and established hedge funds, who shared some of their best ideas with attendees. Last year’s event raised $320,000 for San Francisco’s underprivileged youth, providing them with educational opportunities.
Among the hedge funds tracked by Insider Monkey that pitched ideas were Highland Capital Management, which is headed by James Dondero; Christopher Lord‘s Criterion Capital, Oleg Nodelman‘s EcoR1 Capital, and Mick McGuire‘s Marcato Capital.
At last year’s Sohn Conference, some of the big ideas were Morgan Stanley (NYSE:MS), which was pitched by Jeffrey Ubben’s ValueAct Capital, Marcato Capital Management’s bullish thesis on Buffalo Wild Wings (NASDAQ:BWLD), and Social Capital’s aggressive long-term call on Workday Inc. (NYSE:WDAY). Morgan Stanley has jumped by over 54% in the past year, while Workday has gained 20% and Buffalo Wild Wings has declined by 24%.
Five pitches from this year’s Conference caught our attention, which were on Deckers Outdoor Corp (DECK), Vistra Energy Corp (VST), Mercadolibre Inc (MELI), Sony Corp (ADR) (SNE), and Ironwood Pharmaceuticals Inc. (IRWD). We’ll examine the reasoning behind those pitches in this article.
At Insider Monkey, we track insider trading and hedge fund activity to uncover actionable patterns and profit from them. We track over 700 of the most successful hedge funds ever in our database and identify only their best stock picks. Hedge funds are like many other companies in that they bundle products (in this case, stock picks) together and sell them to customers (investors) as a package deal. That means you get their 73rd-best pick along with their best pick, and who wants to pay exorbitant fees for a fund’s 73rd-best idea when you could instead invest in only their best ideas? Our flagship strategy has gained 44% since February 2016 and our stock picks released in the middle of February 2017 beat the market by over 5 percentage points in the three months that followed. Our latest stock picks were released in mid-August, which investors can gain access to by becoming a subscriber to Insider Monkey’s premium newsletters.
Let’s start with Deckers Outdoor Corp (NYSE:DECK), which was pitched by Mick McGuire. The stock ranks as Marcato’s largest position as of June 30 (1.95 million shares valued at $133 million), and the fund is currently engaged in an activist campaign against the company. McGuire’s campaign is focused on the company spinning off or selling some of its non-core brands and recapitalizing its balance sheet. McGuire told CNBC last week that the company could do a better job in terms of the latter, predicting that the $2 billion company could have as much as $500 million in net cash at the end of this year.
McGuire believes Deckers Outdoor Corp (NYSE:DECK)’s margins could double along with its stock if the company is successful at shifting its focus to its growing Ugg brand. McGuire has nominated a full slate of ten candidates for the company’s board whom he believes could successfully execute his vision and is prepared to fight a proxy contest if necessary. Marcato won three seats on Buffalo Wild Wings (NASDAQ:BWLD)’ board after a proxy battle earlier this year, though the stock fell heavily after the win and has yet to recover.
Vistra Energy Corp (NYSE:VST) was pitched by Mark Okada of Highland Capital, which took a very large stake in the stock in the second-quarter, a $258 million position that became the fund’s largest. Since its IPO during that quarter, Vistra Energy has gained 23%.
Highland Capital believes there are a number of reasons why Vistra Energy shares could drive higher, including their already attractive valuation and the M&A opportunities that could be available to it thanks to its low leverage. Citi analyst Praful Mehta suggested that it’s likely the company will acquire Dynegy Inc. (NYSE:DYN) for $11-$12 per share in stock. Billionaire John Paulson also took a big stake in Vistra Energy Corp (NYSE:VST) during the second-quarter.
On the next page we’ll check out why leading hedge funds like Mercadolibre Inc (NASDAQ:MELI), Sony Corp (ADR) (NYSE:SNE), and Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD).