Latest Ideas From Some Heavy Hitters

By Eric Jackson
RealMoney Contributor
5/27/2010 5:00 PM EDT
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Yesterday was the 15th annual Ira Sohn Research Conference in New York. The event brings together the best hedge-fund managers in the world to present their top ideas for the coming year. All proceeds from the event go to charity, supporting pediatric cancer and other childhood diseases.

The event has a stellar reputation, partly because of its track record of managers presenting ideas here for the first time publicly that go on to pan out exactly as they argue. In 2008, David Einhorn made a splash at this conference by pointing out some of the problems with Lehman Brothers -- four months prior to that firm's bankruptcy. At the 2007 conference, Bill Ackman called for the demise of Ambac (ABK - commentary - Trade Now) and MBIA (MBI - commentary - Trade Now), and last year he touted General Growth Properties (GGP - commentary - Trade Now) when the stock was under $4 -- it's now over $13. Some have called this conference the Learning Annex for hedge-fund managers.

Just an idea for the event organizers: There's such interest in the ideas from the event that they should consider live streaming the event on the Web. They could charge for it and likely still get a large audience that would further support their worthy cause.

Yesterday's roster of speakers was stellar as usual, including Ackman of Pershing Square, Einhorn from Greenlight, Sam Zell, David Tepper of Appaloosa and Seth Klarman of Baupost.

Many speakers, including Einhorn and Ackman, reiterated arguments they've made publicly, for example shorting the ratings agencies likeMoody's (MCO - commentary - Trade Now) andMcGraw-Hill (MHP - commentary - Trade Now) and going long General Growth. Other speakers, such as Niall Ferguson of Harvard and former auto-czar Steve Rattner, chose to stick to macroeconomic predictions.

David Tepper, who was bullish in 2008 and lost money, then stayed bullish in 2009 and made $4 billion, was still bullish yesterday. He pointed to the bleachers, a la Babe Ruth, and said that Bank of America (BAC -commentary - Trade Now) is going to $27. Tepper also likes AIG (AIG - commentary - Trade Now) and the beaten-down Spanish bank Banco Santander (STD - commentary - Trade Now).

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[This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required.]

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Intellectual Activism's Impact On General Growth

By Eric Jackson

12/23/09 - 06:01 AM EST

Stock quotes in this article: GGWPQ , SPG

NEW YORK (TheStreet) -- It used to be that activism was conducted by poison letters to management from Dan Loeb, or by acerbic rhetoric leaked to the mainstream press from Carl Icahn. But a new kind of activism is being waged by leading hedge funds with positions on both sides of the trade in bankrupt mall owner General Growth Properties(GGWPQ Quote).

Pershing Square Capital Management, Hovde Capital, and T2 Partners are taking turns exchanging their analyses on why they think the stock is under- or over-valued. These intellectual arguments aren't just academic pursuits. They're having large effects on the stock price. Some of the smart money will be right, while others won't look so smart a year from now. Here's what you need to know to take advantage of this new kind of activism.

General Growth started in 1954, when two brothers founded a strip mall in Cedar Rapids, Iowa. The company hit a $20 billion market capitalization in April 2007 and is now one of the top mall owners in the country today. But General Growth took on a lot of debt in the credit expansion and was unable to roll over this debt when the lending markets froze, leading to their bankruptcy in April.

The company entered bankruptcy on April 16 with its common shares trading then at 60 cents each The shares have had quite a run since then, touching $12 two weeks ago.

Back in May of this year, Bill Ackman of Pershing Square profiled the bullish case for General Growth at the Ira Sohn Research Conference. He laid out a convincing case for the unique value embedded within General Growth. Unlike the vast majority of bankruptcies, Ackman argued General Growth's was unusual because its net assets were greater than its net liabilities. The company had a liquidity issue, not a solvency issue, Ackman said. Occupancy rates were still high, net operating income (NOI) was steady, and the company owned some of the more prestigious malls in the country across a wide footprint, he contended.

In the extremely conservative scenario, Ackman suggested that the equity value of General Growth was $10 per share at that time. With more normalized assumptions, giving value to the management company and several undeveloped properties and assets, Ackman said the equity value per share would be above $30. As long as the broad economy didn't sink into a severe recession, Ackman said he expected there would be value for equity holders after creditors were compensated.

[This post is an excerpt of the full article, which available on TheStreet.com by clicking here.]

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