(Adds details from Gundlach and Einhorn picks)
By David Randall and Svea Herbst-Bayliss
NEW YORK May 8 With the U.S. stock market near
record highs, hedge fund managers presented ideas that largely
depend on rising property values and corporate mergers for
growth at a high-profile investment event in New York on Monday.
The bullish picks on companies ranging from electric car
maker Tesla Inc to the Canadian owner of the
"Teletubbies" children’s television show marked a change from
last year, when several managers expected slowing global
A late 2016 equities rally left the average hedge fund's
returns lagging the broader market, and speakers this year
looked eager to make up lost ground.
Keith Meister, who runs $5.5 billion hedge fund Corvex,
revealed the fund's stake in data communications company
CenturyLink Inc, which is merging with Level 3
Communications Inc, sending CenturyLink shares up 5
Shares in Toronto-listed DHX Media Ltd, which owns
rights to popular children's television shows including "Bob the
Builder" and "Teletubbies," ended up almost 5 percent after
Debra Fine, founder and president of Fine Capital Partners,
announced her position in the company and pegged its fair value
at between C$20 and C$30 per share, more than three times its
current market value.
And billionaire investor William Ackman, who runs $11
billion Pershing Square Capital Management, underscored his
bullishness on Howard Hughes Corp, emphasizing the real
estate company's attractive land holdings. His fund has owned
stock in the company since 2010 and is its largest investor.
Ackman, the company's board chairman, noted that Howard
Hughes' story is not well known and said it will do more to help
investors gain insight. Its shares ended up 3.75 percent.
Some of the few bearish picks came from two noted
short-sellers. Jeffrey Gundlach, head of DoubleLine Capital,
said that the U.S. benchmark S&P 500 was overvalued, and
recommended borrowing money to short the S&P 500 exchange-traded
fund (ETF) and hold the iShares Emerging Markets ETF instead.
David Einhorn, known for shorting Lehman Brothers before the
2008 financial crisis and the Wall Street firm's bankruptcy,
announced a short position in oil and gas services company Core
Laboratories NV, a company which he said was far more
cyclical than the market realizes. Shares in the company ended
down 2.4 percent.
Hedge funds were caught off guard by the surprise Election
Day victory of Donald Trump in November, which helped spark a
more-than-12-percent rally in the S&P 500 on the prospect of
lower taxes and lighter regulation.
The average hedge fund returned 7.5 percent from the start
of May 2016 through March 2017, according to Hedge Fund
Research, approximately half the 14.4 percent gain in the
benchmark S&P 500 index over the same time.
While Gundlach last year predicted that Trump would be
elected president, this year the presenters concentrated on the
markets and steered clear of politics, barely mentioning the
president or his proposed legislation, including tax cuts, which
are seen to help hedge funds.
The hedge fund industry had net outflows of $5.4 billion in
the first quarter of 2017, according to HFR. That followed $70.1
billion in outflows in 2016, the largest calendar year loss
since 2009, as public pension funds in states including New
Jersey, New York, Illinois and Rhode Island pulled money from
Some of the speakers on Monday poked fun at themselves for
getting it wrong in a year of so many surprises. Last year
Stanley Druckenmiller, one of the industry's best-known macro
investors, had urged investors to buy gold because he felt the
stock market was overvalued.
"I suggested get out of equities and buy gold. That's why
I'm introducing this year," said Druckenmiller, who used to work
for George Soros and is now a private investor.
For a table on picks from the Sohn Investment Conference,
(Reporting by Svea Herbst-Bayliss, additional reporting by
Lawrence Delevingne, Sam Forgione and Michael Flaherty; Editing
by Meredith Mazzilli and Bill Rigby)