Larry Robbins Presentation Ira Sohn Conference 2014VW Staff
Larry Robbins is the Founder, Portfolio Manager and CEO of Glenview Capital Management, a $7.5B hedge fund in its 14th year of operation. Glenview is focused on delivering attractive absolute returns through an intense focus on deep fundamental research and individual security selection. Headquartered in New York City, Glenview has 73 employees, including 34 investment professionals. Prior to founding Glenview, Larry Robbins spent six years as an analyst and partner at Omega Advisors on their US equity long/short team. Larry Robbins joined Omega after three years at Gleacher & Company, a merger and advisory boutique in New York.
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Larry Robbins spoke at the IRA Sohn Investment Conference, also see Larry Robbins On Monsanto’s Impenetrable Moat and Hertz’s Core Value. Below are notes from his presentation.
Highlights from Larry Robbins’s presentation
Phil Laffont is not the only one who is a fan of John Malone, Larry Robbins is as well. See our piece on his recent letter to investors here
.Speaker notes that Larry Robbins has had some great ideas which he presented at Ira Sohn Conference. Robbins recommended shorting GM, which later declared bankruptcy. Robbins also called for buying healthcare companies despite Obamacare fears.
2:14 Larry Robbins said conference is good time to reflect on what we thought would happen and what actually did. Larry Robbins thinks that 2014 is not so different from 2013. He notes that the biggest difference is between the yield on corporates from two years ago until today. Robbins thinks that stocks are still cheap based on relative basis, especially with companies cash rich and having low borrowing costs. In terms of 2013 versus 2014, Robbins believes that opportunities are now harder to find and you need to do more work.
Robbins likes ‘convertible equities’ he calls this value enhancing events which makes a stock even more attractive like M&A. Robbins notes that not all HMOs are bad and you need to see which bend the cost curve down. He believes the Government has helped in this regard. Despite the fact that HMOs have weathered they are trading at 10.6x forward earnings. The pain is in rearview mirrors and the sunny days are ahead says Robbins.
2:18 The companies will benefit even when interest rates normalize. The wave of new management has also helped, with UNH being the exception, which has a solid CEO. Humana (HUM) is a medicare advantage company. Robbins jokes that there are too many old people in the population. Humana is taking that share because seniors love Medicare advantage. The 2014 elections won’t matter because seniors like it. Humana has high top line growth and has ‘options’ attached to it.
2:23 NEarly every HMO has teamed up with a PBM. Humana is likely to do this in the next 1-2 years and could be accretive by 10-15% for shares. Humana can take on debt and even buy HMO or buyback shares, these could all increase value. Public exchanges could add up to 60 cents a share, other programs could add 90 cents a share. They could earn up to $13 a share which should be a 40% return.
2:25 Next WLP only sold part of its business for 10 years, they can buy it back in 4-5 years that is hugely accretive. Robbins also notes if WLP got rid of amortization could add $0.50 a share.
In utopian world we would all eat organic, but we cannot solve world hunger on organic basis, especially in parts of the world where food is scarce. There are very few other solutions, since chemicals are bad, and the best option is GMOs, which he believes are here to stay. In terms of economics, farmers make a 250% IRR and the world wins because we get more food and MON gets 20% of the profit.
2:27 Robbins notes that on the surface MON looks expensive, but when you examine it, the company is very cheap. The company is an oligopoly and compares some of the products to a phase III product in their pipeline which could add $1-$2 a share, 6-7% in growth to take it up to 24-25% growth. If you had a near monopoly in an area, Robbins says the biggest pushback, are you asking them to do something unnatural? If none of these things happen its 40%? return these only make it more accretive. Businesses which earn nothing today could earn a huge amount in 10 years, which is a nice call option on the stock. They can leverage, buy more, and have money to pursue even more research and spending.
Larry Robbins is done but Druckenmiller came on stage.
Druckenmiller is not pitching an idea, though. He’s talking about Zach Schreiber, a younger fund manager who is a new speaker at the conference. Zach worked at Duquesne and Druckenmiller calls him a rising star.
SURPRISE Druckenmiller on stage!
— ValueWalk.com (@valuewalk) May 5, 2014
Druckenmiller says that Zach ran more money at the hedge fund than Druckenmiller himself and had better returns in 2013 and YTD.