On May 5, top fund managers gathered for the annual Ira Sohn Conference and discussed some of their top investment ideas for 2014 and beyond. While its still best to do your own research and not rely on fund managers to make picks for you, taking at look at some of their top picks can give average investors a starting point for finding their next investment.
Ackman is back
Bill Ackman is not one to shy away from controversy as evidenced by his investment standoff with Carl Icahn and the activist role Ackman frequently takes with his investments. Those who follow Ackman and his fund, Pershing Square, are already well aware that GSEs Fannie Mae (NASDAQOTCBB: FNMA ) and Freddie Mac (NASDAQOTCBB: FMCC ) are receiving much of his attention.
Ackman did not let up on his bullish stance on Fannie Mae and Freddie Mac during the Conference, as he unveiled a 110 page slideshow showing the GSEs' value for investors and the housing market. Among other things, Ackman noted that the GSEs are largely responsible for the availability of the 30 year mortgage and that their business model is generally safe with more regulation and less subprime mortgages.
Fannie and Freddie shares rose a few percent during Ackman's presentation where he noted he would be willing to make a deal with the government. Presumably, such a deal would carry major benefits for common shareholders, since Ackman's Pershing Square owns just under 10% of each GSE's outstanding shares and has taken out an agreement with a counterparty to effectively increase his investment to 11% of each GSE.
From Russia with no investor love
Another big money investor, James Grant, from Grant's Interest Rate Observer, is bringing a bullish position on one of the least liked companies in the world. With all its problems, few investors are considering Russian energy giant Gazprom (NASDAQOTH: OGZPY ) for their portfolio. Not only is the company exposed geographically by being in Russia and having pipelines in Ukraine, but Gazprom is also majority owned by the Russian government which has taken a hand-on management approach.
With all these risk factors Gazprom trades at roughly 2.5 times earnings, an extremely cheap valuation compared to other major energy producers. Grant doesn't ignore the risks but sees them as priced in at the current valuation and looks toward possible dividend increases or a deal with China to boost the stock.
Of course things could get worse for Gazprom. Right now, western governments are mulling additional sanctions on Russia possibly targeting energy exports. At the same time, Vladimir Putin remains a wild card and there is certainly political risk from the Russian side. Grant sees the likelihood of these events as largely priced in but investors should remember that this is far from a safe-haven value stock.
A conference of the big money
Fannie Mae, Freddie Mac, and Gazprom are just among many companies mentioned at Ira Sohn but to discuss every company mentioned would require an article longer than anyone would want to read. While these three companies serve as a great starting point, investors should not just rely on big money investors to pick their stocks for them.
But with the people behind these picks, I believe they are worth examining in greater detail if they fit with your overall investment strategy.
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