Somewhat ironically, the Value Investing Congress -- a semiannual gathering where suited white dudes gather to hear the cult of value's heavyweights share their best investment ideas -- isn't a place where everyone marches to the beat of the same drummer.
Chief among the rabblerousers are David Einhorn and Bill Ackman. Intellectual stalwarts and institutions in the value-investing community, they've gained a certain notoriety for their willingness to defy convention, muckraking and meticulous analyses, and stellar long-term track records. Their presentations at the VIC are widely anticipated, and celebrated, among the conference attendees.
As consummate contrarians, we happily trod the path less followed ourselves. But we make it no secret that we're big fans of Einhorn and Ackman. In that spirit, what follows is a collection of a few nuggets that caught our attention.
Michael Olsen, CFA, Special Ops and Million Dollar Portfolio: For all the hullabaloo surrounding ObamaCare, it's not altogether unreasonable that investors emotionally deserted the shares of managed-care organizations. But I've maintained for some time that, as WellPoint, Cigna
Einhorn, for his part, echoed that sentiment, as he pegged Cigna as one of his favorite long ideas. He cited Cigna's exposure to large-group commercial insurance, relatively limited earnings exposure to fluctuating medical costs and usage, and margins already well below mandated caps, Cigna looks pretty cheap at 11 times trailing earnings. I'd posit there's a valuation kicker in a lesser-known asset, Cigna's pharmacy benefit manager, which might not be getting its fair due as a part of the larger enterprise. That could make for a very healthy investment.
Bryan Hinmon, CFA, Pro and Options: It's remarkable to see adults donning $5,000 suits salivating openly. Such is the case as Einhorn takes the stage to divulge his latest short thesis. At this fall's Value Investing Congress, he took a bite out of the spicy burrito known as Chipotle Mexican Grill
Chipotle has had success in the past raising prices to deal with rising protein prices. But Einhorn suspects the company's ability to do so is coming to an end now that Yum! Brands'
Joe Magyer, Inside Value: I loved Einhorn's cry for investors to, in the immortal words of Bud Fox, do their own homework, Marv. There is no substitute for performing your own analysis and forming your own opinions on a stock and how it might plug into your own portfolio. I bat around ideas with some very smart Fools and study superinvestors' moves on a daily basis, but it's always through a lens of skepticism and never done blindly. You should better inform your opinions by seeking out smart perspectives but come to your own conclusions.
Remember, even the best investors struggle to be right 60% of the time. Superinvestors like Ackman and Einhorn are great sources of ideas and thinking, but mindless hero-worship will leave you rudderless, without exit strategies, and desperately casting about in a never-ending quest for others to make the tough decisions for you. You are capable and know your own portfolio better than anyone else. Just buckle down and do the homework yourself. Unlike your high school geometry class, I promise you'll find studying the business of making money interesting -- and rewarding.
Joel South, Fool.com: I highly recommend hearing Ackman and Einhorn present their research, not only for the exhausting amount of investigation and detail applied, but also for their polished demeanor and classy showmanship. Both presenters created a vibe throughout the conference, but one lesser-known fund manager who I thought provided a refreshing and disciplined approach was Jeffrey Ubben from ValueAct Capital.
Maybe it was the West Coast affluence, but I think it's important for all investors to take a step back and grasp the bigger picture to simplify things and not get caught up in intricate details that can foil your investing thesis. ValueAct places its money behind companies with high switching costs that are easy to digest, like Halliburton
Michael Olsen owns shares of UnitedHealth. Joel South owns shares of Halliburton. Bryan Hinmon and Joe Magyer own none of the stocks mentioned here. The Motley Fool owns shares of Chipotle Mexican Grill. Motley Fool newsletter services have recommended buying shares of UnitedHealth Group, Halliburton, and Chipotle Mexican Grill and creating a diagonal call position in UnitedHealth Group. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.