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At the beginning of October, Dallas, Texas, hosted the Great Investors’ Best Ideas Conference. Great Investors’ Best Ideas Conference is organized every year by the Great Investors’ Best Ideas Foundation, a non-profit founded in 2007. The Conference, which has been taking place yearly since 2007, is an event that hosts various great investors that share their ideas. All the proceeds from the event go to the Michael J. Fox Foundation for Parkinson’s Research and Vickery Meadow Youth Development Foundation.
This year’s conference hosted several renown investors, including Bill Ackman of Pershing Square, David Einhorn of Greenlight Capital, Thomas A. Russo of Gardner Russo & Gardner, Andrew Wellington of Lyrical Asset Management, and Jeanie Wyatt of South Texas Money Management. The investors that spoke at the conference presented some of their best ideas and we are going to take a closer look at what they said and the moves these funds made in these stocks.
Let’s start with Bill Ackman, the CEO of Pershing Square, a widely known activist fund. At the conference, Ackman talked about Automatic Data Processing (NASDAQ:ADP), one of his recent investments. In August, Pershing Square disclosed via a 13D filing that iw otns 36.08 million shares of Automatic Data Processing, representing 8.3% of the company’s outstanding stock. Ackman considers that the stock can double in value, as ADP represents a quality business with secular tailwinds.
In August, Pershing Square issued a presentation on Automatic Data Processing (NASDAQ:ADP) titled “The Time is Now”. In the presentation, the fund pointed out that ADP has several growth opportunities, but the company’s success has “made it a lethargic and inefficient sleeping giant.” They consider that Automatic Data Processing (NASDAQ:ADP)’s employer services segment, which represents the core business, is underperforming its competitors and its potential. In this way, an optimal management of the company could increase the employer services’ operating margins by 1,500 to 2,000 basis points by 2022 and boost its EPS by nearly 50%. In this way, the company could be worth between $221 to $255 per share by June 2021.
Earlier this month, Ackman hosted a webcast during which he compared Automatic Data Processing (NASDAQ:ADP) to its main competitors and reiterated the main issues surrounding the company. Ackman also said they nominated three directors to be elected to the company’s board and urged shareholders to vote for them.
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Even though Ackman started his campaign to improve Automatic Data Processing (NASDAQ:ADP)’s shareholder value only a couple of months ago, things have escalated fast and got pretty intense. In August, ADP CEO Carlos Rodriguez talked about Ackman’s campaign on CNBC and compared the investor to a “spoiled brat”. On his end, Ackman has launched a website and has been buying newspaper ads and issuing presentations in order to reach out to retail investors that own small numbers of shares individually, but collectively hold around 28% of the company’s stock.
The manager of Greenlight Capital, David Einhorn, talked about General Motors Corp (NYSE:GM), the fund’s largest holding that contains nearly 54.76 million shares worth $1.91 billion as of the end of June. During the first quarter of 2017, Greenlight boosted its stake in General Motors more than threefold and at the Conference Einhorn said that he still considers the stock to be cheap and represents a good investment opportunity for new investors. Einhorn also pointed out the recent sale of the risky European business (GM sold Opel and Vauxhall brands to French PSA Group for $2.3 billion). He also likes that the company is investing in electric and autonomous cars, which represent the future.
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Greenlight has been holding shares of General Motors Corp (NYSE:GM) for a couple of years now. The fund held shares between 2011 and 2014, but then sold it on the back of disappointing earnings guidance. In his letter to the fund’s investors for the first quarter of 2015, Einhorn talked about reinitiating a stake in the company at $34.62 per share. Interestingly, Einhorn talked about the European business back then too, saying that the company was closer to eliminating its losses in Europe. The investor also pointed out that the stock was trading at around 8 times forward earnings and the stock is currently trading at a similar valuation, which is probably why Einhorn considers that it’s still cheap.
On the next page, we are going to discuss the stock ideas pitched by Tom Russo, Andrew Wellington, and Jeanie Wyatt.
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