Best Ideas Pitched by Bill Ackman, David Einhorn & Others at GIBI Conference

At the beginning of October, Dallas, Texas hosted the Great Investors’ Best Ideas Conference. The 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 renowned 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 it owns 36.08 million shares of Automatic Data Processing, representing 8.3% of the company’s outstanding stock. Ackman believes 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.” Pershing thinks that Automatic Data Processing (NASDAQ:ADP)’s employer services segment, which represents its core business, is underperforming its competitors and its potential. In this way, optimal management of the company could increase 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.

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 gotten 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 its risky European business (GM sold the 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.

Greenlight has been holding shares of General Motors Corp (NYSE:GM) for a few 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.

Tom Russo, a managing member of Gardner Russo & Gardner, talked about Wells Fargo & Co (NYSE:WFC). Around a year ago, Wells Fargo got itself in hot water following the revelation that it had opened millions of accounts for customers that didn’t ask for them. As a result, customers were wrongly charged and even had their credit scores affected. The scandal led to the resignation of Wells Fargo’s CEO John Stumpf and the company faced a backlash from the government. However, Tom Russo, whose fund owns around 12.65 million shares of Wells Fargo & Co (NYSE:WFC) (representing around 5.20% of its 13F portfolio’s value), believes that despite the issues stemming from the scandal, the bank looks good, as it wasn’t affected that badly from a financial standpoint.

Wells Fargo & Co (NYSE:WFC) recently posted its financial results for the third-quarter, which showed that the consumer sales scandal had some impact on its performance. The bank posted revenue of $21.94 billion, which declined by 2% on the year and was lower than the expected $22.40 billion. However, its adjusted EPS of $1.04 was better than the consensus estimate of $1.03. The adjusted EPS excludes $1 billion in litigation costs related to Wells Fargo & Co (NYSE:WFC)’s pre-crisis mortgage lending practices.

Andrew Wellington, co-founder, managing partner and Chief Investment Officer of Lyrical Asset Management, pitched Flex Ltd (NASDAQ:FLEX), in which the fund initiated a stake during the second-quarter and reported a $202.84 million position that contained 12.44 million shares in its latest 13F filing. Wellington likes that Flex Ltd (NASDAQ:FLEX) is registering double-digit growth in profits and is using around half of its free cash flow to return money to shareholders. Last year, Flex Ltd (NASDAQ:FLEX)’s board of directors authorized a buyback program worth $500 million, and at the end of June 2017 it had $211 million still available.

Last but not least, Jeanie Wyatt, CEO and CIO of South Texas Money Management, talked about Electronic Arts Inc. (NASDAQ:EA). At the end of June, South Texas Money Management held 325,183 shares of the company worth $34.38 million. Wyatt likes Electronic Arts Inc. (NASDAQ:EA) because the company enjoys higher margins due to going over the top (provides its products via Internet) than its peers that still focus on traditional distribution methods, like selling physical video games in stores. Moreover, Electronic Arts Inc. (NASDAQ:EA) has accelerating sales growth and has new upside in the e-sports segment.

Disclosure: None