Three top investors just shared a stock pick during a panel at the CNBC Institutional Investor Delivering Alpha conference in New York City.
The players were:
- Robert Bishop, the founder of Impala Asset Management Jim Chanos, Kynikos Associates founder and managing partner Bill Miller, the founder, chairman, and chief investment officer at LMM
Throughout the conference, speaker after speaker has described this market as dangerous – discussing how low yields have pushed investors toward desperation and how it seems as if assets are fully priced, making it hard to find value.
So pay attention.
First up, Miller:
Miller said his son described his pick as both “boring and obvious.”
He’s long the S&P 500 and short the 10-year Treasury. “Treasurys are hardly a risk-free asset,” he said. “This more or less mathematically has to work.”
Miller is also long the stock of the beleaguered company Valeant Pharmaceuticals.
“Forget about the earnings number and just focus on free cash flow,” he said.
He added that the company was a busted rollup that would eventually turn into a leveraged buyout.
“It’s a completely different company, different management … you should be able to make 25%, 30% on Valeant in the next five years,” he said.
He added that it should now be considered a slow-growth regular pharmaceutical company.
The idea is Teck Resources, a company that trades in the US and Canada. It’s a mining stock, so this is a commodities/metals story. You have to believe that prices will go up as Chinese demand improves.
And there’s something to be said for that, as there are signs that the Chinese government is acting to stabilize its economy, despite saying last year that it was working toward allowing it to normalize. Generally, its stimulus has been about infrastructure – especially property development – which is great for metals.
Bishop said the world was trying to slow its production of metals and China specifically was limiting the days coke and coal could be mined.
Teck Resources makes zinc, copper, coke, and coal. It has also cut costs significantly.
- Bloomberg TV screenshot
Chanos rehashed a short position he had already announced: his short of the world of Elon Musk.
On Tuesday he focused on Tesla’s merger with SolarCity, which he said was “a completely flawed business model.”
“The bottom line is that Tesla, which was slightly above the red line, puts itself well under the red line by buying SolarCity … The combined SolarCity and Tesla, which we think will have a cash burn of $1 billion a quarter, will constantly need access to capital markets,” he said.
He said the proof of that, and of the fact there’s something wrong with corporate governance at Tesla, was that the Tesla board refused to provide a bridge loan to SolarCity. That was disclosed in merger documents.