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John Paulson, who has endured wild swings of fortune as a hedge fund manager, used his first appearance at the Sohn Investment Conference in New York to pitch three stocks: Caesars Entertainment, AngloGold Ashanti and CVR Energy.
The one-day Sohn Investment Conference is built around presentations from high profile investors, and the low key presentation marked a step back into the public eye for Mr Paulson, who last year saw losses of as much as 50 per cent across the hedge funds he manages for Paulson & Co.
It came towards the end of a day that provided entertainment for the investors packed into the Lincoln Center, but few groundbreaking ideas.
Topics ranged from the likelihood of natural gas prices remaining low, to the claimed undervaluation of UK cable company Virgin Media: at the current level of planned share buybacks, it would buy back all of its market capitalisation by 2016, said Philippe Laffont, founder of Coatue Management.
Jeffrey Gundlach, head of Doubleline Capital, provided one of the most downbeat presentations, suggesting how to build a “cubist portfolio” – one that would survive the multiple risks faced by the world economy, a presentation illustrated with extensive quotes from Marx and Edvard Munch’s painting “The Scream”.
As part of that fantastical portfolio, he suggested that investors keep $100 bills hidden in cereal boxes and buy exposure to the Spanish stock market as a hedge against the European authorities using inflation as a solution to the debt crisis.
Other big names offered few surprises. Bill Ackman, head of Pershing Square, ran the crowd through his case for JC Penney, a timely presentation as the company had plunged by a fifth on Wednesday following poor results, but Mr Ackman’s liking for the company is well known.
David Einhorn was one of the most eagerly anticipated speakers as he had used the occasion in the past to push highly successful and detailed short selling ideas, such his prescient call to sell the stock of Lehman Brothers.
This year, however, he went for breadth, rather than depth, in a tour of the world that included a preference for European retailer Dia over its more expensive counterpart Inditex and the argument that Japanese social networking companies were cheap.
Mr Einhorn also compared the online retailer Amazon to Batman, saying that its plans were inscrutable and remarking that it had “taken $30bn of profitless sales from other retailers”. Next in line, he said, was Dick’s Sporting Goods.
A notable absence from his presentation, however, was mention of Herbalife. Shares in the nutrition and weight loss company had dropped by more than a fifth since Mr Einhorn appeared on the company’s earnings call to ask about its sales practices. Shares in Herbalife closed up about 17 per cent at $49.51 on Wednesday.
From Mr Paulson, the first idea he offered those at the conference was Caesars Entertainment, the casino operator which has long been a holding of his hedge fund. Mr Paulson said that the fact that the group had pushed its debt maturities out until 2015, when $8bn comes due, gave the stock a period of option value during which the business could recover .
AngloGold Ashanti, the gold miner, was trading at its lowest valuation in 10 years, he said in his promotion of the company. “That represents an anomaly which to me represents a pretty attractive entry point”
“Today you are buying gold at $1,558 an ounce,” said Mr Paulson, who through his hedge fund is the largest holder of the gold exchange traded fund GLD. ”If you buy AngloGold, you are only paying $183 per proven ounce of gold reserves”.
His last idea was what Mr Paulson called a merger arbitrage opportunity, a throwback to his initial career trading around corporate transactions, before he made billions of dollars shorting subprime securities in 2007. The idea was built around CVR Energy, a company set to be purchased by veteran corporate raider Carl Icahn. “I call this a gift from Carl,” he said.
Mr Icahn has agreed to buy CVR for $30 a share and intends to sell it on to an as-yet-unidentified corporate buyer. He has also agreed to deliver shareholders up to $7 a share more if he is successful. This, said Mr Paulson, allowed investors to lock in a profit using warrants.