UPDATE: Hedge Fund Manager Tepper Thinks BofA Shares Could Go To $27
May 26 2010 - 7:00PM
Dow Jones News
Sallie Mae and American International Group Inc. (AIG) 8.175%
junior subordinated debt were some of the picks hedge fund managers
touted at a widely followed industry conference in New York on
Wednesday.
Manager David Tepper, who made headlines last year for his
outsized success betting on a comeback in bank stocks and debt,
told attendees at the annual Ira Sohn Investment Research
Conference that he still likes Bank of America Corp. (BAC) and
predicted shares, which closed Wednesday at $15.47, could go to
$27. Also getting Mr. Tepper's thumbs up, Spanish bank Banco
Santander (SAN.MC, STD), which has been battered amid the European
debt crisis.
He said shares could double in price. He's also bullish on a $4
billion issue of AIG junior subordinated debt, with an 8.175%
coupon.
Jonathon Jacobson, founder of hedge fund manager Highfields
Capital Management, said he thinks SLM Corp. (SLM), known as Sallie
Mae, should be worth $15-$25 a share, thanks to the shakeout in the
student loan industry and what he called the company's ability to
acquire the servicing rights of student loans being relinquished by
companies exiting the business.
The stock was up 5.5%, to close at $10.96.
Some managers were downbeat. In a presentation called "For
Profit Goes To College," FrontPoint Partners hedge fund manager
Steve Eisman said he remains bearish on for-profit education
companies like Apollo Group Inc. (APOL) and ITT Educational
Services Inc. (ESI). These companies are "marketing machines
masquerading" as educational institutions, said Mr. Eisman, who was
an earlier predictor of the subprime mortgage woes way back in
2004.
Representatives of the two companies didn't immediately respond
to a request for comment.
David Einhorn, still known for his bearish call at the 2008
conference on Lehman Brothers Holdings Inc. (LEHMQ), which shortly
thereafter headed into bankruptcy protection, said long term budget
problems will affect current generations, not their
grandchildren's. Debts will come due sooner than people think, he
said. Einhorn also reiterated that he thinks the system of how
credit ratings agencies assign ratings should be looked at by
regulators. Last year, Einhorn at the Sohn conference said he was
shorting shares of Moody's Corp. (MCO).
Jeremy Grantham, co-founder of investment management firm GMO
LLC, said he thinks the housing bubble in the U.K. and Australia
haven't yet deflated, and will eventually cause "pain" just like
the collapse of the U.S. housing bubble.
Jamie Dinan of York Capital Management says his firm likes the
equities of companies coming out of bankruptcy, like LyondellBasell
Industries (LALLF, LALBF), which came out of bankruptcy in April
and is looking to list on the New York Stock Exchange later this
year.
Also slated to speak Wednesday was manager Bill Ackman. At the
2007 conference, he rightly predicted that bond insurers would be
hurt by the subprime mortgage crisis.
The unusual conference, at which 12 hedge-fund managers present
their favorite investment ideas in concise 15-minute presentations,
was founded 15 years ago in honor of Ira Sohn, a Wall Street
analyst who died of cancer at 29-years-old. The conference raises
funds for pediatric illnesses. It is followed keenly by investors
looking for new perspectives from top hedge-fund names.
Now the foundation is launching a new conference in San
Francisco, to raise money for a not-for-profit organization that
runs a network of charter schools in the Bay Area. The first event,
scheduled for Oct. 6., is being organized by Patrick Wolff, a
managing director at hedge fund firm Clarium Capital who is also a
two-time U.S. chess champion and International Grandmaster.
(Alistair Barr and Melissa Korn contributed to this
article.)
-By Joseph Checkler; Dow Jones Newswires;
212-416-2152;joseph.checkler@dowjones.com
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