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Chipotle Mexican Grill Inc
General Growth Properties Inc
Berkshire Hathaway Inc
JC Penney Co Inc
Green Mountain Coffee Roasters Inc
General Motors Co
Yum! Brands Inc
One by one, the hedge fund founders headlining this week’s Value Investing Congress—aka Wall Street’s most entertaining variety show—bounded onstage and performed their acts.
Some sang (the praises of their long bets). Some danced (around their own lackluster returns). And in the show’s greatest magic trick, David Einhorn of Greenlight Capital said a few words about Chipotle Mexican Grill (CMG) and made more than $1 billion in market cap go poof.
The two-day conference, held in a sixth-floor hotel ballroom in Times Square, is in its eighth year. It’s advertised as a venue for investors to hear “profitable ideas” from each other over cocktails, or from marquee names behind a podium. Although this has been a mediocre year for hedge funds, which have largely missed out on huge gains in the stock market, you’d never know it from the bravura performances given by some of the industry’s biggest names. Cracking jokes, rattling off statistics, and oozing polish, presenters had the audience applauding and a secondary congregation on Twitter racing to follow their recommendations.
Whitney Tilson, co-founder of T2 Partners, on Monday boosted Netflix (NFLX), a company he had previously criticized, arguing that its low price today is comparable to where Amazon (AMZN) was a decade ago, before it began a twentyfold rise. The comments sent Netflix’s ailing stock price up as much as 4 percent.
Bill Ackman, the billionaire founder of Pershing Square Capital Management, delivered a widely anticipated stemwinder on General Growth Properties (GGP), a real estate investment trust that owns shopping malls across the U.S. Over 103 slides, Ackman looked like he was having fun, rocking on his right heel and mocking an asset management company for comparing itself to Berkshire Hathaway (BRK/B). “I know Berkshire Hathaway, and Brookfield [Asset Management] is no Berkshire Hathaway,” he joked. Ackman also defended his investment in J. C. Penney (JCP), which has fallen 33 percent this year.
“I am convinced Bill Ackman is a robot,” one journalist wrote on Twitter. “No man can read this much, think so clearly, or have such awesome hair.”
The star of the show may have been Einhorn. At last year’s Value Investing Congress, the Greenlight Capital co-founder picked apart Green Mountain Coffee Roasters (GMCR), sending the Vermont company’s shares plummeting.
“I’m told the stock started sliding while I was still clearing my throat,” Einhorn said this morning, before re-assailing Green Mountain as a weak stock. He illustrated his points with images of dogs and cats doing homework, the movie Airplane!, Alfred E. Neuman, and a young Bill and Hillary Clinton.
Pivoting to General Motors (GM), Einhorn said he liked what he saw in the once-bankrupt carmaker, including a cleaned-up balance sheet and a rise in the perceived value of the company’s brands. And Cigna (CI) is promising, he said, despite Wall Street’s vague worries about Obamacare. “When we see something that looks like too much work for some people, we see opportunity,” he said.
With the crowd worked up, Einhorn announced what they were waiting for: Chipotle is a short. (Short-selling is a way to bet that a stock will decline.) The chain is susceptible to copycats, he said, as well as rising grain prices and investigations into its labor pool. A better performer, Einhorn said, is a downscale rival.
“Come to Taco Taco Taco Taco Taco Taco Tacooooooo Bell,” Einhorn sang. The Yum! Brands (YUM) chain has been “a laggard for decades,” but was positioned to “eat Chipotle’s lunch” with the introduction of a new menu with higher-quality ingredients. And sales of lower-end items were still strong.
“The Doritos Locos Tacos menu has been a huge success,” Einhorn noted, as shares of Chipotle, a corporation with more than 30,000 employees, fell as much as 8.2 percent.
Tilson, a co-founder of the event, thanked Einhorn and informed the audience that it wasn’t quite time yet for lunch.