market folly

Today we're focusing on the latest investment theses from top hedge fund managers that recently presented ideas at the Harbor Investment Conference. Alex Klabin of Senator Investment Group sees value in Valspar (VAL). Instead of focusing on cyclical businesses, Senator is targeting defensive businesses for the foreseeable future. We had covered some of Senator's investment theses at a previous conference as well.

The following is a guest post from our friends over at Benzinga.com summarizing the hedge fund manager's talk:

"Klabin, who has $3 billion dollars under management, said he believes that defensive businesses are trading at a discount of about 20% to where they should be trading, given historical valuations. He specifically mentioned looking at Merck (MRK), after the drug company missed earnings this week. Klabin said the company is probably full of bloat and there is a lot of fat that could probably be cut there.

Klabin said that expectations for defensive companies are very low, with only about 4% earnings growth, barely outpacing inflation.

The specific name he discusses at the conference is the Valspar Corporation (NYSE: VAL), which manufactures and distributes coatings and paints across the world. Klabin described the company as a combination of Sherwin Williams (NYSE: SHW) and a coating application company.

The company is a global leader in coating applications, with a 40% market share. Valspar makes the coatings on the inside of plastic bottles used for Coca-Cola (NYSE: KO) and other manufacturers. Without it, the acidic acid in the Coke would eat away at the bottle.

In the paint segment of the business, Klabin said he sees the quiet ability to raise prices for paint, and no one would notice."

To read the rest of Klabin's thoughts on the company, head to Benzinga for the full post here.