market folly

We're posting up notes from the Ira Sohn Conference.  Michael Price spoke briefly on J.C. Penney (JCP) saying that he just bought shares on the dip today.  Look at the ownership, the board, the assets below it.  "Look at the top lines, the revenues" (that was the problem).  He also said it's too early to get into banks, and to wait it out.

Price then introduced the Ira Sohn Contest Winner: Shantanu Agrawal who pitched long Xerox (XRX).  The judges panel consisted of David Einhorn (who is long XRX), Bill Ackman, Joel Greenblatt, Seth Klarman, and Michael Price.


Long Xerox (XRX): Stock $7.40 now. Uses sum of the parts (SOTP). Core business generates FCF, not high growth, but EBITDA to FCF conversion. Create equity at 14% FCF yield, could re-leverage the business, 21% FCF to equity.

Catalyst is return of cash flow in dividends and buybacks. $9.50 base, upside $11-12. Downside to $6.50. See $10B debt, but $6B associated with equip financing business. So he says net debt, after cash, only $2.7B, or $0,9B. Document related revenues were actually up 1% in 2011, so idea is not collapsing as fast as people think.

Bull case is cheap, FCF high, debt not as high as it looks, core business in slow decline not collapse, and decent risk/reward with $6.50 down, $9.50 fair value, $12 upside.


P.S. - Don't miss other presentations from David Einhorn, John Paulson, Bill Ackman & more: notes from Ira Sohn Conference 2012.