market folly

Continuing coverage, we're posting up notes from the Value Investing Congress.  Below are notes and the presentation of Jeff Ubben of ValueAct Capital, which manages around $8.5 billion.  His presentation was entitled 'Avoiding Complexity and VAC Circle of Life.'

Ubben's Stock Ideas

CB Richard Ellis (CBG):  Dominant market share, 50% recurring revenue, does real estate leasing.  Ubben pointed out that outsourcing is in the first innings and that the company is one of only 2 that can scale it.

Moody's (MCO):  He doesn't like traditional financials, hard to value assets, or retailers.  Yet he likes MCO.  Says high moat and limited competition, pricing power.  55% recurring revenue and a big M&A cycle coming.  Then he showed slides from the company's pitch book (Einhorn disparaged MCO earlier in the day).  Ubben said MCO is "schmuck insurance" and at the end of the day their ratings are a currency.  We previously detailed when Ubben went activist on MCO back in 2011.

Valiant Pharmaceuticals (VRX):  A branded generics play.  We recently posted up why Ruane Cunniff & Weitz Funds like VRX.

Motorola Solutions (MSI):  This is his biggest position.  He says the big thing here is to drive the payout ratio.  It's going slow and steady but he thinks there's an opportunity for them to actively help the company. 


Other stocks he mentioned:

Adobe (ADBE)

CR Bard (BCR)

Sara Lee

Halliburton (HAL)



Learning From His Mistakes:

1. Valuation.  Just math, require 10% per year.
2. Leverage.  Make sure it's appropriate for the cyclicality of the business.
3. Bad Governance.  Don't go looking for a problem to fix.
4. Complexity.  Need easily identifiable drivers.  Simpler, the better.

For more from this hedge fund manager, we've posted up Ubben on activist value investing.


Embedded below is Ubben's slideshow presentation from the Value Investing Congress: 





Check out the rest of the hedge fund presentations from the Value Investing Congress.