market folly

The annual Sohn New York Investment Conference recently took place and featured hedge fund managers sharing their latest investment ideas to benefit charity.  Before the main event, emerging managers shared their ideas in the Next Wave Sohn portion of the event.  Here's notes from these pitches.  You can also view notes from the main Sohn New York Conference here too.

Next Wave Sohn New York Notes 2018

Dylan Adelman, 2017 Sohn Investment Idea Contest Winner, Student at Penn.  Long Vostok New Ventures. (VNV) Listed in Stockholm.  Russian classified business.  He compared it to Craigslist, which has 90% operating margins and only 40 employees, making $500 million/year in profit.  Basically, "the Craigslist of Russia, but run to maximize profit.


Alexander Captain, Cat Rock Capital Management: Long Takeaway (TKWY), listed in Amsterdam.  "The Grubhub of Central Europe."  He said they looked for stocks that could go up 10x in 10 years, such as AMZN that when up 23x, and MA, PCLN, which went up more than 10x each.  Key was three factors: a big market, obvious shift, and winner-take-most economics.  He says Online Food Delivery fits these criteria.  $50B of a $2T food market, so huge market.  Ecommerce for restaurants is an obvious shift, as 80% of orders are still done over the phone now.


Tim Garry, Pelorus Jack Capital: He is predicting a price momentum / Beta crash.  Says 40% of market was driven by fundamental investors 10 years ago, and now it's only 11%. Relation to style factors such as momentum is more important than Beta.  Says there is a big spread between growth and value, and now quants are all in growth trades.  He uses DeMark indicators and was mixing up technical analysis and quant talk.  "High beta stocks underperform low beta."  Sounded like his pitch was almost be long dividend stocks and short growth stocks (back in 2016 for 2 months, growth stocks dropped 5% two months in a row).


Rashmi Kwatra, Sixteenth Street Capital:  Long Bank of Bangladesh (BRAC).  She runs a concentrated long only fund investing in Southeast Asia.  Bangladesh has a population of 163M, is located between India and China, entire country is the size of New York State.  Similar thesis for region - underbanked, rapid growth, etc


Oleg Nodelman, EcoR1 Capital: Long Ascendis Pharma (ASND).  Biotech PM, cancer survivor, claims to be "value oriented" Biotech PM, yet less than 10% of biotechs are profitable, and he points out that there is a 90% clinical failure rate.  ASND is a "platform company" which is in Phase 3 trials of a new Growth Hormone Deficiency treatment that only needs once a week shots instead of current treatments which are daily shots.   He does the math and gets $1.5B peak revenue based on $35k/year and 50% penetration, 8 years duration.  Says Big Pharma will buy them out if they are approved, and could pay 4x revenue to get $129/share. They also have Achondroplasia treatment (this is what Verne Troyer had) which he says is worth $111, and something called PTH worth $49.  so he argues you could double your money on this one.


Scott Goodwin, Diameter Capital Partners: Short Rallye, the owner of a levered French grocery called Casino, buy the 3 year CDS.  He runs a $1.7B credit fund, long/short.  This play has all the elements they look for: business with complexity, challenged industry, and similar playbook in other situations.  "We want equity risk masquerading as credit risk." Grocers are already under attack, just like they are in the US, but if macro turns down at all, there is no margin for error here at all.


Be sure to also check out notes from the main Sohn New York Conference as well, featuring Bill Gurley, David Einhorn, Larry Robbins and more.