Billionaire investor Larry Robbins of Glenview Capital Management doesn't have unbridled optimism on the stock market, but he thinks stocks like Thermo Fisher, Monsanto and Flextronics provide an excellent opportunity, especially compared to ultralow bond yields.
"Glenview is not wildly bullish on the market. We would just simply say the conditions are normal for us to run the playbook we normally do, which is find great companies at good or great prices and then engage with them to do smart things to build value," Robbins said Thursday in New York at the Harbor Investment Conference in an on-stage interview with fellow hedge fund manager Bill Ackman.
Robbins again recommended buying the stock of agricultural and chemical giant Monsanto. The company is the second-largest holding for Glenview, which has about $10 billion under management. Thermo Fisher is first and Flextronics is third.
He said the world would need about 3 percent more food per acre of farmable land over the next 20 years and that genetically modified foods and "informatics," areas where Monsanto is a leader, are the most likely way to meet that demand. Informatics refers data-driven research to improve crops.
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Robbins added that Glenview and Monsanto management had engaged in "productive" discussions to take on more debt given low interest rates.
"Given those business characteristics, that's a company that should be levered 2 ½ times, four times," Robbins said, noting how Monsato recently had $1 billion in net cash. He said Monsanto would eventually be able to buy more stock back at a higher return, pay dividends to shareholders, and invest in new technology and equipment.
"That's the responsible thing to do," Robbins said of taking on debt to expand. "They have a business which is by definition a growing annuity," he added.
Robbins also briefly discussed McDonald's, a smaller Glenview position. He said the fast food chain had struggled recently and could be better run, citing Burger King, Dominos and Dunkin' Donuts as model franchises who had changed course.
Robbins said incoming CEO Steve Easterbrook is "interested in driving and growing value." That, combined with potential board changes in the next year, make the business a "uniquely interesting opportunity right now."
He didn't indicate that Glenview would nominate directors for McDonald's.
The Harbor event is organized by Ackman of Pershing Square Capital Management and Mark Axelowitz, a managing director at UBS Private Wealth Management. The investment idea conference sells sponsorships of up to $50,000 and tickets start at $1,500. All proceeds benefit the children and families of Boys & Girls Harbor, a nonprofit in East Harlem, New York.
