Looking to Deliver Alpha? Here Are Six Really Big Ideas
From buying individual company stock to finding value in the aftermath of the housing market, there are still a plethora of ways to generate value for investors.
Here are six innovative ideas presented by a panel at the Delivering Alpha conference presented by CNBC and Institutional Investor magazine:
Kyle Bass, founder and principal, Hayman Advisors: The world is on the precipice of serial sovereign debt defaults, setting up challenges for investors. "Today is the largest accumulation of peacetime debt in world history," he said. "A cluster of sovereign defaults" is going to happen "much sooner than people are ready for." His idea: Buying options against Japanese bonds, believing that the nation could be the first domino to fall after Greece defaults.
Leon Cooperman, chairman and CEO of Omega Advisors: Returns are so low on other assets, particularly bonds, that investors will have only one place to go. "The US equity market will be higher at the end of the year than it is presently. Stocks are the best house in the financial asset neighborhood." His idea: At some point shorting US debt, and for now buying the following stocks: Apple, Qualcomm, Boston Scientific, Sallie Mae and KKR Financial Holdings.
Philip Falcone, founder of Harbinger Capital Investments: With the economy on the wane, unemployment high and income stagnating, consumers are changing. "There's a definitive shift today in the way the consumer is looking at things. In tight economies, the consumer always takes a different approach to how they shop. They become thrifty shoppers. The best way to capitalize on this is to focus on companies where the consumer is buying value-added products." His idea: Spectrum Brands.
J. Tomlinson Hill, CEO, Blackstone Marketable Alternative Asset Management: If real estate hasn't bottomed yet, it isn't far away. That is setting up an opportunity for large investors to capitalize on the leftover damage. His idea: Buying pools of distressed mortgages, defined as two months overdue or in foreclosure. "By and large you're not going to see another 15 to 20 percent across the board (decline)," he said. Investing in this space is difficult, with the need to go through 50,000 loans or more to find which ones are worth buying. But Hill said his firm contracts out to perform that service.
Daniel S. Loeb, Founder & CEO, Third Point: Yahoo. Yahoo? Yes, Yahoo . After launching into a blistering attack on the battered Internet company—"one of the most horrendous management teams," "the same crappy interface, the same stupid logo, "led by a series of people who didn't know what they were doing"—Loeb said there actually is value at the company. He said it is worth $19 in liquidation value and believes the stock can grow with a new board and management team.
Anne B. Popkin, president, Symphony Asset Management: Many things have changed since the financial crisis in 2008, not the least of them the shape of corporate credit. Popkin believes higher-quality leveraged debt has become attractive since the dour days of the credit collapse and now presents good opportunity. Her idea: short-dated corporate loans, particularly in retail. "We are moving up the capital structure to higher quality and we are staying in short maturity and liquid securities," she said. "We don't think you should bet the ranch...Risk management is absolutely crucial here."