Delivering Alpha

Young guns provide top investments for future

This young gun says he has a $50 billion idea
This young gun says he has a $50 billion idea

The young guns are out and they're looking to bag some big investing game.

Three executives who Institutional Investor recently tabbed as the ones to watch in the under-50 crowd on Wall Street spoke Wednesday at the Delivering Alpha conference presented by the magazine and CNBC.

And they've got plenty of ideas for the future.

Josh Birnbaum, 41, CIO at Tilden Park Capital Management, is investing in mortgage putbacks, which involve originators being forced to buy back mortgages from the holder. They happen usually in cases of fraud or deceit, and Birnbaum believes there is opportunity—$50 billion worth.

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He called it "one of the largest settlement opportunities to come out of the" financial crisis, which was precipitated in large part by fraudulent and reckless bank lending. Investors in mortgage bonds have been demanding restitution on the loans, and regulators have come down hard on financial institutions involved.

"We read in the paper almost every day about some new big settlement that banks are paying related to the crisis," Birnbaum said. "Mortgage putbacks are a great angle, a great way of playing the settlements."

Joshua Birnbaum
Joshua Roberts | Bloomberg | Getty Images

They offer two advantages: One is that the loans can be purchased in the market at deep discount to par, then sold to the originators at par; and two, that purchasers are entitled to settlements from all claims filed during the life of the loans.

The downside: "These are very complicated securities," he said, and investors need to know what they're buying, which requires a lot of time and research.

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Jeffrey Smith, CEO and CIO at Starboard Value, likes packager MeadWestvaco, which he said could be poised for a breakout after lagging the performance of its competitors.

"We believe there are many opportunities to improve value at the company," Smith said. "We are encouraging the board and management to take action to maximize shareholder value."

Smith said the company has the potential to reach $59 a share, which would be about 36 percent growth from its current level. MeadWestvaco trades at a steep discount—about 50 percent—to its peers, he said.

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Deepak Gulati, 36, CIO at Argentiere Capital, has a variety of ideas.

They include going long on volatility, which has been dormant for all of 2014.

He also likes stock indexes in Japan, Korea and China as well as the European financial sector and U.S. energy stocks.

Finally, he is tech-focused as well, with an emphasis on Amazon, Texas Instruments and

—By CNBC's Jeff Cox

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