CNBC EXCLUSIVE: CNBC TRANSCRIPT: CNBC’S MARIA BARTIROMO SPEAKS WITH TIGER MANAGEMENT FOUNDER JULIAN ROBERTSON TODAY ON CNBC
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Tiger Management Founder Julian Robertson today, Tuesday, Oct. 23rd on CNBC's "Closing Bell with Maria Bartiromo."
All references must be sourced to CNBC.
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MARIA BARTIROMO: Julian, thanks for being with us. Great to have you on the program.
JULIAN ROBERTSON: Great to be here. Thank you Maria.
MARIA BARTIROMO: Let-- let's talk about investing in this broad landscape of-- the economy. How would you characterize where we are right now in the economy?
JULIAN ROBERTSON: Well, I think it's quite an interesting-- time in our economy and I think the economy-- and-- some of the things overseas are really having a big effect on investors. And-- we have forgotten that there is-- something outside of the economy and that is various companies. And-- I think that right now a lot of very good investors have become so frightened about what's going on in Europe and in Asia and-- with-- QE2, QE3, QE-- et cetera, that-- they've kind of lost their way and are not realizing that there's still an awful lot of marvelous companies available at very reasonable prices. And-- I-- am-- am-- am a hedge fund seeder and I've worked with-- people and I've-- I've seen this problem develop. And there are these problems overseas, there are these problems in Europe, but on the other hand-- the stock prices are very reasonable. We have some of the greatest bargains available. I think-- Apple is a magnificently-- company and-- company and-- a great-- value of these… And it's rare that you get a chance at having a great company at a great value.
MARIA BARTIROMO: I want to ask you about specific companies and holdings-- coming up, but so when you look at this market, for example today when we see a market down 200 points and all this nervousness really driving the day, would you be poised to put money into the market, buy into the sell off?
JULIAN ROBERTSON: I would buy the-- specific good companies that are available now. I-- I think that-- this is the perfect time for hedge funds. And-- because I think we know how to hedge, we can hedge. Some of us may have hedged so much that we really aren't going to do well unless-- a real tragedy occurs economically in the world.
MARIA BARTIROMO: What's the best hedging strategy?
JULIAN ROBERTSON: Well, I think, you know, the best hedging-- strategy basically is to-- be long the 50 best companies in the world and be short the 50 worst companies in the world. And-- unfortunately a lot of times the 50 worst companies outperform the 50 best. But-- it's a good system for anybody who-- has been in this business for a while and-- because it-- it-- it is hedging.
MARIA BARTIROMO: And then of course you have been in this business for a long time, having the best record of any hedge fund manager for so many years--
JULIAN ROBERTSON: Well--
MARIA BARTIROMO: --before-- stopping and managing for other clients. How has the hedge fund business changed?
JULIAN ROBERTSON: Hedge fund change-- as a business has changed tremendously since I started. And it's-- it's become much more difficult. And the reason is that our competition used to be individual brokers, individuals themselves, bank trust departments. Now our competition are other hedge funds and the hedge funds are just much tougher competition than the-- brokers and individuals and-- trust funds were.
MARIA BARTIROMO: Do you still see the kind of liquidity and participation-- by investors that we have over the last, you know, two decades or so? I mean it feels like the retail investor has left the party. Is it all institutional right now?
JULIAN ROBERTSON: I think there's a lot about retail investors having left the party and maybe the retail investor in many ways has-- has-- has turned himself-- over to a hedge fund manager. And-- I think-- maybe hedge funds refect-- reflect wealthy individuals as much as anything else.
MARIA BARTIROMO: But are they doing as as well as they had been? You know, people wondering if in fact the performance is still there, given all the competition. That ETFs, mutual funds, so much competition for the investor dollar today.
JULIAN ROBERTSON: Well, I think the-- the-- the real reason that hedge funds in general are not performing as well as they have is if the-- is so much more competition for more hedge fund money. When I started-- I don't-- do not think there was a half billion dollars-- a half billion in hedge funds. Now there're $3 trillion. And-- so-- this-- the differences are astronomical in terms of-- amounts of money.
MARIA BARTIROMO: So do you worry that the-- this part of the investor class has left, like the retail investor? Do you think there's a lot of money on the sidelines that is poised to come back in at some point? And what would be the catalyst for that money to come back?
JULIAN ROBERTSON: Well, I think that-- you know-- a change would be-- catalytic. I-- I really feel that-- if American-- industry felt that the country were being effectively managed it might get more courage and it might-- go in and-- do a lot of investing on its own. It's very difficult for these men who run corporations all over the world to-- to make the decisions now to go ahead with expansion. And-- I-- I-- I think that-- that-- that if the economy got going-- the markets would-- would-- would get going.
MARIA BARTIROMO: Do you think the election represents that kind of catalyst? Will things loosen up after the election? I know you've been a supporter of Mitt Romney. You think he has a shot to win?
JULIAN ROBERTSON: I think he has a good shot. And I'm thrilled over and I-- at the very-- worse I think the American people know what a fine man Mitt Romney is and I think he's acquitted himself beautifully during the campaign. And-- I am very hopeful he's going to get elected.
MARIA BARTIROMO: It's unbelievable how tight this race is.
JULIAN ROBERTSON: It's very tight. It's very tight. And I think Mitt-- I-- I-- I think the-- is an odds on favorite to win the-- the popular vote. Whether or not he'll get the electoral vote, I don't know.
MARIA BARTIROMO: Let's talk a little about investing today. I know you've been a long time holder of Apple. You just said a moment ago you still think it represents value. Why is that? Because of where it's trading versus its profitability?
JULIAN ROBERTSON: Well, I-- I just think-- you know, that's just one thing that's advantageous about being, you know, Methuselah. You can go back and see in history where things have sold. And-- we used to have the Nifty 50-- stock list, which were stocks over 50 times earnings. And all of the great companies practically at that time in the '70s were above 50 times earnings. And-- and I mean that-- that was even including companies that since then have proven to be not so terribly great, but still good. Like Avon Products. And-- Polaroid, which is no longer with us. All those companies were well above 50 times earnings. And-- Apple is now probably-- somewhere around 14, 15 times next year's earnings. It's-- very, very reasonable for the kind of growth you can get. And-- I think their system is good too. They've got the-- really scientific minds here in the United States-- coming up with these wonderful devices and then they are shipped to ti-- China. I mean the ideas are shipped over there and they're made over in China and the Far East. And-- I-- I think that-- is-- is a very good-- system. And-- and-- and even-- a better system, if you look at an Armageddon-type thing-- if-- if some of the American companies had to pay their-- manufacturing employees-- …in the event we really went into a very, very weak period in the economy, it would be horrible for them. Apple really is sort of outsourcing most of this. And-- if you take the worst look at things and-- and-- the economy-- Apple might be a place to hide.
MARIA BARTIROMO: And increasingly you've been looking at technology, Apple, as well as other tech companies.
JULIAN ROBERTSON: Correct.
MARIA BARTIROMO: Tech stocks.
JULIAN ROBERTSON: Correct.
MARIA BARTIROMO: But this most recent earnings period. Aren't we seeing that there's a real slow down going on for technology? You had companies like Microsoft, Intel, IBM, all reporting that things have in fact slowed down. So is now the time to commit new capital to some of these tech names, even in the midst of this global slowdown?
JULIAN ROBERTSON: I think it is. And-- and I think-- those-- those companies you mentioned-- have been sort of slowdown-- tech companies for some time. I mean-- well, let's face it. What does Intel really supply? They supply the personal computer-- business and that is-- sort of being-- that-- that's sort of being changed by the new Apple products that have come out.
MARIA BARTIROMO: Well, there's this real move to mobility.
JULIAN ROBERTSON: Well, I mean, you know, and the-- the-- the iPhone is probably better than almost any personal computer was 20 years ago.
MARIA BARTIROMO: So--
JULIAN ROBERTSON: It's my--
MARIA BARTIROMO: So you're saying there's these big demographic changes and sort of structural changes within technology and Apple is leading that move?
JULIAN ROBERTSON: I think so.
MARIA BARTIROMO: Yeah, for sure. Facebook, another-- stock or company that you've been looking at in terms of a social media. What's the attraction?
JULIAN ROBERTSON: Well, I think the attraction is the social media side of it. And-- you-- e-- even Eric Smith, who-- at Google who was a little late to the party-- is a great believer in-- the social media. And-- I think it is, you know, live, well and-- moving ahead. And-- I am-- kind of-- an admirer of the-- young fella who heads up-- Facebook.
MARIA BARTIROMO: Mark Zuckerberg.
JULIAN ROBERTSON: Mark Zuckerberg-- gave a gift to Newark that is-- going to result in something just wonderful over there. And-- I don't think he gets enough credit for being the philanthropist he is-- for he is a very fine man and this-- effort he has put forward in Newark is going to bear fruit very, very fast and is going to be, I think, the biggest thing in education-- over the next several years.
MARIA BARTIROMO: And of course you and your foundation have also done so much to change education.
JULIAN ROBERTSON: Well, what--
MARIA BARTIROMO: Why--
JULIAN ROBERTSON: --we've tried to help out on some of these things, but Mark is really on the lead on this.
MARIA BARTIROMO: Why do you think-- his gift and what he is doing will really move the needle in education?
JULIAN ROBERTSON: Well, I think he's given a gift that's going to make it possible that-- there will be-- some change-- among-- among-- governing bodies on the idea that a teacher can never be removed. And-- the whole idea in education should be to-- get the best teachers. And if you've got bad teachers, get rid of the bad teachers and replace them with good teachers. And encourage good teachers. Encourage 'em by bonuses and all of that. And I think Mark is very well aware of all of that and he is-- very helpful in-- in getting this put in through the country.
MARIA BARTIROMO: That's terrific. And of course some of the stories in education are just horrific. I mean you--
JULIAN ROBERTSON: Horrific.
MARIA BARTIROMO: --think about you can't get rid of a teacher and you know--
JULIAN ROBERTSON: You can't--
MARIA BARTIROMO: --that there was sexual harassment.
JULIAN ROBERTSON: The-- it's-- it's so absurd.
MARIA BARTIROMO: It's outrageous.
JULIAN ROBERTSON: It really is. And-- and-- and some of the ideas we as Americans have had such as, you know, small classroom. Well, I'd rather have the best teacher in the school with 50 children-- with 50 kids in his class than the worst teacher with a one-on-one situation. And-- I think we've got to realize that-- that great teachers-- can teach more people and should.
MARIA BARTIROMO: So in terms of Facebook, I know you like-- you like the management, you like Mark Zuckerberg and what he's done. You admire-- that. Would you buy the stock?
JULIAN ROBERTSON: I-- I-- I-- I don't-- really know enough about-- the stock-- to say that. I've sort of been lucky on that. Some of-- our younger people-- that-- have-- a private investment group-- were very early in Facebook and got in it many years ago. And-- I'm part of their partnership so it's-- it's been-- but that-- I don't know enough about it-- the pricing now.
MARIA BARTIROMO: As-- as-- sort of-- a student of investing and-- and Wall Street for so many years were you surprised at the debacle with that IPO? The company has lost 50% of its value. Real sort of-- you know, botched up IPO from the get go.
JULIAN ROBERTSON: It really was botched up. And-- but in-- in-- in a sense it was symbolic of what hot deals have been for years. You know, they-- there-- there was-- you know, the-- people buying it and greedy and it's all kind of a greed game and in a sense everybody gets what they deserve.
MARIA BARTIROMO: Tell me about your portfolio and how you're-- allocating capital today? In an overall strategy I know Apple's a big holding. Where else do you put money today?
JULIAN ROBERTSON: Well, I'm looking around for great companies. I-- I-- I-- and I-- I've actually invested in a European air carrier. And-- and I-- I'm-- I'm very-- high on-- on-- on Ryan Air. Ryan Air is the low cost producer in the world and-- it's selling at a very reasonable multiple. I know its chairman very well and I think he's a cost cutter supreme. And-- I-- I take-- that company has a moat around it because of its costs being so low. Rolls Royce, many people think of as-- as a luxury car manufacturer. In essence what it is is a great supplier to the-- aerospace and-- aeronautics-- all-- all over the world. And-- you know, this is-- another way of playing-- the airlines-- because they will build-- so much of-- the parts for these airlines and the engines and all of that. So-- Ryan I think is e-- excellent stuff. A couple of financial companies. Capital One. Ocwen Financial. Ocwen-- Ocwen being a mortgage-- servicing company that's just bought-- a large-- mortgage company from-- Wilbur Ross. And-- those-- those companies have-- have a lot I think going for 'em. And Capital One's a fine company. And then-- the-- the-- you know, always hedger-- I think the steels-- are-- are away overvalued. And-- A.K. Steel and U.S. Steel and-- Japanese steels are-- just ridiculously priced for anything except a real take off economy and I don't think anybody expects the economy to explode on the upside.
MARIA BARTIROMO: So they're trading at high levels and at the same time that the backdrop for business is actually slowing down?
JULIAN ROBERTSON: Very definitely.
MARIA BARTIROMO: For the steel companies?
JULIAN ROBERTSON: And-- and-- and-- and in China there're huge stockpiles of steel everywhere. And-- and-- and-- and, you know, China is becoming the big-- user of steel.
MARIA BARTIROMO: Interesting that you are looking some European companies in the middle of the worst debt crisis we've ever seen in Europe. So you're really being selective within this upset in Europe. How worried are you about what's going on in Europe right now?
JULIAN ROBERTSON: Quite. But I think, you know, somehow we always seem to muddle through these things. And-- I think we'll muddle through again. And-- but-- I-- I-- I think that-- having the world's low cost producer is a pretty good thing in the airline and travel business.
MARIA BARTIROMO: So it's really the airlines-- and of course Rolls Royce, this car--
JULIAN ROBERTSON: Rolls Royce.
MARIA BARTIROMO: --company and-- and Jap--
JULIAN ROBERTSON: And-- and-- and-- and I-- I-- that's sort of coincidental. I mean one's an airline, one's a supplier. But-- I-- I do believe-- airline travel will be a continuing growth area of the world.
MARIA BARTIROMO: Do you think that there are other bargains in Europe? Would you be investing in Europe right now given what's going on?
JULIAN ROBERTSON: Yeah, I-- I would. I-- I think there are some-- very good bargains in Europe.
MARIA BARTIROMO: Do you expect Greece to stay in the euro? Any thoughts about how the euro might look different in the coming years?
JULIAN ROBERTSON: I-- I-- I-- I can't understand-- why-- why eur-- why Greece stays in the-- in the euro. And-- and I don't quite understand why the euro wants-- Greece. But-- I think the Germans-- it's quite-- the-- they-- they have-- they have the best of both worlds right now. I mean they-- they have great manufacturing-- power and-- and they have a very cheap currency in the euro. And-- if-- Greece and some of these other people get out of it, then the Germans would and longer have-- a cheap currency and they would-- find themselves in much more competitive situations.
MARIA BARTIROMO: I guess the worry is is that others follow suit, like Portugal, Spain, Italy?
JULIAN ROBERTSON: That's right. That's right.
MARIA BARTIROMO: It-- it-- in terms of overall broad strategy, you're-- you're short on the steels. This is interesting. Do you think there are other areas of this market that get impacted from the slowdown in China? Is that why you-- you short steels, because of the valuable but also because of the slowdown in China? And if so, what other commodities type companies will get impacted by that slowdown.
JULIAN ROBERTSON: Well-- let me just say first that I think China is-- the-- the place to be for hedge funds. I really do. There are so many-- great companies there and so many absolute frauds there that-- that's where you should be. And-- you know, if I were-- if anybody ever asked me, "Where would you go to be in a hedge-- to start a hedge fund," I'd have to say China. The trouble is-- who wants to go there and live there? And-- we are finding such people and-- backing them. And I am looking forward to seeing how they do in this-- in-- in-- in the Chinese area.
MARIA BARTIROMO: So even if a hard landing occurs, that works because you're shorting part of it in your--
JULIAN ROBERTSON: That-- that's right.
MARIA BARTIROMO: --hedging-- the hedging strategy. What are your thoughts on the debate last night? How did that go?
JULIAN ROBERTSON: I think the debate-- went-- went well. I have-- thought both-- both guys-- really kind of made us proud. The intellectual strength they both showed was really pretty fantastic I thought. And-- of course I've been a longtime admirer of Mitt Romney's and-- for better for worse-- I'd-- I'm really happy that the American people are seeing what a fantastic human being he is. And I think-- that's-- that's one of the good things that's come out of the debates.
MARIA BARTIROMO: You have been visiting and-- I guess investing in and-- and you like New Zealand a lot. Can you talk to us about that?
JULIAN ROBERTSON: Well-- New Zealand is a labor of love, not-- not really investment. I mean I have-- I've got a-- couple of labors of love that it's-- reached such a proportion that I guess they-- they would-- they would be investments now. But-- I-- I really-- think it's a gorgeous part of the world and-- I'm over there more as a lover rather than an investor.
MARIA BARTIROMO: Oh, that-- that's good. I'm glad you're having fun. Is it-- you're-- you're still here putting money to work. I mean working on your foundation. But at least you have some time for some fun.
JULIAN ROBERTSON: Well, it's fun and-- life is fun and-- New York is even fun-- without my wife-- which I never-- thought any place would be-- at-- for a while. But it-- it is. And-- I've often said-- you know, as long as you can walk and talk-- you're kind of in demand in New York.
MARIA BARTIROMO: What are your other priorities for the foundation?
JULIAN ROBERTSON: Our-- our foundation-- really we are very interested in stem cells. We're very interested in cancer research. I'm extremely interested in the environment, which is tragically being overlooked. And we've got a planet that may go up in smoke soon and-- and-- and-- and no one is paying any attention to it. And-- I-- I think of all the things I'm involved with that the environmental situation looks the worst now because it's not getting any attention. The good news is that everyone under 30 is very aware of the environmental situation and-- and-- and-- and as they become voters or more-- part of the population-- they-- they'll get these things through. But do we have that much time? And-- and the-- the-- everybody I know that's in the environmental field-- thinks that Armageddon day is getting closer. And-- we have to worry-- succinctly about the time when the tundra melts and releases all these methane gasses into the atmosphere. Just to fill you on the odds here-- methane gas is about 100 times worse than carbon gas in the atmosphere. And-- so the-- the tundra's extremely important. There're some people that think that-- within 17 years the tundra will begin to melt. And-- I mean that-- that's just-- catastrophic.
MARIA BARTIROMO: Extraordinary. Unbelievable. And on cancer, where are we in the fight against cancer, would you say?
JULIAN ROBERTSON: Well, I think we-- we're making great strides. The-- the-- the-- the great man on the-- in the-- in the cancer fund is-- an old pal of mine from the-- from the investment business. And he has just been fabulous. And-- what-- and I'm-- having a senior moment now, but this is the wonderful man who started the junk bond business.
MARIA BARTIROMO: Michael Millican.
JULIAN ROBERTSON: Michael Millican-- has just-- revitalized cancer research. And--
MARIA BARTIROMO: He really has done so much for prostate.
JULIAN ROBERTSON: And-- and-- so much for prostate. And-- 20 years ago-- everybody thought-- breast cancer would be the one that was making the most progress over the next 20 years. Well, Mike has made prostate-- the most successful-- fight of any of 'em. And-- and there are a lot of great things going on in cancer research and I'm-- I'm looking at it optimistically.
MARIA BARTIROMO: Yeah, he's done such a great job. I was just-- I love Mike. Final question here, Julian. Earlier you-- you said, yes, you would be poised to put money into certain quality companies in this market. If you had to be a betting man, betting on this market for the rest of the year, you think it ends higher from where we are or lower from where we right now?
JULIAN ROBERTSON: I-- I-- I've really got no idea what is going to happen this year. But I-- I-- I think if we take a five year-- horizon, I could find you 10 good stocks. And-- I'd always hedge 'em and I would hope those 10 outdid those 10 bad ones I picked to-- to hedge against 'em.
MARIA BARTIROMO: Julian, would you like to add anything else that I may have missed?
JULIAN ROBERTSON: No. In fact-- in fact this has been fun.
MARIA BARTIROMO: This has been terrific. Thanks so much for joining us.
JULIAN ROBERTSON: I love being with you.
MARIA BARTIROMO: Thank you. And we love having you. Julian Robertson joining us.
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