Investing Tips From Chicago's Premier Investment Conference

For its 10th year, Chicago’s premier investment conference, Invest For Kids, welcomed a group of 11 elite investment managers to give rapid-fire presentations and engage in conversation. More than 1,000 guests across financial services were in attendance, including asset managers, hedge fund professionals, and students. The 2018 Forum, held Oct. 24 at the Harris Theater, celebrated the event’s 10th anniversary.

Invest For Kids was founded by Ron Levin and Ben Kovler to be an investment ideas conference with a social purpose extending far beyond simply providing actionable investment ideas. Over 9,000 people have attended the event in the 10 years since founding, heard from more than 90 speakers, and raised more than $13 million dollars for charity — supporting 60 community organizations. The event this year raised a spectacular $1.7 million dollars.

Those charitable donations are enabled in large part by the fact that 100 percent of the revenue generated by the conference is donated to nonprofits, as all conference expenses are underwritten by the founders and their families. Invest For Kids donations are focused on small community organizations throughout the Chicago area, mainly those with budgets between $2-3 million dollars, where the donations can achieve highest impact. More than 100 applications are annually reviewed and vetted each year, to get the highest possible return — specifically in the areas of child and young adult development, learning, and training in underserved and too often overlooked communities. Seven excellent organizations will be the beneficiaries of the 2018 funds raised:

In addition to its charitable mission, Invest For Kids is also a forum for featured speakers to give their insights and outlook on markets and the economy, as well as for analysts and investment managers to give specific equity recommendations to the assembled audience of Chicago’s finance community.

The highlight of this year’s conference came at the opening of the conference, with a Fireside Chat between Michael J. Sacks, of GCM Grosvenor ($50 Billion AUM), and Kenneth Griffin of Citadel Investment Group ($30 Billion AUM).

Let’s Talk Politics

Mr. Sacks began the conversation by asking Mr. Griffin about his big picture views on some of the most important questions out there right now — trade policy with China, the upcoming elections, and the economy. In terms of trade (and tariffs with China), Mr. Griffin was of the opinion that the objective of the White House is unclear, but that post midterm elections, the rhetoric may calm. On the elections, his opinion was that the polls seem to have much less value than in prior elections, and if Democrats do take the House that they will need to decide whether to negotiate with President Trump on immigration and infrastructure or to simply refuse to engage with the White House at all. In terms of the economy, Mr. Griffin said that the “economy is on a tear,” which should be a tail wind for equities and a head wind for bond prices.

Evaluating the Current Investing Climate

In terms of the current investing climate, Mr. Griffin noted that the “scars of ’08 run deep” and that Citadel was reducing its exposure to higher risk instruments due to the current climate of uncertainty. Were he to have to put a portfolio on autopilot, he explained that he would recommend global equities for those many years from retirement, and a portfolio of inflation-protected bonds and other fixed income investments for those approaching retirement.

With that, the panel of stock pickers began. Here, some key takeaways from the conference:

Daniel J. O’Keefe

Artisan Partners, Chicago

Investment Recommendation (Long): Dentsply Sirona Inc (Ticker XRAY)

Why: Demographics favor the increased use of dental care as the U.S. population ages and needs more dental care and as the world population increasingly has access to basic dental care. Dentsply supplies both disposable dental supplies used in routine dental care and digital dental equipment. On the equipment side, their Cerec machine can take a 3D scan of a tooth and mill the replacement tooth on site in the same day. Mr. O’Keefe believes the company has a strong franchise and that there is growth potential for all parts of their business.

Christopher James

Partner Fund Management, San Francisco

Investment Recommendation (Long): Intuit Inc. (Ticker INTU)

Why: Intuit, the maker of TurboTax and QuickBooks, has a massive data set that it can monetize, and will only monetize with the express permission of its customers. The data contained in a consumer’s TurboTax file could be used by a consumer to seamlessly fill out a personal loan application, reducing friction for consumers and reducing costs for loan originators. As consumer loans are the fastest growing segment of the lending industry, Intuit has a huge opportunity. Intuit also has accounting software that will serve the millennial economy, where some say 50 percent of work will be in the gig economy by 2027. Intuit has the customer base and a first mover advantage to capture this expected market. Finally, Mr. James said Intuit should be evaluated as a FinTech company, not a software company, and that when this shift occurs its P/E multiple will increase.

Mark Lampert

BVF Partners L.P., San Francisco

Investment Recommendation (Long): Idorsia (Ticker ISIA — Swiss Stock Exchange)

Why: Actelion was a Swiss Biotech firm that was recently sold to Johnson & Johnson. As part of the transaction, Idorsia was spun out of the acquisition into a standalone company, with 12 drugs in the pipeline, five of which are in phase 3 trials. Actelion was founded by Drs. Jean Paul and Martine Clozel. When they sold Actelion to J&J it was for the purpose of expanding the commercial reach of the drugs that were already on the market, but the Clozels maintained their ownership of the drugs in their development pipeline. As owners of Actelion, the Clozels dedicated themselves to research science, and continually invested all of their gains into personally buying back stock in the company. In the case of Idorsia, they invested roughly 1/3 of their pretax proceeds from the sale of Actelion to Johnson & Johnson into the spinoff (and its 12 drugs in the pipeline). Mr. Lampert sees the potential in the Clozels and their ability to steward Idorsia and achieve extraordinary gains.

Vivien Azer

Cowen and Company, New York City

Investment Recommendation (Long): Canopy Growth (Ticker CGC)

Why: Canopy Growth is a marijuana producer from Canada that is a leader in the nascent market for both medical and recreational THC and CBD use. Recreational marijuana use for adults in Canada became legal on Oct. 17, and has been legal for recreational use in California, the most populous U.S. state, since Jan. 1. These new markets, in addition to existing U.S. markets for legal recreational and medical use, are a massive new consumer products category, one which Mr. Azer doubts will be duplicated in her career. The regulatory landscape is changing throughout the developed world, and she predicts that in very conservative scenarios, the market will experience exponential growth over the next 10 years. Canopy is unique in that Constellation Brands, the largest beer importer in the U.S., is a major shareholder, and they will together be able to dominate multiple categories in the U.S., Canada, and other countries. THC and CBD can be used in recreational, beauty and nutraceutical, OTC Pain/Sleep, and Pharmaceutical cases. Canopy has the ability to be an entrant in these categories and has the international production and infrastructure in place to become the dominant first household name, which should propel the stock price.

Feature photo by rawpixel on Unsplash.

 

More from Make It Better: 


Joshua Streckert is the founder and managing partner of SJ Equity Partners, L.P., a private investment partnership focusing on short-term long/short equity-trading strategies. Previously he worked in fixed-income derivatives trading, valuations, and risk management for Lehman Brothers and Bank of America. A graduate of Northwestern University, he is passionate about supporting his alma mater, as well as the American Red Cross.