Don’t believe everything hedge funders say at the Sohn conference

David Einhorn: calling the signs
David Einhorn: calling the signs
Image: AP/Kathy Kmonicek
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It’s that time of year when billionaires and some lowly millionaires gather at the Ira Sohn Conference in New York to listen to hedge fund masters dole out nuggets of wisdom about investing and the global economy. Oh, and to raise money for pediatric cancer research.

The question is: Is their advice worth following? A Financial Times study showed that an investor who followed the top ideas from last year’s Sohn conference would’ve made a 19% return, which the FT compared to the 22% return of a passive index fund tracking the US stock market.

Bill Ackman touted JC Penney at last year’s Sohn conference, but he’s taken a big hit on the department store chain since then (more on him in an another post). John Paulson (who is actually at the other hedge fund conference in Las Vegas today, the Skybridge Alternatives Conference, or SALT) has lost a lot of money on gold.

As for this year’s Sohn wisdom, Keith Meister, a Carl Icahn disciple who went on to found Corvex Management, gave one of the conference’s most clear cut investment tips today. He revealed that Corvex has a stake in TW Telecom, whose stock rose more than 6% on the news. Meister said the company was a natural deal target as the US telecommunications industry consolidates, with Verizon, AT&T or Time Warner Cable being some of the possible future buyers. He also said Corvex had a stake in telecom company Level 3, which he saw as a buyer in the industry.

It’s worth noting that some Sohn predictions come true. A few years ago at the conference, David Einhorn, the final speaker at this year’s event, famously called out Lehman Brothers on the bank’s sketchy financial position just before it collapsed. More recently, Einhorn made headlines for pushing Apple to return more of its cash to investors. In April, Apple announced it was giving $55 billion more to shareholders through a share buyback and increased dividend.