By Steven Russolillo, and David Benoit
Five hours and a dozen presentations into the annual Sohn
Investment Conference, a speaker finally drew a big market
reaction, as hedge-fund manager David Einhorn unveiled a bet
against athenahealth Inc.
Shares of the electronic health-care-records provider plummeted
after Mr. Einhorn, founder of Greenlight Capital Inc., said the
stock may fall 80%.
One of the few hedge-fund managers to relish talking about his
shorts, Mr. Einhorn said athena and other technology stocks were
indicative of a bubble. Shares in the company, which wasn't
available for comment, quickly dropped 10% to about $113 in
after-hours trading.
"The thing about bubble stocks is the best reason to own them is
because they are going up," Mr. Einhorn said of the company and
other tech stocks that have risen in recent months. "When they stop
going up, these stocks become falling knives."
Mr. Einhorn had the biggest impact during a day of
recommendations from high-profile hedge-fund managers on topics
from the U.S. housing market to China's currency to the Brazilian
presidential race.
Paul Tudor Jones, a 34-year hedge-fund veteran who counts as
part of the old guard in the industry, took a broader view, calling
the trading environment "as difficult as I've ever seen it in my
career."
Mr. Jones's main fund is down about 4% this year, according to
investor documents. The billionaire said he has been particularly
perplexed by a lack of interest-rate movement that has hurt his
ability to make relative- value investments, bets on assets
appreciating while wagering on others depreciating. So-called macro
funds generally make investments based on global financial trends
rather than individual stocks. "What we desperately need is a macro
doctor to proscribe central bank Viagra because otherwise it is
going to continue to be somewhat dull," he said at the annual
gathering of hedge-fund managers.
Macro funds have lost money three years running, says research
firm HFR Inc. Emerging- market hedge funds dropped about 1% in the
first quarter.
One manager whose fund has been hurt lately, Michael Novogratz,
who co-manages a macro fund for Fortress Investment Group LLC, said
he sees a bottom nearing in Brazil, especially if Brazil President
Dilma Rousseff loses a re-election bid this fall. "It's so bad,
it's good," he said.
A former Julian Robertson protégé, Chris Shumway, who closed his
own eponymous shop three years ago, encouraged investors to short
China's offshore currency.
"Our view is they have limited options within China to deal with
their slowing growth," Mr. Shumway said.
Bill Ackman, the founder of Pershing Square Capital Management
LP, went to new lengths to attack the U.S. Senate plan to wind down
and overhaul the government-run mortgage-finance companies Fannie
Mae and Freddie Mac.
In his first extended public remarks since accumulating nearly
10% of the firms' common shares starting in November, Mr. Ackman
said Fannie and Freddie were essential to preserving the housing
market. He expressed doubt that lawmakers could raise the $500
billion needed to capitalize the firms in any new iteration.
"We don't think there's an investor in the world of any
consequence that will invest in the new version of Fannie and
Freddie," he said.
He wasn't the only investor with a provocative view on housing.
Bond-fund manager Jeffrey Gundlach of DoubleLine Capital LP pointed
to a generational shift away from home buying and toward renting,
and recommended shorting, or betting against, an exchange-traded
fund that tracks the prospects of major home builders.
"Single-family housing is overbelieved and overrated," he
said.
Despite the bearish picks, the mood was often light inside the
packed Avery Fisher Hall, normally home to the New York
Philharmonic. Mr. Jones said he slips into "daydreaming about
winning 'Dancing with the Stars' on some days in the office."
James Grant, editor of Grant's Interest Rate Observer, brought a
bit of topical humor to his presentation, boosting Russian
state-controlled natural-gas giant OAO Gazprom. He said the stock
had been so beaten down it was "Donald Sterling with a London
ticker," a reference to the Los Angeles Clippers owner who was
banned from the National Basketball Association last week after
recordings of his racist comments went public.
Some investors went for dry jokes. "There's an alarming outbreak
of old people in the United States," observed Larry Robbins of
Glenview Capital Management in his pitch for Medicare-focused
insurer Humana Inc.
Although there were many billions of dollars of net worth
represented on stage, profitability of the managers' picks was far
from certain. In a bulletin to clients, Westport, Conn., research
firm Birinyi Associates Inc. warned that the investment ideas
presented at last year's conference underperformed the Standard
& Poor's 500 by 19.1 percentage points.
An investor who wagered an equal amount of money on all of last
year's Sohn picks would have been down 3.8% by now, compared to a
15.2% for the S&P, Birinyi said.
Proceeds from the Sohn Conference support research programs for
the treatment and cure of pediatric cancer. Organizers said they
have raised more than $50 million for the cause since 1995.
Rob Copeland and Sarah Krouse contributed to this article.
Write to Rob Copeland at rob.copeland@wsj.com
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