Hedge fund managers gathered Wednesday at the 2024 Sohn Investment Conference in New York to share their best investment ideas. Sohn is one of the most anticipated hedge fund events of the year. It kicked off with “Next Wave Sohn,” a session that features the ideas of rising stars within the hedge fund industry. Here are their picks: Eric Wolff, Gumshoe Capital Management Investment Idea: Pason Systems Energy company Pason Systems is a dominant provider of EDR, or electronic drilling recorder, solutions for the oil and gas industry, according to Eric Wolff, portfolio manager at Gumshoe Capital Management. Wolff sees between 45% and 180% upside for Pason, which he said has between 60% and 85% of market share in the Western world. “Pason offers a superior service that is hard to duplicate. … We think this is an excellent business that deserves to trade a healthier multiple than it does today,” Wolff said, adding that the company is trading at an oil and gas multiple rather than at a software valuation. “We think this is a near monopolistic business … even if the multiple doesn’t expand, we can achieve 18% returns through cycle just based on the calendar for business.” Shares have added roughly 4% this year, and jumped more than 19% over the past month. Michelle Ross, StemPoint Capital Investment Idea: Crinetics Pharmaceuticals One stock that could nearly double from here on the surge of interest around weight loss drugs and an increased focus on endocrine health is Crinetics Pharmaceuticals, according to Michelle Ross, CIO at StemPoint Capital. The stock is up nearly 33% year to date. Crinetics, which develops therapies for endocrine diseases, can tap into a multibillion-dollar potential U.S. market opportunity as it targets therapeutics for Cushing’s Disease and Congenital Adrenal Hyperplasia, Ross said. Endocrinology is an $8 billion market, but the cumulative market size including the company’s future therapy targets is upwards of $200 billion, which includes estimates for future obesity drugs, the investor said. She has a one-year price target of $88 for the stock, implying 92% upside, while her long-term price target of $339 suggests a whopping 665% upside for the company. Ross said she expects significant outperformance for years to come, competing with the likes of Eli Lilly and Novo Nordisk, as the “obesity market moves from an injectable to an oral pill.” During the last three years, Crinetics delivered 200% outperformance, as compared to the SPDR S & P Biotech ETF (XBI) , she said. This year, Crinetics is up by more than 31%, whereas XBI has risen 1.8%. CRNX YTD mountain Nikhil Daftary, NK Capital Investment Idea: Alimentation Couche-Tard A Canadian operator of global convenience stores is a buying opportunity in an industry that is often overlooked, according to Nikhil Daftary, co-founder and partner at NK Capital. Alimentation Couche-Tard is listed in Canada, but makes most of its profits in the U.S, where it is the second-largest convenience store chain, behind only 7-Eleven, Daftary said. It has CA$75 billion market cap with an “unbelievable record of success,” according to the investor. What’s more, Daftary anticipates that scale gas stations will be a surprising beneficiary of the growth in electric vehicle adoption. “We believe Couch-Tard is one of the greatest success stories in public markets priced like a value stock,” Daftary said, adding that the company has a share price to match an 18% CAGR. “We believe the company can grow EPS in mid-teens growth rate for many years to come” that can one day rival some of the world’s biggest chains, such as Starbucks and McDonalds. “We think Couche can be one of the biggest retailers in the world one day,” he said. The stock is down 4.4% this year, losing roughly 11% over the past month after the company posted disappointing third-quarter earnings. Short-sellers Chris Drose, founder of Bleecker Street Capital, called out food packaging company Sealed Air as “a melting ice cube hiding in plain sight.” The short seller noted that the company has a $5 billion market cap with about $4.8 billion of debt. Nate Koppikar, portfolio manager at Orso Partners, named Globe Life as a short pick, calling it “one of the sleaziest businesses” he’s ever come across, as it uses brokers to sell short-term medical plans that “turned out worthless” for customers. He expects the stock could crater by 50% this year, as he anticipates the Justice Department and Federal Trade Commission may take action against the company. Shares were down 2.8% in midday trading. Safkhet Capital founder Fahmi Quadir named Adtalem Global Education as her highest conviction short, pointing out that it received nearly $2 billion in taxpayer funded subsidies last year but generates “horrendous student outcomes” with graduates unable to pay their debt back.
