Some of the country's most-watched hedge-fund managers dish on their top picks and pans. By Elizabeth Leary, Contributing Editor October 2, 2012 Once a year, some of the country's most-famous value investors get together for a confab in New York City. Attendees pay nearly $5,000 apiece to enter, so you might expect them to feast on lobster, take a helicopter ride over Manhattan or, at the very least, get a photo with a presidential candidate. Alas, neither swank grub nor photo ops were to be found. But on the first day of the conference, attendees got what they paid for: A detailed explanation of some of these investors' top ideas. As a sign of the influence of the speakers, many of the stocks up for discussion made big price moves during the day's trading on October 1.SEE ALSO: Our Slide Show of the World's 10 Best Stocks Whitney Tilson, who co-manages the Tilson Focus (symbol TILFX) and Tilson Dividend (TILDX) mutual funds, as well as a hedge fund, began his session with an appeal for stocks over bonds. In recent years, investors have been steadily withdrawing money from stock funds and pouring cash into bond funds. But, Tilson noted, the four publicly traded companies with triple-A credit ratings -- Automatic Data Processing (ADP), ExxonMobil (XOM), Johnson & Johnson (JNJ) and Microsoft (MSFT) -- offer dividend yields from 2.5% to 3.1%, compared with the current 1.6% yield of ten-year Treasuries. Tilson said it was "absolute madness" to favor Treasuries over high-quality dividend-paying stocks, yet that's what many investors are doing. Let's get down to specific stocks -- with seven buy recommendations from the conference and one sell: Advertisement Netflix as an Acquisition Target One of Tilson's favorites is online movie rental company Netflix (NFLX), which he compared with Amazon.com (AMZN) in 2001. Since then, Amazon has rocketed from about $17 to $252.01, for a gain of 1,382% (all current prices are through October 1). Both Netflix and Amazon deliver an old product in a new way, and both offer compelling value for customers, Tilson says. He said that Netflix, which has about ten times as many subscribers as Hulu, its nearest competitor, is in a business in which success begets success. Attracting more subscribers allows Netflix to buy the rights to make more movies and television shows available for streaming, which then attracts more subscribers. Netflix, which has a market capitalization of $3.1 billion, would make an appealing "bite-size acquisition" for many larger companies. Shares of Netflix rose 3% on October 1, to $56.05. Advertisement Howard Hughes Corp. for Unrealized Value Tilson also touted real estate developer Howard Hughes Corp. (HHC), which was spun off from General Growth Properties during the latter's bankruptcy reorganization in 2010. Because the firm is a real estate company that doesn't pay a dividend, Tilson said, "there are no natural owners" for the stock (unlike real estate investment trusts, which appeal to income investors). Tilson said the market hasn't fully recognized the value of the planned communities Howard Hughes is developing in Hawaii, Texas, Las Vegas and New York City. At the same time, even Tilson isn't sure of precisely how much those properties are worth, and he offered a wide range of estimates of the stock's intrinsic value -- from $67 to $125 per share. The stock closed at $72.72, up 2.4% during the day. Berkshire Hathaway, Still Tilson also reiterated the bullish case for Berkshire Hathaway (BRK-B), a perennial favorite. Berkshire's legendary chief executive, Warren Buffett, turned 82 in August, but Tilson figures he has at least five more years at the helm (for more of Tilson's thoughts on Berkshire, see Fire Sale on Buffett). Advertisement Agrium Can Soar Via Restructuring Barry Rosenstein, co-founder of New York City hedge fund Jana Partners, is an activist investor, meaning he typically takes large positions in a company and tries to influence management to make changes that will benefit shareholders. At the conference, Rosenstein spoke in public for the first time about the changes he has been seeking at Agrium (AGU). Jana is the largest investor in the Calgary, Canada-based fertilizer company, which Rosenstein argues is composed of two essentially discrete businesses. Its wholesale unit produces, markets and distributes nitrogen, potash and other fertilizers to agricultural and industrial customers, and its retail unit sells fertilizer and seed directly to farmers through stores. The latter is the laggard, Rosenstein says. He believes that by separating the retail and wholesale businesses, cutting costs at the company's retail unit and pursuing other operational changes, shareholders could see a gain of as much as 50% (read Jana's full analysis). Agrium shares rose 2.0%, to $105.53. Two Stocks to Prosper from Undervalued Land Mick McGuire, who runs Marcato Capital Management, a San Francisco hedge fund, offered picks along a common theme: undervalued land. McGuire said that U.S. accounting standards generally direct companies to record land at its cost at the time of purchase and subsequently to "test" that value periodically in case it needs to be lowered. But the standards do not require companies to adjust the book value of their land upward if the land appreciates. That means the value of long-held property is often understated assets on their books. Advertisement Alexander & Baldwin (ALEX) holds Hawaii real estate that's still valued on its books at its original 1870 purchase price. McGuire said that accurately accounting for that land's value, plus its potential uses, could provide as much as a 50% gain for the stock, which closed at $28.69. The core business of Gencorp (GY) has nothing to do with real estate -- it supplies propulsion systems to the aerospace and defense industries -- but in the 1950s the company acquired some large tracts in California to test its systems. Since then, the company has stopped using the land to perform those tests, and sprawl and development have encroached. Its once-remote 12,000 acres are now desirable Sacramento suburbs. McGuire said the stock could be worth as much as $24 -- compared with its current price of $9.81 -- if the company were to develop or sell that land. Layne Christensen as a Turnaround Prospect Kian Ghazi, co-founder of Hawkshaw Capital Management, a New York City hedge fund, recommended Layne Christensen (LAYN). Layne builds and maintains water-related infrastructure, such as wells and sewers, and explores and drills for precious minerals, such as gold and copper. Ghazi said the company has the number-one market-share position in water-well drilling and the number-three position for mineral exploration. Yet results have disappointed -- the company has reported two quarterly losses so far this year -- and the stock has shed 13.4% year-to-date. Ghazi said the problems largely stem from one unit within the water division. Smarter bidding on contracts, plus a switch in the types of contracts Layne takes on in favor of a more profitable mix, could right the ship. And Layne has new management with a good track record at turnarounds. The stock closed at $20.95, up 6.8% for the day. A turnaround in the company's problem unit could drive the stock as high as $32, said Ghazi. Layne's book value of $21.93 per share should provide a floor for the stock price, Ghazi added. Is Splunk Overvalued? Finally, a recommendation on the short side, a bet on a lower share price. Zack Buckley, manager of Buckley Capital Partners, a hedge fund in Zephyrhills, Fla., suggested that investors sell short Splunk (SPLK). Splunk makes software that analyzes Web site data. Its stock, which fell 2.2% for the day, to $35.93, has more than doubled since the company went public last April at $17 per share. It trades, Buckley said, at an astronomical 271 times estimated 2015 earnings. Moreover, customers can easily switch to other vendors, and Splunk's product line is undiversified. 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