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A slew of Wall Street’s top hedge fund managers shared their best ideas on Wednesday at the annual Sohn San Francisco Investment Conference.
The conference is best known for hedge fund managers making market-moving presentations. The Sohn conference held in San Francisco is the West Coast version of the investment conferences that began in New York. The conferences, presented in partnership with CNBC, benefit education and other children’s causes.
Here are some of picks from the fund managers this year.
Kevin Oram, Praesidium Investment Management Company
Long: Instructure (INST)
Praesidium is finding value in educational technology company Instructure. The company develops education learning software Canvas, which is used by more than 1,000 institutions and six million students.
Canvas has taken “tremendous” market share from its competitor BlackBoard, portfolio manager Kevin Oram said. Canvas generated about $235 million in revenue in 2018, more than 90% of the company’s total revenue, Oram said.
The hedge fund believes Canvas can grow its earnings by 40% by 2022.
Instructure’s other software start-up Bridge is losing money, however, as it requires “vast up-front” R&D investments and a large dedicated sales team, Oram said.
The company needs to eliminate Bridge’s losses by selling it, Oram said, adding that the company’s board will announce new strategic plans on Dec. 3.
Gil Simon, SoMa Equity Partners
SailPoint Technologies (SAIL)
SoMa Equity Partners made a pitch for security software company SailPoint Technologies, which specializes in identity governance.
SailPoint ensures employees access only what they need to access, which is crucial in an environment when many corporations are threatened by insider threats, internal data breaches and hacks, CEO Gil Simon said.
The company, which currently has a $2 billion market cap, is likely to double in three years with its stock surging to $35 to $40 a share from Wednesday’s close of $18.32, Simon said. The manager sees strong tailwinds including massive enterprise replacement opportunities.
Adam Fisher, Commonwealth Asset Management
Short: interest rates in China
Adam Fisher, CEO at Commonwealth Asset Management, believes the global trend of zero interest rates will spread to China.
“Interest rates in China are going to zero,” Fisher said. “We believe rates much more likely to fall to other countries in East Asia than to rise for idiosyncratic domestic reason.”
Fisher said China’s four megacities with a population of 10 million or more — Beijing, Shanghai Shenzhen and Guangzhou — are already as rich as the rest of East Asia, meaning it’s unlikely for them to have explosive growth going forward.
Furthermore, China’s workforce is about to collapse as its working age population peaked in 2015 and is projected to fall by 125 million in 2019, which will slow down traditional bank lending, Fisher said.
The stage is set for the Chinese government to step in and cut interest rates further, the manager said.
Glen Kacher, Light Street Capital
Long: Talend (TLND)
Light Street Capital is recommending data integration company Talend.
Talend disrupted the ETL (extract, transform and load) data market when it was launched in 2005, chief investment officer and founder Glen Kacher said. The company has been benefiting from the cloud database wave in the past few years and is building a hybrid platform with both on-premises and cloud solutions, Kacher added.
The company is “the growth leader” in the data integration market, which enjoyed a 38.7% growth and 87% in recurring subscription revenue in 2018, Kacher said.
