David Einhorn’s Special Roast
After striking out in his bid to buy a big piece of the New York Mets, David Einhorn is swinging for the fences with his high-profile bet that Green Mountain Coffee Roasters is overvalued. In a ponderous 30-minute, 110-slide presentation at the recent Value Investing Congress in New York, the founder of hedge fund Greenlight Capital put his reputation on the line when he criticized the coffee maker for its lack of transparency, questionable accounting and low-growth prospects as its distinctive but expensive K-Cups come off patent and face an onslaught of competition. “There is a lot of questionable behavior here,” Einhorn told his audience. After the presentation the coffee maker’s stock dropped 10 percent that day and 27 percent for the week. —Stephen Taub
Unemployment’s a Royal Concern
Regional unemployment and the Arab Spring were focal points for Jordan’s King Abdullah II during his keynote speech at the special-edition World Economic Forum in Amman last month. “Our region stands today at the gates to the future,” said the king at the opening of the WEF’s summit on economic growth and job creation in the Arab world. The region needs to generate 85 million new jobs to resolve the Middle East’s unemployment problem, he said, stressing the importance of a sound government in creating jobs: “Let’s be clear: Political reform is economic reform. For businesses to invest and expand with confidence, they need a predictable, level playing field; transparency and accountability; [and] the rule of law.” —Farah Halime
Investing for Life
Joel Greenblatt, founder of Gotham Capital, is known to reveal his investing secrets to his students at Columbia Business School. But he’s also placed a lot of that value-investing wisdom into a series of books, the latest of which, The Big Secret for the Small Investor, recently hit stores. According to Greenblatt, successful investing comes down to this: “Figure out the value of something — and then pay a lot less.” Part of his success at Gotham is that he goes one step beyond Benjamin Graham, adding quality to value to screen for investment prospects. From a universe of companies, he culled the 2,500 cheapest (as ranked by earnings before interest and taxes, divided by enterprise value), extracted the same number of high-quality ones (as ranked by ebit, divided by net working capital plus net fixed assets) and combined the crème de la crème of both groups to come up with a value-weighted index whose compounded annual growth rate was 16.1 percent for the 20 years ended December 31, 2010. By comparison, the total return of the S&P 500 during the same period was 9.1 percent. “Value investing is about rolling up your sleeves and doing hard work,” says Greenblatt. “You have to stick with it.” —Jay Akasie
It’s Haitong for Hu
The former chief economist for Citic Securities International Co. in Hong Kong, Hu Yifan, couldn’t resist joining rival Haitong International Securities Group on August 8; that’s considered an extremely lucky day, as 8-8 is synonymous with “wealth” in Chinese. Though at Citic Securities, Hu headed a team of five economists focusing on macro analysis, at Haitong she is chief economist and head of research, overseeing a team of 30 analysts who provide coverage ranging from global macro and equity strategy to market analysis. “We are expecting to continue to expand in 2012 with more head counts and coverage,” says Hu. Haitong International’s parent company, Haitong Securities Co., is China’s second-largest brokerage in terms of revenue, with 9.8 billion yuan ($1.47 billion) in 2010. —Allen T. Cheng
Telling Banks the Truth
Mike Mayo owes his career to Institutional Investor. While working at the Federal Reserve in Washington in the late 1980s, Mayo was keen to get a job on Wall Street. But as a complete outsider, he had few contacts and little idea of how to go about it. So he smartly bought a subscription to II, looked up the top-ranked banking analysts and began cold-calling them. “I would not have my job today if it were not for Institutional Investor,” says Mayo. Since joining the ranks of the sell side more than two decades ago, Mayo, now himself an All-America Research Team analyst, has become famous for his willingness to speak the truth. He downgraded the banking industry in 1999 and has been bearish on it more or less ever since, a sentiment vividly communicated in his new book, Exile on Wall Street: One Analyst’s Fight to Save the Big Banks from Themselves. He remains horrified by much of the behavior of the major banking institutions. —Imogen Rose-Smith
