What's a shell-shocked investor to do? Big-name experts drop hints at Dallas symposium

What do Shutterfly, Phillips 66, aluminum car doors and rental houses have in common?

All were hot picks by big-name speakers at last week’s GIBI Investment Symposium at the Winspear Opera House.

GIBI -- pronounced gibby and shorthand for Great Investors Best Ideas -- fulfilled its promise of offering a buffet of investment food for thought.

Attendees paid $1,000 (mostly tax-deductible) to hear a star-studded program in an afternoon. If they chose wisely, they could recoup the price of a ticket and then some. And in the process they supported two worthy charities, the Michael J. Fox Foundation for Parkinson’s Research and the Vickery Meadow Youth Development Foundation.

Caroline Cooley, chief investment officer of Crestline Investors Inc. in Fort Worth, served up Shutterfly Inc. (NASDAQ: SFLY), which she feels combines a strong consumer bent with a compelling financial story.

It’s always interesting to hear how GIBI’s celebrity investors come to their ah-ha moments.

Cooley used to scrapbook the old-fashioned way of literally cutting and pasting.

“Ten hours later, I’d have two pages of a scrapbook,” she says. “Enter Shutterfly. Now, in less than a minute, I can turn a favorite photo into thoughtful gift for my future daughter-in-law all by using my phone.”

As for her financial reasoning: Shutterfly, founded in 17 years ago, originally printed 4-by-6 photos -- now a minimal part of its business. It’s morphed into “an innovative premium provider of personalized printed products, including photo books, holiday cards, calendars, invitations and prints.” It has 60-plus percent market share, annual revenue of more than $1 billion and is 10 times larger than its nearest competitor. Its loyal customer base of 10 million gives it a 75 percent repeat business.

Dallas billionaire Andy Beal says we should abandon traditional forms of investment.

“You’re going to hate to hear this, but my advice is to get out of just about everything because just about everything is overpriced,” says the CEO of Beal Financial Corp., who sits on Donald Trump’s economic adviser council.

“The stupid government, the stupid bureaucrats, the stupid Federal Reserve have gone to great efforts to deprive us all of reasonable investment opportunities in an attempt to force us to make investments in areas where we wouldn’t otherwise invest. They foolishly think this will stimulate the economy,”  Beal says. “They accomplish this manipulative and ill-advised task through massive government borrowing and deficit spending through massive currency creation. They have essentially out-invested all of us.

“Traditional investors must now compete for the virtually nothing that remains.”

Other than that, how was the play, Mrs. Lincoln?

Over the next few years, the current environment where cash is trash will shift to one where cash is king and interest rates are much higher.

So what’s a shell-shocked investor to do?

“Buy investment rental homes, lock in 3.25 percent, fixed-rate mortgages. I guarantee there will come a day when you’ll save 3 or 4 percent a year on that mortgage and you’ll be able to rent out the houses to cover the expenses, and real estate will inflate.”

Lisa Hess, president of SkyCapital Management, says we should invest in the disruptive automobile revolution.

She sees two main themes: Increased fuel efficiency standards are driving the industry toward lighter and electric cars. And the demand for technology in cars is making them computers on wheels.

Her recommendation plays into the first theme. She thinks Constellium (NYSE: CSTM), a global maker of aluminum hoods, doors and other car parts, is a promising buy at a depressed price.

New leadership has fixed its liquidity issues and sidled up with a synergistic joint-venture partner.

And it will be easier for investors to value Constellium after Alcoa Inc. spins off its aluminum finished-products operation into a publicly held company, Arconic, on Nov. 1.

Hess is unenthusiastic about the Big Three car makers because she feels they are slow to adapt. She’s also not sold on auto insurance, which will lose some of its spark as cars become smarter.

David Einhorn, president of Greenlight Capital Inc., runs counter to her thinking, at least in the short term. His favorite stock is General Motors Co. (NYSE: GM)

“The company continues to perform, and the stock doesn’t go up. Eventually this will have to resolve itself,” says the well-known hedge-fund manager.

“There are worries about how sustainable the financing is, whether there’s minor deterioration in the credit profile of customers, whether the leases have been extended too long, and so forth,” he says. “So there’s a view that no matter good GM’s results are it doesn’t matter because they’re ‘peak’ results, so don’t buy the stock.

But Einhorn isn’t swayed by this reasoning.

“The stock is at $31 and change today. You’re getting almost a 5 percent dividend, and you’re getting another 6 to 7 percent in share repurchase,” he says. “So effectively you’re getting a double-digit return while you’re waiting to see what the next development is. In this environment, that’s just too high to ignore.”

What is the environment?

“The market right now is a group of really cheap stocks on one side and a group of really expensive, overpriced stocks on the other side. You just have to figure out which is which.”

Mario Gabelli thinks you should find common ground stocks that win no matter who gets elected president.

Think infrastructure. Forty percent of America's bridges are falling apart, says the CEO of GAMCO Investors Inc. So he’s invested in a collection of heavy equipment rental companies and thinks you should, too.

Among his picks: Ashtead Group Plc (LON: AHT), which owns Sunbelt Rentals Inc. in the United States, and United Rentals Inc. (NYSE: URI), the world’s largest equipment rental company.

A sneak play would be Herc Holdings Inc. (NYSE: HRI), which changed its name from Hertz Equipment Rental Co. when it went public in July, Gabelli says. “Very few people know about it. It’s a tiny company. It has some legacy issues, but on balance I think it’s a double or a triple three years from now.”

Ray Nixon believes he knows how Warren Buffett’s investment mind works.

Nixon, executive director of Barrow, Hanley, Mewhinney & Strauss, rode the wave created by Buffett when the world’s most famous investor bought 15 percent of BNSF Railway Co. and then went on to buy the Fort Worth-based freight railroad company.

He senses a similar deal in the makings with Phillips 66 (NYSE: PSX), the Houston-based multinational refiner and chemical company.

“You can take my word that the stock it’s cheap. The stock is down because the refining business is in a cyclical low right now. It will probably be that way for another 12 months.” Nixon lays out his thesis. “They’ve spent a lot of money on their chemical business, so you’re about to see them reap huge capital returns. And I think you’re going to see this gentleman right here buy the company,” he says, PowerPointing a photo of Buffett on the mega screen.

“Buffett has moved his ownership up to 15 percent. He probably wouldn’t like seeing this presentation,” Nixon says.

Nixon says his company values Phillips at $102 a share. “Warren likes round numbers, so I think he’ll make a hundred-dollar offer. I don’t think he’s moving out of his position. I think he’s waiting for the stock to move down into the low 70s [from the current 80s], and  that’s when he’ll begin accumulating and indicating that he’s interested in buying the whole thing.”

Susan Byrne admits that her pick isn’t going to get anybody’s investment juices flowing: Apple Inc. (NASDAQ: AAPL) She still sees as a stock worthy of note because of its dividends.

“Dividends wind up being half of your return,” says the founder and vice chairman of Westwood Holdings Group Inc.

She cautions against simply buying high-dividend without looking at the balance sheet with an eye to the future. “As interest rates go up, those high dividends might not actually be very valuable,” she says.

“Apple is my proxy for the kind of stock that you could hold for 10 years and go into your retirement with real cash flow instead of Treasuries,” she says. “Usually companies that pay dividends are not the biggest, fastest growers. But they’re still growing, and they can still pay the dividends.”

T. Boone Pickens, a perennial GIBI speaker, says he’s finally going to be right about the price of oil.

He predicts $60 a barrel by the end of the year and $70 by the close of 2017.

Pickens is feeling a bit more flush these days, saying his portfolio is up 300 percent this year.

Whew! People had been worried about where his next meal would be coming from.

“Oil is moving up, inventories are coming down, and we need the oil, is where we are,” Pickens says. “It came to the senses of those who can really make it happen quick -- the Saudis, the Russians and the Iranians -- that they have to work together. It shows that no matter how much you hate somebody, for money you will work together.

“That agreement will be signed at the November OPEC meeting. The Russians are going to the OPEC meeting, which is most unusual.

“We will be 60 [dollars a barrel] by the end of the year. You don’t need to bet on it. But I have.”

As for his favorite oilfield plays: Pioneer Natural Resources Co. (NYSE: PXD), EOG Resources Inc. (NYSE: EOG), Parsley Energy Inc. (NYSE: PE) and Concho Resources Inc. (NYSE: CXO).

Moderator Gretchen Morgenson, assistant business and financial editor of The New York Times, asked Pickens what could derail his predictions.

“I can’t imagine. How could I be wrong?” he says coyly. “A recession would do it for me. That could happen next year. But I don’t think it will happen early in the year. Other than that I figure I’m OK.”