Carson Block at the Sohn San Francisco Investment Conference
Carson Block, chief investment officer of Muddy Waters Capital LLC, spoke about his investment approaches at the 2016 Sohn San Francisco Investment Conference. He’s well-known in the market (SPY) (QQQ) (IVV) because of his shorting strategy.
Short Tutor Perini
Carson Block advised investors to short Tutor Perini (TPC). The company is a building construction company with market capitalization of $1.02 billion. According to Block, the company’s business couldn’t consistently generate cash. Also, the company’s management isn’t stable. It had four chief financial officers appointed over nine years. The liquidity in the business became a challenge for the company.
He also added that in the last five years, the loan agreement has been revised six times, which indicates that the bank could take out the company’s facility. Tutor Perini uses heavy cash on working capital and its business practice is “very aggressive.” The company has a very high level of disputes with clients in the form of unapproved change orders and claims. Stronger management is required to support the company’s business.
Currently, the stock is trading at $20.75. On a year-to-date basis, the stock returned 26.6%, while the S&P 500 index (SPY) (QQQ) returned nearly 7% during the same period. Over a two-year period, the stock returned -13.5%. The stock’s current price-to-earnings multiple is 15.84x. The stock has a beta of 2.19, which indicates that the stock is highly sensitive compared to the market (VFINX) (IWM). The stock is trading 2% and 9.6% below its 20-day and 100-day moving averages, respectively.
In the next part of this series, we’ll analyze Mason Morfit’s investment idea.