View from the hedge fund seat looks good

October 13, 2010, 1:26 AM UTC
Fortune

One activist investor believes the uncertainty that’s paralyzing corporate leaders will lift after the election.

Hedge fund manager Bill Ackman gave a sunny prognosis on corporations and consumers Wednesday at the 6th Annual Value Investing Congress, a two-day confab for devotees of Warren Buffett, David Dodd, and Benjamin Graham.

“We are more bullish than most,” Ackman said, referring to his hedge fund Pershing Square Capital Management. On the corporate side, he said that American businesses used the credit crisis as an opportunity to improve supply chains and reduce bloated payrolls, allowing to them to enter 2010 “lean and efficient.”

Companies have seen record cash flow and profitability, and at the same time have been reluctant to raise dividends, he said, adding that this is the best capitalized corporate America he has seen since he has been an investor.

The lack of confidence that has seemingly paralyzed US businesses should lift once the elections are over in a few weeks, Ackman told the audience. As companies inevitably expand, they’ll hire again and help boost consumer confidence.

Ackman’s comments stood in stark contrast to other speakers with darker views on the economy, most notably Michael Lewitt, the author of The Death of Capital and the president of Harch Capital Management. Rather than focus on current bright spots, Lewitt argued that global markets are stuck in a boom and bust cycle due to pro-cyclical regulatory and monetary policies. Not only are current policies fueling speculative bubbles, they are destined to create another crash, he said.

But Ackman, who is best known for shorting the mortgage insurer MBIA (MBI) and trying to goose Target’s (TGT) stock price, was clearly the main event on the first day of the conference. The ballroom at the Marriott Marquis hotel in New York City filled to capacity just before the well-known hedge fund manager took the stage.

Instead of his usual fast-paced, chart-filled 100-slide power point presentation, Ackman’s talk was an extended question and answer session with the audience, moderated by Whitney Tilson, a longtime friend and conference organizer.

Ackman said his bullish view has manifested itself in his recent investment in JC Penney (JCP), one of the most economically sensitive stocks that he’s invested in for some time.