Oliver Kelton mantiene una posición de Cash del 29% del fondo Odey European Focus.
El report de este mes es un claro ejemplo de sus impresiones:
European equity markets retreated again in September as investors adjusted to a slowdown in global growth, escalating risks in Emerging Markets, continued commodity price volatility, rising high yield bond spreads, tightening monetary conditions and a scandal at Volkswagen. Consequently the probability of additional monetary stimulus increased. The US Federal Reserve surprised many investors by not raising rates, the Chinese announced additional stimulus measures and expectations mounted that both the ECB and BOJ would expand their existing programs in response to the weaker macroeconomic backdrop. The Fund fell 3% versus a 4.5% drop for the MSCI Daily Net Europe Index. The Fund was helped by its liquidity position and stock selection. On the positive side Suedzucker rose sharply on materially raising its guidance, Alcatel-Lucent moved up as the merger with Nokia appears to be running ahead of schedule, and IAG was helped by robust European third quarter air demand statistics reported by competitors. On the negative side we faced a broad array of further downside pressures that led us to cut further losses in several stocks, including cutting our remaining positions in E.ON, and DSM. Beyond these cutting of losses we made only small changes, including starting a new position in Vivendi, the French media conglomerate. At an aggregate level the macroeconomic backdrop in Europe continues to track a similar trajectory as it has done throughout the year. Indeed, for the first time in many years, on a relative basis this circa 2% GDP growth trend appears increasingly compelling on a global basis. However, while our base case remains for a continued gradual recovery tracking this trend there are several factors that are making us more nervous about this scenario. First, we are now nearly three years into the demand recovery that we originally expected and given the substantial additional stimulus provided over the last 12 months from collapsing energy prices, lower yields and an over 20% devaluation of the Euro against the dollar, we are surprised that this has not shown more positive signs to accelerate growth. Indeed, if anything, the data at both a company and macro level over the last few months has provided some more mixed signals. Second, with global growth continuing to slow, hurt by Emerging Markets and growth rates in the US moderating on tightening financial conditions, the spillover risks are rising. Third, despite the improved money supply trends and pockets of exciting new loan origination, in aggregate, tighter capital requirements and continuing deleveraging pressures within the banking system are holding back growth. Indeed, the ECB’s QE program has arguably added a new dimension of risks in credit and the compression of net interest margins we are now seeing in countries like Spain and Italy.
One area of particular market interest in early October is the energy and commodity sectors. We have been materially underweight these sectors for several years, predominantly as we believed that underlying prices had, following the Chinese led commodity super cycle and the first wave of US QE, moved materially beyond long run marginal costs. Underlying prices have since substantially corrected over the last three years and hence, in many commodities, we now believe that the relationship between price and marginal cost is much more favourable. Consequently, we have tentatively looked for value but only where we believed we had a significant margin of safety, and hence our investments in Suedzucker and utilities. Unfortunately, we have had only mixed success in these investments, primarily as the margins of safety have proved less robust than we anticipated. Looking forward, given the adjustment in end prices and the current levels of distress built up we expect significant opportunities to emerge in both the energy and commodity spheres and have spent considerable time researching the most interesting opportunities. However, we are yet to venture beyond these original special situations as we are yet to find other sufficient margins of safety and are not yet convinced there has been either a significant enough removal of capacity, or improvement in demand outlook to warrant prices moving materially higher beyond marginal costs.
For example, in the oil majors - although oil prices have now moved back well into marginal cost curves, we are actually very surprised how little the oil majors have fallen. Despite the capex cuts to date, cash flows remain pressured and we expect further pain as the downstream windfall that the oil majors have enjoyed since late 2014 likely starts to give way, in turn further challenging dividends. At a stock level Suedzucker, the German sugar producer, performed best as European bioethanol prices rose and European sugar prices started to show the benefits of record low inventory levels. Consequently the company significantly upgraded its earnings guidance. The merger of Alcatel-Lucent and Nokia appears to be tracking ahead of schedule and the recent meetings we had with both companies managements’ are giving us confidence that the merger synergies could be materially higher than guided. IAG benefited from positive sentiment over late summer trading for the European airline industry. On the negative side, press leaks over the nuclear provisions stress tests led to further losses and forced us to cut our position at E.ON, even though we still believe these results are unrealistic. Similarly, at DSM concerns that a further depreciation in the Chinese currency would lead to additional competitive pressures led to new losses that forced us to sell our remaining position. In summary, European equity markets continued to face pressure in September. The Fund benefited from its elevated liquidity position and stock selection but nevertheless still faced losses. We remain positioned across a broad range of value opportunities focusing on a gradual recovery in European economies. Although, we continue to use this as our base case scenario we are cognisant that the risks have risen. Furthermore, given that the weak performance from several stocks has forced us to cut significant losses over recent months, we are currently running with an elevated liquidity position as we assess these current risks closer.