"Equities Remain Attractively Priced But Unloved": Crispin Odey's Latest Market Outlook ~ market folly

Thursday, September 23, 2010

"Equities Remain Attractively Priced But Unloved": Crispin Odey's Latest Market Outlook

Crispin Odey of hedge fund firm Odey Asset Management is out with his latest commentary. Recently, we outlined Odey European's hedge fund outlook and this time around we're taking a look at the prominent UK manager's latest stance on the economy and markets. Crispin Odey's full current oulook:

"September has now almost repaired the damage done in August. Equities remain attractively priced but unloved. This makes share prices volatile, especially since investors remain very cautious on the outlook. I see nothing that can damage the excellent free cash flow outlook for the corporate sector. Where pessimists see governments spending cutbacks next year killing any GNP growth, I see pent-up capital spending plans and a little less paying back of debt taking up the running and more than compensating.

The performance of the fund has been disappointing. We were hurt by being short of governments bonds early on, we have been hurt by being naturally hedged back into the weakest currency, the Euro, and we have been hurt by some painful individual share price movements - Sky Deutschland, Connaught (in small way), Barclays and Ericsson.

The successful strategy this year would have been to opt for those companies serving emerging market- the growth stocks. Value stocks have had a bumpier ride. Investors have been scared by the cyclicality implied in owning high yielding shares, despite earnings yields being twice those of the growth stocks. It is an uneasy time being early, but nothing either at a macro level or at the corporate level has bid me to change my mind. Indeed managements seem to me to be entirely in the right place. Governments, like the UK coalition, are making the difficult decisions and only the politics in the USA remains uncertain. I personally welcome the Tea Party movement there - politicians need to connect with people - and the midterm elections, if they end the Democrat's majority in the House of the Representatives, can only be a blessing."

Odey touches on some of his firm's positions specifically so it's always interesting to see what they've got their eye on: Sky Deutschland, Connaught, Barclays, and Ericsson. Intriguingly, he also touches on how equities remain 'unloved.' As his commentary was penned on August 31st, this comment precedes the rally we've seen in equities as of late. But even then, he'd still most likely point to the massive exodus from equities by retail investors. Odey currently favors value stocks over growth as he feels they have high earnings yields and cheap valuation. In terms of position updates from Odey, we recently detailed that they increased their stake in Pendragon (LON: PDG).

For all our coverage of hedge funds based across the pond, scroll through our posts on UK managers.

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