Star manager blames hedge funds for stock price madness |
Date: Friday, October 3, 2008
Author: Philip Haddon, Citywire.co.uk
The only explanation for the 'crazy' behaviour of stocks at the moment is that hedge funds are unwinding positions with no regard to company fundamentals, says Germany's leading European equity manager, Nils Bartram (pictured above).
A-rated Bartram, who is top of the European equity manager rankings in Germany for his five year performance with the H & A Lux Equities - VALUE Invest fund, says 'they are nasty markets at the moment and there is nowhere you can hide.'
In recent days his performance has been damaged by a fall in oil stocks. Holdings of his such as BG Group and Austrian oil firm OMV fell 8% and 9% respectively on Thursday, leaving Bartram pointing his finger at hedge funds in the US.
'I have to say it is very hard to take any judgments on fundamentals at the moment, it is all driven by the need for liquidity,' he says. ‘There are some stocks which start to fall at 12 o’clock when the US enters the market.
'If you ask me the hedge funds have money outflows and I think they are having to close their shorts on the market. This is driving the rise in many banking stocks today and they are also selling their long positions, for example in oil and miners.
'It seems to me that all the oil companies are getting slaughtered. This started at midday, and it does not make sense. OK, the demand side will weaken a bit but not to that extent,’ the A-rated Munich-based manager says. He thinks the fundamentals of some of these companies make such sharp falls incomprehensible.
'Falls in companies like Yara or OMV are ridiculous. OMV is trading below book value. It seems to be only driven by the desperate need for money from some market participants, who have to sell without any respect to fundamentals.’
He points to the 'nightmares' that some of the smaller markets in Europe are going through at the moment, such as Austria, Norway, Iceland and Finland, as evidence of a US sell-off in European assets. 'My only explanation is that Americans are selling European assets and repatriating US dollars back to their own country.'
As a value manager, Bartram cannot help getting excited by some of the valuations in the market at the moment. But he admits you need a long term view for the value to be realised. 'You can find companies that have simply been beaten too much. So in that way it is a very good time for value investors,' he says.
Meanwhile he applauds the Irish government's move to guarantee bank deposits and hopes other European countries follow suit.
'I think what the Irish government has done might be a very good way to restore confidence in banking system. If everyone is sure their deposits are safe, there is no need to move deposits and I hope this will restore confidence between banks, as they don’t trust each other at the moment.'
With press reports in Germany suggesting the bail-out deal for Hypo Real Estate is looking in doubt, Bartram has faith that the German government will act decisively if they have to.
‘I don’t think the German government will allow a huge bank to go bankrupt and allow a run on banks. A run on banks is a very dangerous situation.'
Using end of August data, Bartram has returned 106% over five years with the H & A Lux Equities - VALUE Invest fund. This makes him the top manager in Germany in the European equity sector and second in Citywire's pan-European rankings.
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