View the article online at http://citywire.co.uk/money/article/a347370
Finding value in distressed companies
BlackRock’s Mark Lyttleton argues that the stockmarket is excessively pricing in potential difficulties in raising capital.
BlackRock’s Mark Lyttleton is seeing value in distressed companies, arguing that the stockmarket is excessively pricing in potential difficulties in raising capital.
Lyttleton (pictured), manager of the £1.5 billion UK Absolute Alpha fund, believes the spate of recent rights issues show that companies can quickly reverse their financial position.
‘Actually, the credit markets aren’t closed anymore, companies can do rights issues,' he said. 'A company can transform its finances really quickly, and a lot of companies have done that in the last few months.’
He said that price-earnings ratios can be deceptive when analysing value, as they can be based on very low earnings levels that are set to rise. ‘Sometimes the best thing to do is to buy companies with a P/E of 50, because those earnings are almost zero,’ said Lyttleton.
He argued that lots of uncertainty still existed over market outlooks.
‘The big question over the next six to 12 months will be, 'How sustainable will that rally be?' - I think the jury is out,’ he said.
‘I’m cautiously optimistic the world will heal itself,’ he added.
Lyttleton has been making changes to both the nature and the extent of his shorts exposure on the fund as the market rally has taken hold.
He has shifted his shorts exposure to larger companies in response to illiquidity concerns over some of his exposure to smaller and medium-sized companies.
Lyttleton is sanguine about the losses incurred as a result of shorts as the market has risen. He pointed to companies he had been shorting because of major challenges to their business models.
‘The share price goes up because people think green shoots are coming. We’ve had some shorts go up against us,’ he said.
News sponsored by:
Making the most out of Europe's potential means seeing things differently. Learn more about how BlackRock's focused approach to investing in Europe helps investors unlock the continent's vast potential.
In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.
More about this:
Look up the funds
Look up the shares
Look up the fund managers
More from us
- BlackRock's Lyttleton cuts shorts on UK Absolute Alpha
- BlackRock unveils European version of Lyttleton fund
- BlackRock's Lyttleton predicts wave of rights issues
- BlackRock to launch European absolute return fund
- BlackRock's Lyttleton still shunning banks
Tools from Citywire Money
From the Forums
Weekly email from The Lolly
Get simple, easy ways to make more from your money. Just enter your email address below
An error occured while subscribing your email. Please try again later.
Thank you for registering for your weekly newsletter from The Lolly.
Keep an eye out for us in your inbox, and please add firstname.lastname@example.org to your safe senders list so we don't get junked.