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Crispin Odey: why Barclays makes me 'very excited'
by Emma Dunkley on Oct 06, 2011 at 15:44
Crispin Odey, the manager of the Insynergy Odey fund , reveals the banks, companies and regions he thinks are showing attractive valuations, as equity markets fall and shares slump to levels last seen in 2009.
One of these stocks is UK lender Barclays, which has been hit hard in the downturn as concern over banks' exposure to the European sovereign debt crisis grow.
'It [Barclays] has taken great strides over the last two years to improve mortgage margins and build their capital base, but are being rewarded with a price/earnings ratio of only five to six times and a price/book ratio of 0.4 times, a rating which suggests that other investors believe the bank’s assets are only worth roughly half of the balance sheet valuation.'
The Citywire Selection manager said although markets have fallen sharply, the question is whether this is justified by the economic outlook, or whether this represents a buying opportunity.
Odey said: ‘Remember that the only time that shares are a bargain is when there are more sellers than buyers and in such times, there is always something to worry about.’
He added it is hard to believe that a significant portion of any bad news surrounding Greece, Spain and French banks are not discounted into share prices, as these issues, along with the European sovereign debt crisis among other factors, have been debated for so long.
He said: ‘Another theme that is currently heavy in the portfolio is Germany. This country has benefited from a much weaker currency than would otherwise have been the case had the Deutschmark still been an independent currency.’
As a result, he said car manufacturers such as BMW and Volkswagen have enjoyed this weaker currency and yet are priced at just only six times and five and a half times price/earnings ratios despite prodigious cash generation.
The largest position in Odey’s fund remains in British Sky Broadcasting. Although News Corp to withdrew their bid for BskyB’s earlier in the year, hurting the share price, Odey believes this is positive in the long-term for BskyB, as he felt the merger would have undervalued the firm and its cash generation down the line.
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