Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Clunie: my shorts that play the China slowdown

Clunie: my shorts that play the China slowdown

James Clunie, manager of the Swip UK Flexible Strategy fund, has revealed his recent short positions put in place to benefit from China’s slowdown.

China’s GDP growth has tapered off, growing 7.6% in the second quarter versus previous rates of over 9%, and Clunie believes the country could be in for a hard landing.

In view of this, the manager has shorted companies he feels suffer from a slowdown in China.

‘Luxury goods – there is enormous demand out of China,’ said Clunie. ‘Mulberry is a luxury stock that did well in the late 1990’s. Luxury stocks do well when there’s quick wealth creation.

‘So with the correlation between China consumer spending and luxury property prices – it is a natural short.'

He added: ‘Mulberry has had a massive deceleration. Burberry has also slowed down – growth isn’t coming out as well as they’d hoped.’

Earlier this year, Mulberry shares soared to £25 and now hover at around £14. Clunie said he shorted this firm at £20 and then added to his short, in the view it was ‘massively over-priced.'

Clunie has also shorted mining firms Rio, Antofagasta, and Anglo-America on the back of China’s slowdown and in belief this will get worse.

‘China residential property has been in a big bubble – transaction levels have collapsed, and China’s growth is cooling,’ added Clunie.

However, Clunie conceded shorting is tough and has lost money shorting SuperGroup and Admiral ‘too early,’ even though the stocks halved after he shorted.

‘It’s risky, shorting and waiting until there are losses [in a company],’ said Clunie. ‘You need to be well-informed, arguably better informed than the long book. So I look for where short-sellers have a high appetite.

‘We use fundamental analysis to see if stocks are over-priced. We look at stock lending data – do people agree with us when you see over-priced stock?’ he added. ‘We then wait to see if others short, and then we short. When you move as a pack, there’s more power and delayed arbitrage.’

On the long-side, Clunie invests in Reed Elsevier, AstraZeneca and BAE Systems, for example.

‘[BAE Systems] it’s got a high yield of around 7%, and looks cheap, because British defence spending cuts are being priced in,’ he said.

BAE recently saw the planned cuts, which were in line with their budgeted cuts, said Clunie, making the stock cheap with the cuts more than priced in.

‘BAE’s rivals have higher price to earnings ratios and are more American. So this is an out of fashion value stock with high yield,’ he added.

Astrazeneca is also cheap because the market is concerned some of the patents are coming off, said Clunie. ‘It’s unfashionable and cheap, so I’ll take it,’ he added.

Over three years, Clunie has delivered 34.93% on his fund, compared with Libor three month’s 2.48%.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Related Fund Managers

James Clunie
James Clunie
45/59 in Alternative UCITS - Long/Short Equity (Performance over 3 years) Average Total Return: 15.77%
Citywire TV
Play Biotech Growth: we will ride out this storm

Biotech Growth: we will ride out this storm

Geoffrey Hsu of Biotech Growth Trust says the sell-off in biotechnology stocks represents a buying opportunity for long-term investors.

Play Picton: the UK property hotspots for rental income

Picton: the UK property hotspots for rental income

Picton Property Income CEO Michael Morris reveals how he is planning to ride the ‘ripple effect’ as UK economic growth spills out from the capital across the country.

Brewin's Foster talks financial crisis MkII with Allianz's Riddell

Brewin's Foster talks financial crisis MkII with Allianz's Riddell

This week Brewin Dolphin's head of research talks to Mike Riddell, fund manager at Allianz Global Investors, about the forces driving bonds markets in a tumultuous week for markets.

Your Business: Cover Star Club

Profile: PortfolioMetrix is on a mission to kill 'Frankenstein' systems

Profile: PortfolioMetrix is on a mission to kill 'Frankenstein' systems

In a buyers’ market for off-the-peg discretionary management, self-funded start-ups begin at an inherent disadvantage

Wealth Manager on Twitter