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The stocks in Crispin Odey's long book
on Mar 24, 2014 at 15:39
Air travel and the US economic turnaround feature as themes in fund manager Crispin Odey's long book.
Renowned hedge fund manager Crispin Odey has warned that a US turnaround this year could spark a recession in emerging markets.
Odey warned that further pain is yet to hit the emerging markets, particularly those with current account deficits, once it becomes apparent that QE will come to an end on stronger growth in the US. He says the UK, with its growing current account deficit, may also prove dangerously positioned going into an election next year.
On the back of his confidence in a US revival, Odey rebuilt positions in US housebuilders during the third quarter of last year and says he is still seeing upside at current valuations.
His positive views on a US turnaround are reflected through his long book. Here we unveil some of Odey's favoured long positions - taken from the fund manager's presentation.
Stock pick Delta airlines is trading at around $35 up from pre-credit crisis levels of around $6 to the end of 2013. Over the 12 months to 21 March the stock is up 99.3%
Commenting 'we all know you must never travel anywhere by plane', Odey says a solution to what can be a negative experience could be to buy airline shares.
'The answer is the only way you should travel is to buy shares in Delta or BA and the unpleasantness is reflected in the profit margins,' he said.
Odey describes fertiliser product manufacturer CF Industries as 'a beneficiary of what is happening in the US and what is happening to energy costs there'.
He added: 'This is reflecting the very idea that there might be a US turnaround this year. Our point is when the US turns around, that is when tapering will come to an end and that is when emerging markets have to have their recession - although not all of those are running large current account deficits. The UK also seems a dangerous place to be running into the election next year.'
Since 2005 the stock is up over $ 1,300% rise. Over the past year the share price is up 31.3%.
US housebuilder DR Horton features among Odey's favoured longs.
Odey rebuilt positions in US housebuilders during the third quarter of last year on the back of his view of a US revival. He said he is still seeing upside at current valuations.
Pointing to Warren Buffett’s prediction that the US will return to one million housing starts per year, which is below his forecast of 1.5 million, he says that a price-to-earnings ratio of five to six times for US housebuilders ‘is just a bit too cheap’.
Over the past five years DR Horton's share price has risen 151% and as the chart above shows, the stock has recovered sharply from its credit crisis lows, gathering speed from November 2011 onwards.
Avis Budget features as one of Odey's favourite longs, which he notes continues to perform.
Over the past 10 years the stock has seen its share price fall from $30 in 2003 to zero during the depths of the recession. Thankfully for Odey, it has since recovered and is now closer to $50 as economic confidence has recovered. Over the past three years alone, the stock is up over 203.4%.
Truck manufacturer Paccar is another of Odey's favoured stocks, appearing in the Odey Swan and Opus funds.
Like a number of other positions in the fund manager's long book, the stock is linked to his positive views on the strength of an economic revival in the US.
In November of last year, Odey noted in his monthly newsletter: 'Whilst others can argue that European competitors start with lower margins, I want exposure to the economy; that I can see growing. Whirlpool beats Electrolux, Paccar and Navistar beat Volvo Trucks.'
The stock is now trading at $66.3 and has risen 163.3% over the past five years.
Global engineering group GKN makes an appearance in Odey's long book.
At the end of January Odey Asset Management held some 11.4 million shares in GKN.
GKN's share price is up 452.9% over the past five years, trading at around 380p on 24 March.
Odey Asset Management owns some 9% of Sky Deutschland. The fund manager is understood to have been attracted to the stock on account of its product range and the technological innovations the company has made.
The share price is up 94.3% over the past five years at €6.76.
Odey Asset Management is the largest institutional shareholder in Sports Direct, with a stake that equates to around 7% of the company.
Odey has been reported as supportive of founder and executive deputy chairman Mike Ashley's plan to award share options worth £67 million under a proposed bonus scheme - which will go to a shareholder vote on 4 April. The proposals would see Ashley, who controls a 62% stake in the sports goods seller, receive another 8 million shares
The share price is up 1,283% over the past five years with the share price at 836.5p. Sports Direct's market value has increased from less than £2 billion to around £5 billion since September 2012.
Odey's long position in Whirlpool relates to his bullish outlook on the US economy.
In November of last year, he noted in his monthly newsletter: 'Whilst others can argue that European competitors start with lower margins, I want exposure to the economy; that I can see growing. Whirlpool beats Electrolux, Paccar and Navistar beat Volvo Trucks.'
Over the past five years Whirlpool's share price is up 452.7%, rising from close to $25 in 2008 to $142 on 24 March.