James Montier – Suckers’ rally or real deal?
Source: http://www.investmentpostcards.com/2009/05/09/james-montier-%e2%80%93-suckers-rally-or-real-deal/Posted on Saturday, May 9th, 2009 | In Market Commentary
The debate rages on: Is this a suckers’ rally or a new bull market? James Montier, the highly respected co-chief strategist of SocGen has weighed in on the subject in his latest Mind Matters investment newsletter. The paragraphs below have been republished from a post by Paul Murphy on the FT Alphaville blog.
The question [whether this is a suckers’ rally or a new bull market] is on quite a few lips right now. Montier says he doesn’t have a clue. So he’s buying insurance – to protect on the downside. From the strategist’s latest missive to clients:
“This strategy paid dividends in Japan which was characterised by explosive rallies (driven by the economic recovery) and the horrifying slumps as the recovery failed. Two methods of insurance stand out. Either I could buy index puts (relatively cheap at the moment) or I could construct individual short positions. In the past I’ve argued that the perfect short candidate is overvalued, with deteriorating fundamentals, poor capital discipline and poor accounting. Running my screen to find such names reveals candidates such as Anheuser-Busch InBev, Ericsson, Cairn Energy, and Staples.”
Montier’s point is that he needs to “off-set ignorance” – and his Eastern experience teaches that a portfolio of shorts offers the best hedge. A value oriented long/short strategy for Japan has generated a return of 12% per annum over the last two decades in Japan, against a market that was contracting at a yearly rate of 4%. A long-only value strategy for Japan generated a 3% return – indicating that the the Japanese market’s under-performance was largely down to the appalling performance of supposed “glamour stocks”, which lost 8.5% per annum over the past 20 years.
So, what to sell … Montier reckons there are four traits to the perfect short: overvaluation, deteriorating fundamentals, poor capital discipline and bad accounting.
Here, in three parts, is his full filtered list (click to enlarge):
Source: Paul Murphy, FT Alphaville, May 6, 2009 (hat tip: GreenLightAdvisor).
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anheuser busch, bad accounting;, Cape Town, Ericsson, investment postcards, James Montier, Japan, Market Commentary, Paul Murphy;, poor accounting;, SocGen;, Staples
 About Prieur du Plessis (http://www.investmentpostcards.com)
Prieur du Plessis has 25 years’ experience in professional investment research and portfolio management. More than 1,000 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns. He has also published a book, Financial Basics: Investment. Prieur is chief executive and principal shareholder of South African-based Plexus Asset Management, which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and other African countries. Plexus is the South African partner of John Mauldin, author of the Thoughts from the Frontline e-letter, and also has an exclusive licensing agreement with California-based Research Affiliates for managing and distributing its enhanced Fundamental IndexTM methodology in the Pan-African area. Prieur is 52 years old and lives with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town, South Africa. His recreational activities include long-distance running, motor cycling, traveling and reading. |
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September 30th, 2009 at 1:32 am
your “get articles daily” – “subscribe me” doesn’t work.
It keeps rejecting my email address as invalid.