The top five contrarian plays of the year so far
By Kristen McGachey, 16 Feb 17
From betting on Europe over the US to sticking by emerging market debt, we look at five ways portfolio managers have stepped outside the box early on in 2017.
On the subject of contrarian plays in Europe, Mike Clements, portfolio manager of the OYSTER Continental European Selection Fund at SYZ Asset Management, thinks the recent political and financial turmoil in Italy has unearthed attractive opportunities in the broader financial area.
The Italian market, says Clements, “has suffered recent price weakness fuelled by political turmoil and a struggling banking system.”
“While we are staying away from Italian banks given the difficulty in assessing future risk, we are seeing attractive opportunities in broader financials. We believe the best positioned businesses are the loan servicers, such as Eurocastle, and asset managers including Anima.”
He continued: “Eurocastle is the leading NPL servicer in Italy and will invariably play a key role in managing the enormous stock of NPLs in Italy. Anima is the largest independent asset manager in Italy, and its shares have been under pressure mainly due to the troubles of some of its distribution partners including Monte Dei Paschi. However, at current levels we feel much of the risk is priced in and actually there is considerable upside from its developing relationship with Poste Italiane.”
Clements is also considering speciality finance company Banca Sistema that acquires trade receivables owed by Italian Public Administration.
“This is an overlooked and under-researched stock that has an attractive, low-risk business model,” he said. “The low valuation reflects lack of wider interest from other investors and general antipathy towards Italian financial stocks.”
Tags: Bonds
