Funds Hub

Money managers under the microscope

Indebted companies – short or long?

June 23, 2009

Hedge funds and other investors are shorting stocks laden with the biggest debts, according to stock lending research group DataExplorers, betting they may struggle to refinance themselves.

rtr1w38nAccording to the research, Yell Group and Debenhams are among the top ten non-financial firms with the biggest net debt to equity ratios out of the 300 largest listed companies in the UK.

They also rank 1st and 4th respectively in Dataexplorers’ ‘Negative Sentiment’ (DNS) indicator, which is highlights where stock out on loan — usually used for shorting — has been highest and is rising.

In Europe, meanwhile, Itinere Infraestructuras and Grupo Ferrovial are among the top ten firms with the biggest net debt to equity ratios, and rank 8th and 15th in Dataexplorers’ DNS score.

In the U.S., Caterpillar and Autozone are in the top ten for debt ratios and rank 40th and 44th on the DNS, while in Japan debt-heavy Kintetsu, Japan Airlines and Odakyu Electric Railway rank 9th, 12th and 13th on the DNS score.

“This reflects recent concerns about banks failing to lend, or to roll over existing loans, as well as the capacity of some companies to service debt from current revenues,” the paper says.

This bet by many funds is in stark contrast to the view expressed by Crispin Odey, who earlier this year pointed to the start of a new bull market and who recently told clients he sees the best opportunities in “prodigal” companies.

“I still find myself coming out of meetings with companies whose share price is up fivefold since January and wanting to fill my boots,” he enthused.

“But it is quite a narrow field. It encompasses companies that at one stage looked like they would be denied refinancing but have now secured it.”

Comments

Very good article.

In my opinion, it is all a matter of market timing. It does not matter if it is gold, oil, or Microsoft, if you have access to good market timing signals, they will help you get in and out at a profit.

No guarantees in this business, but if they are right most of the time, you can still make $s.

There are may web sites providing them out there (search Google). Just find one that works and use it! Check out http://invetrics.com as an example.

Its Dow Jones timing signals are up 43% as of 6/23/09 while the Dow is up just 29% off its March lows.

Following a market timing system works!

Posted by Michael | Report as abusive
 

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