The market’s relentless, grinding levitation to daily all-time highs without a pause, has some of the most prominent investors reacting in very different ways.
Last week we reported that Prem Watsa, considered by many as “Canada’s most famous investor”, threw in the bearish towel, when he announced that his investment fir, Fairfax Financial was covering its firm’s equity hedges after suffering a $1.1 billion net loss on its investments in Q4, and $1.2 billion for all of 2016.
Still, despite folding on his well-known bearish stance, Watsa said he expects further volatility in the year ahead during the conference call, telling investors 20-30% fluctuations in stocks prices are “very much possible,” warning that quarterly income will fluctuate “wildly” and investment income “will only make sense in the long term”, but highlighting opportunity in volatile markets, so long as investors are extremely selective stock pickers.
Then, overnight Reuters reported that another prominent hedge fund manager, ValueAct’s Jeffrey Ubben, said that his firm had been taking money out of the capital markets as valuations have become overextended, leaving it with $3 billion in cash.
“I really feel that the large-cap activist plays are very treacherous with high PEs (price-to-earnings) and not a lot of growth,” Ubben said, speaking at the Reuters “Future of Shareholder Activism” event in New York. He told Reuters that he was not focusing on any particular sector but instead looking for bets on idiosyncratic, mid-sized companies such as spin-offs and “weird” corporate structures.
Among the other highlights from the conference, Ubben joined other hedge fund managers in discussing the Trump administration, saying “everything about Trump I think is inflationary” while citing policies like a potential border tax. But he added that the looming increase in interest rates were more of a concern as a board member.
The activist investor said he got “super lucky” with the Trump administration’s proposed financial deregulation measures, which caused bank shares – including current ValueAct holding Morgan Stanley – to spike. He said he sold some shares in Morgan Stanley following its price increase.
On the coming initial public offering of Snap Inc, Ubben said that he has no problem with shares that do not initially have voting rights as long as they eventually allow for shareholders to have their say.
“I understand it,” he said. “If that’s what it takes to get growth companies public and let the public participate in high-growth companies.”
As we will show shortly, the theme of hedge funds taking advantage of the Trump rally to sell to “private wealth” and retail investors is nothing new, and many of his peers are taking advantage of the current record highs to quietly offload their positions.
via http://ift.tt/2l393id Tyler Durden