Brian Bollen's Blog

RWC’s Ajay Gambhir Sets Positive Tone

RWC’s Ajay Gambhir sets a positive tone for long/short investing in 2012, against a tough macro backdrop

Speaking to investors this week, Ajay Gambhir, manager of RWC’s £190m RWC Europe Absolute Alpha Fund, outlined to investors why despite a range bound outlook for equities in 2012, the environment for stock picking is compelling.

Firstly, valuation dispersion between sectors is at multi-year highs. Sector performance will drive portfolio returns more so than market beta or the cyclical/defensive tilt of a portfolio (that drove returns in 2011).  Gambhir explains: “We do not have a strong view on market direction in 2012, although we do believe that the potential exists for sectors to drive performance through a convergence of valuations. We think the sector shifts will be strong enough to be independent of market direction. By way of example, food stocks are on 16 times P/Es and telcos on nine times P/Es, both are arguably defensive sectors, but rated very differently. Meanwhile, autos are on 8 times P/Es and industrials are on 13 times P/Es, so there is a lot of scope for re-rating and de-rating. These are clear long/short opportunities to my mind.”

Gambhir also sees improving stock picking opportunities over the next 12 to 18 months.

No Representation Without Loss Mutualisation!

No representation without loss mutualisation! As a student demonstration chant this mantra probably would not quite slip off the tongue. But as a pithy means of summing up some industry views about the imposition of a minimum number of independent directors upon the boards of clearing houses and swap execution facilities it certainly has its supporters. The essence of the argument is that only institutions which ‘have skin in the game’ in terms of exposure to risk in the clearing of OTC derivatives should be allowed to vote on any planned risk committee decisions.

Andy Ross, Executive Director, OTC Clearing at Morgan Stanley, elaborates. "When you clear a client trade with a clearing house, there are two main points to bear in mind," he explains. "One, the client puts up an initial margin as collateral for the trade. Two, we put up capital to support the risk of the clients to the CCP. And it is not just our own client which benefits from our guarantee; if another party gets into trouble we can lose capital. Our cash is at significant risk."

MuhlenkampMemorandum: Party Like It's Issue 99

The 99th and latest issue of the ever interesting quarterly publication MuhlenkampMemorandum is now available at http://www.muhlenkamp.com/investment/memorandum/issue_99.

The newsletter contains a number of thought-provoking comments and a warning for investors to be wary of exchange-traded products. It is certainly worth casting an eye over, if only for the ‘watch and worry list’ which reads as follows:

European government debt and banking problems;

China’s slowdown which could become a “hard landing” or recession; 

The ongoing U.S. political/economical debate on taxes and spending. 

We do see improvement in some U.S. states, which are coming to grips with government spending at the state level.

The plusses...are the attractive balance sheets and current stock prices of many American (and international) companies. Our strategy in dealing with the crosscurrents has been to keep more-than-normal cash and to invest only in companies selling at modest prices with strong cash flows. We think there will be ample opportunity for more aggressive investing when some of the headwinds discussed above are clarified.  
 

 

Equity For Punks Pulls In Over Half A Million

Any more punk and this share issue would be sporting a brightly multicoloured Mohican. Scotland’s largest independent brewery, BrewDog earlier this week launched a share offer that seeks to bypass the banks by opening up investment opportunities to everyone and anyone, helping to gather mass support for its craft beer revolution in the process.

BrewDog is making 90,000 shares available to buy in £95 packages from the company’s website, BrewDog.com, where potential investors can also download a comprehensive prospectus outlining BrewDog’s growth potential. The FSA- accredited scheme is, we are told, born from BrewDog’s desire to find another way to raise capital in an environment where banks have stopped lending, and to give fans a direct influence on how the business evolves. And it works. By Friday, BrewDog reported that it had raised over £500,000, after raising £750,000 through a similar manoeuvre in 2009 (first time round, though, it took five months).

BrewDog claims that no other business in the UK or Europe is offering equity in their business in the same way (although this must carry a caveat; in my own long experience, the moment someone claims to have done something first, someone else says that someone else did it first).

CTM

I've written a number of full-length novels, which are in what the publishing industry cutely refers to as the pre-published stage.

Gross Encounters is a laugh-out-loud raucous account of the time my friends and I spent as a young student working in a haunted hotel in a small town in the Swiss Alps (i.e. Wengen in the Bernese Oberland).

00 Scale follows the adventures of a tongue-tied easily embarrassed mid-teenager struggling to cope with the primeval urge to find a girlfriend while fighting to win a Subbuteo table football league championship.

Cave Cenam is a mid-life crisis rite of passage novel, in which the central character and his friend set out to arrange a fantasy dinner with their long-lost childhood sweethearts, with life-changing results.

Two Dead Men Got Up To Fight: an EHD novel, is the story of a unique detective partnership, forged to solve a unique case, re-opened when a murder victim from 25 years earlier is found dead.

Hot Metal, Cold Heart follows this partnership as they try to solve the mystery surrounding a string of fantastic murders in the world of international journalism.

CTM remains something of a work in progress, but tells the story of how two people find themselves growing closer together, and achieving happiness together against the odds, when they join a speaking club that is in fact a front for the largest singles organisation in Britain.

And I've just started preliminary work on That Was Then, This Is Now. This tale of thwarted love begins with the arrival of an email in 2011, the dateline of which shows it was sent in the spring of 1972.

If you'd like to read one or two sample chapters, let me know. And if you want to read the rest we can work out a suitable financial arrangement.

Which Way Next?

I have also edited a book by a long-standing friend, Richard Meredith, a business journalist turned traveller and adventurer in his middle age.

Richard had the insane idea of driving a family car, a Daewoo Kalos, affectionately known as the Green Goddes (GG) from the home of the manufacturer in Luton, Bedfordshire, England, to its spiritual home in South Korea, Seoul. Accompanying him throughout was his co-driver, affectionately known as The Kid.

If you like the sample that follows of the resulting book, which contains hair-raising, thought-provoking and stomach-churning episodes in Afghanistan, India and on the high seas, is called Which Way Next? you can order the full volume from:

http://www.amazon.co.uk/Which-Way-Next-Daewoo-Challenge/dp/095414323X/ref=sr_1_2/202-0785617-5551806?ie=UTF8&s=books&qid=1180372962&sr=8-2

Images of Sport: Airdrieonians Football Club

Images of Sport: Airdrieonians Football Club, from Tempus Publishing Ltd, is available to order via Amazon.co.uk. "A snip at just GBP11.99, and an ideal Christmas or birthday present for football followers, and social and fashion historians.

http://www.amazon.co.uk/exec/obidos/ASIN/0752427296/webperks-21/026-3088883-8909216

Airdrieonians FC, long known to their fans and others as The Diamonds, has a unique place in Scottish football history.

Formed a decade earlier than Glasgow Celtic, Airdrieonians made their reputation locally in 1885 by winning a charity football tournament run by the local cricket club. The following year Airdrieonians furthered that reputation nationally by inflicting a humiliating 10-2 defeat upon Glasgow Rangers, that club's worst known loss on its own ground.