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B. G., Opalesque Geneva: Australian hedge fund manager Kardinia Capital believes that homeowners will see a significant increase in mortgage repayments by December, that high debt levels make the global and Australian economies particularly vulnerable, and that the US is headed for a recession. There is nowhere to hide for investors. However, they say, short positions across key sectors such as lossmaking, high multiple technology and consumer discretionary stocks seem to be strong contributors to relatively solid fund performance.
The manager is long some defensive businesses, including Bapcor, Tabcorp, and The Lottery Corporation. Auto parts are generally essential for car maintenance, while lottery tickets have proven to be very defensive during recessions.
Loss makers are worth looking into, they say. "The market wants current earnings, not future long-dated earnings, and certainly not loss makers. Loss makers have no valuation support and 17% of ASX300 are loss makers (even if some are temporary). Some don't even have any significant revenue. This basket is where we are hunting for short ideas," they say.
Kardinia is short high multiple stocks - those with long earnings duration and loss makers. The const...................... To view our full article Click here
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