Odey Asset Management rose when all others succumbed to underperformance. Odey Absolute Return churned a +1.1% return in June, increasing the gain for 1H2013 to +24%. Its flagship fund, Odey European has been doing equally well. The fund is among a handful of equity long/short strategies that worked its way through the maze of troubled stock and bond markets prevailing in June.
Odey Absolute Return managed to return better than its peers because the short portfolio was up in almost all of its assets. The fund was up in short equities, equity futures and in shorts in government bonds as well. Odey lagged -4.5% in the long equity book, the largest such decline for Odey that we have seen in long equities, for as far as one can remember.
Losers and gainers in June
The best performing shorts were FTSE 100 Futures, 10-year Gilt futures, China National Building Material Co. Ltd (HKG:3323), Ashmore Group plc (LON:ASHM) and shorts in 10 year U.S. treasury futures. Odey’s short in Ziggo NV (AMS:ZIGGO), a Netherlands-based television and cable services provider, was the worst performer for the fund.
In the long book the worst performers for June were MAN GROUP PLC (LON:EMG) (OTCMKTS:MNGPF), Regus PLC (LON:RGU), Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930), Barclays PLC (NYSE:BCS) (LON:BARC), Playtech PLC (LON:PTEC). Quanex Building Products Corporation (NYSE:NX) and Shanta Gold Limited (LON:SHG). The long in micro-cap Shanta Gold Limited (LON:SHG) is a surprise as Odey is shorting similar miners in the U.K. The fund has shorts in Kazakhmys plc (LON:KAZ) (HKG:0847) and Lonmin Plc (OTCMKTS:LNMIY) (LON:LMI), both of which have been doing well for Odey. Additionally Crispin Odey has said that this is not the best time to be long gold as other financial assets have greater value when inflation is at low levels. The best returning long was Sky Deutschland AG (ETR:SKYD) (FRA:SKYD).
Odey on Apple Inc. (NASDAQ:AAPL) and Samsung
Absolute Return’s managers, James Hanbury and Jamie Grimston, wrote to investors that the goldilocks period for the economy is over as Federal Reserve tapering of QE looks more real. The managers also discussed Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) in their letter, saying that the it is now the fund’s fifth largest position. They said that while Samsung has underperformed in the past months due to the selloff in EMs, they remain convinced that one of the largest semiconductor manufacturer is worth much more. They stated that the company makes 65% of its profits from the developed markets and that is still not priced into Samsung’s value. The hedge fund has a longstanding position in Samsung and has profited from long Samsung and short Apple hedges last year.
With respect to Samsung’s edge on Apple Inc. (NASDAQ:AAPL), they said that Samsung, which has a very diverse business and makes numerous cellphone components for the smartphone market, is certainly superior to “a bunch of brilliant designers sitting in California with an outsourced supply chain.” They also added that buying Samsung is cheaper for them as the fund was able to buy preferred shares at a 22% discount to book value whereas Apple Inc. (NASDAQ:AAPL) trades at > 2.5x book value.
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