The London based hedge fund, Marshall Wace, is adding to its short portfolio in France. The long/short equity hedge fund has several shorts disclosed in French equities, probably the highest among all others.
Frexit murmurs and more short bets
MW’s new bearish bets come at a time when the term ‘Frexit’ is becoming hot, implying a possible exit of France from the European Union. France is undergoing a turbulent recovery and to add further to instability, a pro-Frexit party, Marine Le Pen’s Front National, just won a closely watched local by-election. Meanwhile approval ratings of Francois Hollande’s Socialist party have just plummeted to an all time low, reports AFP.
The new short bets that Marshall Wace has established are in CGG SA (NYSE:CGG) (EPA:CGG), a company that provides geophysical services, formerly called Compagnie Generale de Geophysique-Veritas. The hedge fund has a 0.7% short in CGG, which would amount to a $26 million.
Marshall Wace manages $10.7 billion in several of its hedge funds. The flagship, MW Eureka is up 13.85% for the year through October 1, Eureka manages $3.8 billion. Other long/short allocations of Marshall Wace, MW Global Opportunities is up 8% while MW Core is up 5.5% for the year.
Alstom winning major contracts
The other new short that the fund disclosed was in Alstom SA (EPA:ALO), a French company involved in the transportation and energy sector. MW is currently holding 0.9% of Alstom’s shares short, which would be worth $95 million on current prices.
Alstom, which manufactures trains, has recently won two contracts, one in Israel and another in South Africa, and has suffered a 16% decline in share price YTD. Alstom signed the largest deal of its history with Passenger Rail Agency of South Africa. The $5.4 billion contract for 600 passenger trains is a joint venture of Alstom, Ubumbano Rail and New Africa Rail, in which Alstom holds a 61% share. The company also won a contract for $420 million in Israel, where it will perform maintenance on 30% of the country’s train cars for the next 15 years.
Morgan Stanley notes that Alstom has potential to outperform, as the company has a FCF yield of 4.5%, higher than other stocks that come up in value screens. In Morgan Stanley’s end of September report on European Equity Strategy, analysts found the company’s stock cheaply valued.
More negative bets from Marshall Wace
Other short bets of the fund are in Veolia Environnement SA (NYSE:VE)—price is up 50% YTD and Alcatel Lucent SA (NYSE:ALU), shares have gained over 180% in this year. Marshall Wace has recently also bet against Air France KLM (OTCMKTS:AFLYY) (EPA:AF), the beleaguered French airline.
One short that Mashall Wace is cashing in today is Peugeot SA (EPA:UG), the French car manufacturer. Stay tuned for more coverage on shortsellers of Peugeot, who are finally seeing some reward after suffering a 100% stock rally this year.