Sohn Conference: Hedge funds recommend Japanese equities, Germany's E.ON, selling AT&T debt

Tesla Exploration

03/10/2018 17:21

By Steven Scheer and Tova Cohen
    TEL AVIV, Oct 3 (Reuters) - Hedge fund managers recommended
buying Japanese equities and shares in German utility E.ON
 EONGn.DE , and shorting AT&T  T.N  debt among their top
investment picks at the Sohn investment conference in Tel Aviv
on Wednesday.
    Aaron Stern, head of international investments at activist
investor Fir Tree Partners, said E.ON was trading at a large
discount to its peers at 11 times earnings because it has a
"hodgepodge" of businesses. 
    However, he also noted that the company was selling off
non-core businesses and swapping assets with RWE  RWEG.DE .
That, he said, will leave E.ON as a pure-play power supplier.
    "The share price can double over the next 24 months," Stern
said, adding that he thought it could reach close to 19 euros a
share.
    Seth Fischer, chief investment officer at Hong Kong-based
Oasis Management, recommended buying Japanese equities, which he
believes are "cheap by every metric".
    He said Oasis is engaged with Alpine Electronics  6818.T ,
in which it owns a 10 percent stake, and was still fighting
Alpine's plans to sell itself to larger affiliate Alps Electric
Co  6770.T . 
    Oasis in May submitted proposals to Alpine that the company
pay a special dividend of 325 yen per share to shareholders and
appoint two independent directors to the board. 
    Fischer said he planned to meet the company next week in
Tokyo and will meet with other shareholders next month to
encourage them to vote against the planned sale unless Alps
sweetens its offer.
    On the debt side, U.S. hedge fund Olympic Peak Management
founding partner Todd Westhus said he planned to short AT&T's
debt when the fund launches in January, citing increasing
competition and high leverage that may ultimately lead to a
credit rating downgrade.  urn:newsml:reuters.com:*:nL8N1WJ2TZ
     A spokesperson for AT&T said the company expects to return
to historical debt levels by the end of 2022 and will use cash
after dividend payments to pay down debt.
    In contrast to an exodus of financial firms from London
because of uncertainty around Britain’s withdrawal from the EU,
U.S. hedge fund Hudson Bay Capital expects to benefit from the
regime change after having recently opened an office there.
 urn:newsml:reuters.com:*:nL5N1T62J5
    Sander Gerber said that if and when Brexit occurs, there
will be dislocation and companies will need to restructure
themselves. "That opens up opportunities for real hedge funds to
profit," he told Reuters.
    Gerber added that he holds a short position on automaker
Tesla  TSLA.O  due to what he deemed the "unusual conduct" of
the company's CEO Elon Musk. He also noted that a number of
employees have left Tesla. Tesla was not immediately available
for comment.   urn:newsml:reuters.com:*:nL8N1WJ49S
    Ionic Capital Management co-founder Bart Baum, meanwhile,
recommended buying long dated U.S. dollar interest rate forwards
in the belief that higher interest rates will lead to higher
rate volatility. He said that the market was pricing in the
opposite.

 (Additional reporting by Maiya Keidan in London and Sheila Dang
in New York; Editing by Kirsten Donovan)
 ((steven.scheer@thomsonreuters.com; +972 2 632 2210; Reuters
Messaging: steven.scheer.thomsonreuters.com@reuters.net;
Twitter: @StevenMScheer))