Hedge Funds Eye A Profit From European Bank Research Retreat | A Finance Article As Europe's big investment banks and brokerages scale back
their research efforts
nike roshe run flyknit ireland , particularly towards small and mid-sized companies, some hedge funds and other specialist players spy an opportunity. If
the major players aren't ferreting out investment ideas among Europe's thousands
of non blue-chip companies, figuring the effort is too costly and time-consuming
at a time of cutbacks and rationalization, other participants see a chance to
capitalize on the resultant gap in the market. The hope? That less analysis and
information flow has left the best investment ideas undiscovered, even in an era
of data overload via everything from specialist investor websites to social
media. "If it's shrinking, that research is going to be replaced by independent
research firms and hedge funds, which are doing their own deep dive and
explicitly investing behind their ideas," said Soren Aandahl, head of research
at activist investor Glaucus. Data underlines the scale of research cutbacks
among the big banks. Four in every 10 European stocks tracked by analysts have
seen a drop in coverage over the last two years
nike roshe run hyperfuse black , twice the number of firms recording a rise, Thomson Reuters figures show. And calculations by Reuters based on
year-end statements show Europe's 30 largest banks by stock market value cut
staff by 80,000 in 2013 alone - not all equity analysts of course but certainly
that category was far from immune. This has led to fewer eyes looking at some of
the 9,000 listed companies in Europe, especially those with a smaller market
capitalisation. Some clients have noticed the difference. "For many of the
European mid-cap companies we cover, the breadth, depth and quality of the
sell-side research (from banks and brokers) has declined," said Moni Sternbach,
head of European mid-cap investing at $6.5 billion hedge fund firm Cheyne
Capital. LUCRATIVE IDEA Yet finding the right investment idea among overlooked
small companies can still prove lucrative
nike roshe run hyperfuse blue , as evidenced by events around Spanish wireless networks provider Gowex, a thinly analyzed company whose shares fell 60
percent after a firm called Gotham City Research issued a detailed report
questioning its accounts. Gowex subsequently filed for bankruptcy. Gotham City
had said in its original report that it stood to benefit from a drop in Gowex
shares, presumably by taking a "short" position by borrowing stock it then sold
in the expectation of being able to buy it back cheaper. U.S.-based Gotham may
also have been taking advantage of Europe having been hit harder in equity
research than other regions, given a steep fall in commissions paid to banks by
fund managers and a subsequent focusing by banks on the large companies that are
more likely to offer them other business. That same pressure on resources has
also seen the quality of research fall, some fund managers say, with some
companies often only covered by a brief note when they release their results.
But there can be risks in being too original. Even if an investor discovers a
great bet, the rest of the market may be too slow to agree. "Lower coverage
means it may take longer for your expected price action to crystallize and hence
increase your risks and carrying cost," said Aquico Wen, owner of fund firm
Victoire
nike roshe run hyperfuse red , referring to the cost of having money tied up in a position. NOTHING NEW In the case of Alent, a performance materials
company that was demerged in 2012 from Cookson, now renamed Vesuvius, activist
fund manager GO Investment Partners advised the firm to split, expecting the
market to applaud the move, only for the firm's stock to drift sideways. "There
was no-one to take it up," said Steve Brown, chief executive of GO. "These
analysts carry on following Croda or Elementis (other comparable companies)
because they've done it for the last 40 years, but none would take anything new
on." After finding a hidden gem or dog
nike roshe run floral blue , funds hope a catalyst such as an analyst earnings revision, an improvement in analyst coverage levels or a change in the
business - such as a well-executed business plan or, in the case of Gowex an
admission of fraud - will trigger a strong move in the share price. One winner
has been Cheyne Capital, whose stakes in Irish firms UDG Healthcare and DCC
surged when the companies relisted in London, drawing more analyst coverage. DCC
Plc is now tracked by 10 analysts, up from just one at the start of last year,
and its shares have risen about 40 percent after it moved fully to the London
Stock Exchange in May 2013. UDG has gained 50 percent after a similar move in
October 2012 and a five-fold rise in analyst cover in two years. Cheyne
Capital's Sternbach is one of those convinced that less bank-led equity research
means room for those prepared to do the legwork. "The reduction in sell-side
research provides opportunities for active buy-side asset managers," Sternbach
said. "Particularly the fundamental bottom-up stock pickers with a focus on
meeting management teams and undertaking their own research."Orioles Equal 2011
Win Total In 36 Fewer Games - RealGM Wiretap
The Orioles equaled their 2011 win total of 69 in 36 fewer games this season.
Baltimore, however nike roshe run floral pink , has their sights set on a playoff berth.
"I don't think you're going to find anybody in that locker room who knows that unless you tell them," manager Buck Showalter said.
The Orioles are in contention for a Wild Card spot in the American League and within striking distance of first-place in the AL East.
"We're not playing to try and beat last year," Matt Wieters said.
"Last year was not the year we wanted to have this year. We wanted to have a chance for the postseason. We wanted to have a chance for the playoffs."
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