In contrast to the cautious steps being taken by many investors into defensive blue chips, Odey is heavily exposed to economically-sensitive companies in the construction, retail and banking sectors.
Through his CF Odey Opus Fund, Odey is particularly positive on the outlook for the US economy and holds around one third of his fund in the region.
He was one of the early movers back into US banks as far back as 18 months ago.
“Events are moving quickly. The US economy continues to show the robustness we are expecting. Talking to company managements reveals still careful planning rather than any expectation of the boom to come.
“The stock market is hitting new highs but leadership, until only recently, was with defensives. There is still little new money coming into the equity market. None of this is consistent with anything other than the very beginning of this bull market. However, when you are in it, daily, prices are rising and the excitement is literally breath-taking." Odey said.
Since inception in 2001 the Odey Opus Fund has returned 219% versus 26% from the MSCI World Index, as shown in the graph below.
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Pay-back time
Performance in the year to April 2012 suffered, with the fund posting losses of 13% versus -4.3% from the index, while the year to April 2010 also saw underperformance with returns of 21.5% compared with 30% from the index.
As a long-term investor, however, he believes his stockpicks will come good. In his latest fund update Odey said: “These are the days that make an old investor smile with excitement: payback time for all those years of pain holding equities. That is if you are still there?”
The fund’s largest holding as at 30 April was British Sky Broadcasting, at 7.2% of the fund. Meanwhile, Sky Deutschland represented 5.8% of the fund, its second-largest holding.
Key trends
Charlie Huggins, fund analyst at Hargreaves Lansdown said: “Odey views rising inflation as an almost inevitable consequence of central banks’ actions. As a result he favours companies with the ability to pass price-rises on to customers, such as pay-TC providers BskyB and Sky Deutschland.
“By contrast Odey is currently avoiding many of the traditional defensive areas such as consumer goods businesses. Companies that make every day essentials such as washing powder and razors have performed strongly over the past few years due to the uncertain economic background. However, he believes investors are now overpaying for these stocks.”
Positive US housing data is a key indicator to Odey the outlook for the US economy is good, as he believes a trickle-down effect should see an increase in demand for white goods from consumers.
He notes a 2% growth in new houses equates to a 22% increase in demands for freezers and washing machines, with allocations to KB Homes, a US residential house builder, and Electrolux a reflection of his views.
Read about why Odey’s love of chicks is an unnecessary distraction.
