21/09/2010
Rothschild & Cie Gestion sticks to a contrarian strategy
p { margin-bottom: 0.08in; } “To beat the stock market indices, you have to break away from them,” says Didier Bouvignies, managing partner and head of management at Rothschild & Cie Gestion, at a presentation of the active and contrarian approach of the management firm, which has “high exposure to high-risk assets.” In the present context, the firm is sceptical of predictions that there will be a double-dip continuation of the recession. In reality, Bouvignies continues, “primary real estate does not represent a serious threat, if only because it represents only 2 1/2 % of GDP. Also, in the current configuration, there is little danger of a steep increase in interest rates. Finally, businesses are now in excellent health, which in theory will allow them to make new investments and recruitments.” Bouvignies adds that “though we are a little bit less optimistic than a few months ago, we haven’t let ourselves wallow in pessimism.” This line of conduct represents a more positive sentiment than the European consensus, by which the equities markets are thought to be headed in a less than positive direction at present. “Europe is excessively undervalued,” with share multiples 20% lower than the prevailing multiples on the US equity markets, “because European shares are sanctioned by considerations related to government debts, which also explains the divergence in performance between Germany and Italy, for example,” says Bouvignies. In sector terms, Rothschild & Cie Gestion, known for its expertise in “growth at reasonable price” (GARP) management, wonders whether the best of the shares with strong exposure to international markets, after a strong rebound, may reach such high levels that it would be difficult to consider them disappointing, or for analysts to adopt such a view of them. At any rate, “though risk premiums are resorbing, the most money is not to be made on equities,” the CIO continues. The banking sector, he says, is still victim to excessive fears about capital and the evolution of business, though these problems are becoming less serious. On European government bonds, Bouvignies says that “the best-rated bonds are relatively unattractive, and remuneration is at its lowest levels in a century, at least for German, French and Dutch government bonds.” For “peripheral” bonds, “there have been too many fears of default, and we do not expect such a scenario to occur in Italy, for example.” As to corporate bonds, Bouvignies notes that “portage is currently interesting, but not in excessive proportions, since portage is producing 140 to 50 basis points, which is simply rather attractive.”
