Crispin Odey, Founder and Managing Director, Odey Asset Management, whom we featured last week, a well known and very successful UK asset manager [less well known in North America, but noteworthy], has issued a warning, arguing that investors should 'Steer Clear of Defensive [stocks]."
According to a Reuters Story:
Defensive stocks like pharmaceuticals -- typically seen as a safe haven in rocky markets -- look like attractive short-selling opportunities, high profile hedge fund manager Crispin Odey says.
Odey, who runs the $1.35 billion Odey European fund, tells Reuters that the high price/earning ratios of defensive stocks like food producers and drugmakers relative to banks, make them vulnerable.
"The paradox is the banks, which go up and down 10 percent each day, are safe and the rest of the market is looking vulnerable," Odey says.
The European banking index has a price-to-earnings ratio of 5.6 times while the FTSEurofirst 300 has a multiple of 8.7 times and the healthcare index has a multiple of 10.3 while Lloyds Banking group's P/E ratio is 2.6 times.
"What we have is the death of safety ... (Defensives) look dangerous. You can either wait 17 years to get your money back or you can wait 2.6 years. What would you rather do?" Odey says.
