Riboldi (Banor SIM): the potential offered by the share-lists in Piazza Affari.

Focus on banks and telecommunications

by Francesca Vercesi

Milan’s financial district in Piazza Affari has seen a lot of fast-paced developments and many experts feel that there are more good performances still to come. Here are some of the under-valued sectors and future potential of the Milanese stock exchange, and shares in general, in the view of Luca Riboldi (photo), CIO of Banor SIM and adviser for Banor SICAV’s Italy Long Short Equity fund.

Piazza Affari has already seen a lot of fast-paced developments but is still not fulfilling its potential. Which positive drivers are still influencing the list, considering that it is mainly bank-centric?
For Banor’s Italy Long Short fund we’re long on companies that we feel are under-valued according to our models (Dividend Discount model or Discounted Cash Flow) and on multiples (P/E, P/BV, EV/Sales, EV/EBIT).

On these positions we can maintain our investments for several years. On short positions, however, we look for stock we feel are under-valued and for which we detect a negative, short-term catalyst, or stocks with broken business models.

At present we still see value in companies in domestic market-facing sectors such as media, real estate or utilities. We also see value in some names in the banking sector (above all the “banche popolari”, primarily regional banks, which could be involved in a reform of governance and a wave of mergers and acquisitions). But we see potential in the sector in general, if the law making it possible to offset losses on loans in the current financial year and not over 5 years is passed. We also take a favourable view of Telecom and some mid-cap industrial stocks.

More generally, what’s your view of the global stock market, given the volatility that’s returned to the markets?
For long/short value managers like us, the return of a touch of volatility is a positive factor, both in terms of funds and projected performance. In a more volatile market, it’s relatively more easy to find a mismatch between market prices and the fair value that emerges from our analyses.

At the global level, this is especially true in the markets of the “peripheral” European countries and in the markets of the Chinese region. In the American market, currently less volatile and with high prices, our long/short approach could be useful to draw advantages from the creation of alpha positions in a scenario with the thrust of the undifferentiated market (beta) is less significant.

How much space would you give, in a balanced portfolio, to shares right now?
We feel that the share asset class poses less of a risk today than bonds, given the level reached by rates and by the spreads on corporate bonds. In a balanced portfolio with an investment horizon of 3-5 years and the scope to use long/short products, we wouldn’t be at all afraid to have a share exposure of around 40%.

Key facts and figures:
Banor Capital Ltd, a London-based asset management company, is born

Both Banor Capital and the SICAV are part of a management-controlled group

billion euros
in assets under influence,
of which 1.8 billion under
discretionary management

Original article in Italian language, available here: Bluerating, June 4, 2015.


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