Fiat and Petrobras are top short picks among shortsellers

Article by Christian A., on November 22, 2012

Shortsellers have been monitoring Singapore commodities trader Olam as well as more popular names like Italian carmaker Fiat and Brazilian oil group Petrobras. At the Ira Sohn Conference in London's Mayfair district, the speakers included hedge fund managers: Chris Cooper-Hohn - the founder of The Children's Investment Fund (TCI), U.S. shortseller Muddy Waters, and Kynikos founder Jim Chanos.

They named stocks that they considered overvalued. This conference is also a charitable event that raises money for pediatric cancer research. Rich investors in the U.S. make it a point to attend this event for the chance to know who the industry’s top stock bets are. Muddy Waters’ comments have led to a drop in Olam's shares.

Meanwhile, TCI's Cooper-Hohn said Fiat was a good stock to short because it will have to raise more cash. A preferred tool of hedge funds, shorting refers to betting on a lower price for a stock. Cooper-Hohn said that Fiat is a “bad company” since it is spending too much cash and its debt levels were worse than the market though.

He explained that people would consider its “net debt of 5 billion euros, ex-Chrysler” but he thinks that the gross debt, which is getting closer to 20 billion euros, is what matters. He added that Fiat would have to “do a rights issues” as soon as it can. Last month, Fiat steeply reduced its targets for the next couple of years and said 2012 net industrial debt may reach 6.5 billion euros, as much as one billion higher than a previous projection. Fiat has yet to comment on this observation.

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