market folly

Continuing our series of notes from the Sohn London Investment Conference, next up is John Armitage of Egerton Capital.

John Armitage is one of the survivors of the hedge fund industry. He co-founded Egerton Capital  in 1994. At Egerton, he is the Chief Investment Officer for all portfolio management activities  including long/ short and long only funds. Egerton Capital has 14% compounded return since 1996.  He presented two long ideas: Signet Jewelers (SIG) and AZ Electronic Materials (LON: AZEM).


Long Signet Jewelers

-  Signet is a leading US mid-market jeweler
- 50% of sale are bridal/wedding related

-  Good IT systems
-  Exclusive brands account for 26% of sales. Exclusive brands reduce direct price competition  from retail outlets and online retailers
-  Signet’s competitive advantages:  1. Sourcing – as one of the biggest buyers of diamonds it has purchasing power , 2. Good advertising - Signet spends twice as much on advertising as their competitors, 3. Highly trained staff - customers need advice when buying jewelery and well trained sales staff are a major asset of the business

Armitage argued that Signet is a retail survivor in an internet age (Even the diamond industry sees competition via the internet, mainly from Blue Nile (NILE)).


Long AZ Electronic Materials

Armitage only had a minute or two left to talk about AZ.  It is a producer and supplier of specialty  chemical materials that are used in smartphones, tablets and connected devices.  The Company’s products are used in the manufacture of integrated circuits and flat panel displays  used in electronic devices and applications, including computers and tablet devices, flat screen  televisions, mobile communication devices, industrial and automotive applications and the  developing light and energy markets.

AZ revenue is driven by the semiconductor market. In Armitage’s view the company is cheap  trading on 13x earnings and a gem.


Armitage also mentioned that his favorite longs were News Corp (NWSA), Volkswagen (VW), Richemont, and Samsung.  At the event, Chris Cooper-Hohn made a presentation on NWSA, one of Armitage's favorites.


For the rest of the hedge fund presentations from this event, head to notes from Sohn London Investment Conference.