market folly

We're posting notes from the Sohn London investment conference 2016.  Next up is Marc Chatin of Parus Fund who pitched a short of Australian banks.


Marc Chatin's Sohn London Conference Presentation

Parus fund is a $2 billion AUM global long/ short equity fund with a net annualized return of 15% since 2003.

Investment idea: Short Australian banks

There are four large Australian banks that make up 80% of market share. Chatin did not distinguish between them, implying they were equally shortable. Banks in Australia have had a good run with +200% upside. They trade on a PE of 12-14x; PB 1.4-2.2x.

Real estate has been booming. Price to income ratio 5.6x for the whole country but 6.4x in metropolitan areas. Debt ratio to household income +200%.

On the supply-side, housing starts are up 200% in the last two years. House prices are beginning to fall. Transaction volumes are coming down – a leading indicator of price.

Demand for Australian housing comes partly from Chinese buyers who make up 10 to 15% of transactions. Total mortgages are up 15% but delinquencies are still low now. Construction will fade. House prices will come down.

Be sure to check out the rest of the Sohn London conference presentations here.