Market Report: US hedge fund star starts Vodafone rush
Thursday 24 January 2013
Punters were dialling up their brokers to buy shares in Vodafone today after a decree from American hedge fund star David Einhorn.
Mr Einhorn, who runs Greenlight Capital in the US and has returned roughly 20 per cent a year to investors since he set it up in 1996, pronounced his keenness on Vodafone in a letter to his investors.
The market caught wind of his view and started buying up the stock. He thinks the telecoms group is a good pick on the back of the possibility of a bid coming from its US joint-venture partner Verizon and said "at current valuation it appears the market is placing no value on its 45 per cent stake in Verizon Wireless. And the Verizon Wireless stake is clearly quite valuable".
Speculation that Vodafone will sell its stake in the joint venture with Verizon has been doing the rounds for some time, but there has been a growing view that Verizon may look at actually making a move on the UK-listed telecoms group.
Punters not convinced by Mr Einhorn's case had another reason to pick up the phone to their broker. Goldman's scribblers said that although there is a "structural squeeze on mobile-only operators" they think Vodafone will improve its position by buying up cable-network assets. They think it could sell a portion of its stake in the Verizon joint venture to fund the cable purchases which would be good for "long-term value".
Goldman trimmed its target price to 195p but gave the shares a buy rating and they rung up a 5.2p gain to 168.65p.
Investors not scrambling for a piece of Vodafone were making a bet on online poker group Bwin.Party Digital Entertainment after a German state changed its rules on online betting. Schleswig-Holstein voted to repeal the existing online gambling law and join the federal gaming treaty. The decision means Bwin's existing licenses will now not be revoked and today the shares added up 12.5p to 113.8p.
Germany's stance on online betting has been a thorn in the side for operators like Betfair which recently decided to change its expansion plans for the country. Germany controls the number of licences issued for online sports betting – a big business for Betfair – but so far online poker remains unregulated. Betfair lost 15.5p to 668p today.
Staying on the gambling theme, bookie William Hill is expected to report a good trading update today and its shares added 5.5p to 362p in anticipation.
London's market was expected to be hit by news of weaker sales at US tech giant Apple, but the bulls won the day with any negative data ignored. A weak pound made the benchmark index look even more attractive. Buyers piled in and the blue-chip index added a whopping 67.27 points to 6,264.91 – reaching another high since May 2008.
Traders aren't happy without a few spurious takeover rumours, and today it was Irish builder CRH's turn. The cement expert added 68p to 1,342p, but most viewed the tittle-tattle as baseless gossip.
Rumoured takeover target United Utilities flowed up by 30p to 747.5p when Bank of America Merrill Lynch rated the group neutral – a hold – up from underperform.
Bus and train operator First Group travelled up 11.8p to 203.8p after reporting that its third quarter was in line with expectations. The group said its UK bus business' sales were up by 2.1 per cent.
The London Stock Exchange beat City forecasts in the last three months despite a continuing decline in share and derivatives trading and said its data business has helped it achieve a strong performance. The shares climbed 22p to 1,205p.
The new boss at defence contractor Chemring presided over results that revealed a 42 per cent slump in full-year profit – in line with what the City had expected. Mark Papworth's plans for a turnaround strategy also cheered and the shares shot up 14.4p to 296.9p.
Over on AIM, medical software specialist Emis was looking sickly after it admitted higher staff costs on a web system for patient records would hit this year's profit. The company, set up in the 1980s by two Yorkshire doctors, makes software that allows healthcare workers to view and add to patients' medical records.
It said profit is expected to be marginally below analysts' expectations. The shares declined 150p to 750p.
Gold Oil raised more than £2m by placing 278 million shares at 0.75p. The shares, returning to the market after a suspension, closed at 1.54p.
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