Noronha: Opportunity in Deep Value Stocks, Credit Markets

In an interview just published in HedgeWorld (reg. req.), Pedro Noronha, managing partner of the relatively young Noster Capital, which concentrates on medium- to long-term trades, comments on opportunities he sees in the current market:

Right now two sets of opportunities are very compelling. First, many deep value stocks, with good business models that generate substantial cash flow and are undervalued, have failed to rally significantly in the past months. The reason is that most of these stocks are not only under-followed but also had small short interests, and so did not benefit from the rally to the same extent as some lower-quality names. This is a very compelling opportunity and we are working flat out on some of these names.

Secondly, credit spreads have tightened to levels that are in some instances very similar to the top of the credit market bubble and in some cases even tighter. This is one of the best risk-reward trades we have ever seen, as one can buy a basket of a diversified group of issuers at a spread of 40 bps over government securities or even lower.