This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Credit Opportunities in Europe, Says Hedge Funder Louis Gargour

"In other words, the systemic risk inherent in Europe has been mitigated," he notes. "But the timing of that mitigation is about two years behind the U.S."

Now we are seeing corporate deleveraging, a benign credit environment and low default rates. There are also dislocations in the European periphery that have created a series of abnormalities, such as undervalued credit and companies.

"You have a variety of factors that are driving European credits spreads tighter or keeping them where they are now, which gives us great opportunity to make good returns," he adds.

Liquidity in the credit markets is one of the most important barometers that LNG monitors, he says. The team maintains a very liquid portfolio, and is able to sell 75% of the portfolio in one week and 90% in one month. They focus on a sweet spot of issuers that remain liquid and give equity-like returns.

"When we first began running strategies in 2001, the capacity constraint was about $500 to $750 million. Given the evolution of the European credit market it is now a quarter of the U.S. market's size. The number of dealers and market makers has increased, but more importantly credit default swaps have arrived, the number of issuers and the number of issues by an issuer have increased, giving us the ability to hedge, to long and short different parts of the capital structure. We believe we can run approximately a billion dollars in this strategy with no frictional issues whatsoever."

Quick and Nimble Investment Process

LNG's investment philosophy, he says, is primarily to preserve capital, understand and exploit market directionality and find idiosyncratic opportunities. The investment process starts with a top down approach, evaluating macro economic factors. Then allocations are made to different sectors, either long or short. Then the investment team conducts a deep analysis of each company. Risk management is done through the universal risk model, which "breaks down risk into the buckets that are most likely to be able to be measured and to be able to be hedgeable."

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AAPL $128.49 -0.67%
FB $80.89 1.60%
GOOG $573.21 -0.08%
TSLA $202.43 1.40%
YHOO $43.99 3.20%


DOW 18,096.90 -106.47 -0.58%
S&P 500 2,098.53 -9.25 -0.44%
NASDAQ 4,967.1410 -12.76 -0.26%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs