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Andrew Feldstein, the CEO/CIO of $12.5 billion BlueMountain Capital (the hedge fund on the other side of the “London Whale” trade), spoke at the Harbor Investment Conference this afternoon at JPMorgan Chase.”The unifying theme across everything that we do across all of our vehicles is that we’re looking for attractively priced optionality. We’re looking for asymmetric return profiles,” Feldstein said.
His focus today at the HIC was on the steel industry, which he thinks is a “fragile situation.” Many of these companies are priced for stability and that means you can find cheap convexity and cheap optionality,” he explained.
Feldstein, who flew through his slide deck, gave these three trade ideas:
- Short JFE Steel via CDS—JFE Steel is Japan’s second largest steel producer and 50 per cent of its steel production goes into the export market. “It’s a fairly leveraged company…It may be the most vulnerable steel producer in Japan to increased Chinese exports as a consequence of leverage and its own reliance on Chinese exports…” he said.
- Short Fortescue —It’s the world’s fourth largest iron ore miner by annual production capacity based in Australia.
- US Steel long equity vs. short credit—There’s a lot of potential for volatility in this company, which is the second largest U.S. integrated steel manufacturer.
The Harbor Investment Conference is an annual event that brings together some of the industry’s top investors to share trade ideas and raise money for the Boys & Girls’ Harbor. Ackman and Mark Axelowitz, managing director from UBS Private Wealth Management, co-host the conference.