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This Hedge Fund Manager Is Betting Big on UBS Stock

  • UBS (UBS) stock is in focus as the company acquired Credit Suisse (CS) over the weekend.
  • Bondholders are not happy about being wiped out, while the equity shareholders will have an out.
  • Crispin Odey’s Odey Asset Management has reportedly taken a position in UBS.
UBS stock - This Hedge Fund Manager Is Betting Big on UBS Stock

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Shares of UBS (NYSE:UBS) have been in the spotlight ever since there was a worry about the banking industry, not so much because of UBS stock directly, but because of Credit Suisse (NYSE:CS).

Earlier this month, worries began to spread about U.S. regional banks. That’s mainly because Silvergate Capital (NYSE:SI) said it would shut down. A much more significant issue became apparent when SVB Financial (NASDAQ:SIVB) and Signature Bank (NASDAQ:SBNY) failed.

A few days later, Credit Suisse was on the brink — again — and this time, it was enough to overwhelm it. The stock cratered, and over the weekend, UBS took it over. The company agreed to a $3.2 billion takeover of Credit Suisse, but the deal has had some pushback.

Mainly because the deal is wiping out tier-one bondholders, angering many investors. That’s because equity shareholders are not getting wiped out. While the equity price has been hammered, it’s not being written down to zero like the bonds. Generally, tier-one bondholders are paid out before equity shareholders.

Regarding UBS stock, shares are up about 13.5% from last week’s low. However, the stock is still down about 8.5% from the month’s high as the drama continues.

UBS Stock Has at Least One Big Buyer

Hedge fund manager and multimillionaire Crispin Odey is taking a big bet on UBS stock after it acquires Credit Suisse. Based on the price action in the stock, there is reason to believe that shares can ultimately go higher from here. Another banking “scare,” though, is sure to frighten retail investors. According to Bloomberg:

“The UK hedge fund manager said he invested 2% of his Odey Asset Management funds into UBS shares after the takeover. Odey personally ran about $1.3 billion of assets at the end of February.”

Of course, it helps that the Swiss National Bank is there to help bolster liquidity. The banks will have “unrestricted access” to the Swiss National Bank’s existing facilities should they need to boost liquidity following the deal.

The Swiss National Bank said: “By providing substantial liquidity assistance, the SNB is fulfilling its mandate to contribute to the financial system’s stability, and it continues to work closely with the federal government and FINMA to this end.”

There is now hope that UBS stock will be okay moving forward. It’s hard to imagine the Swiss National Bank letting both banks fail. That said, the Federal Reserve’s decision to raise interest rates again today could create more ripples throughout the space and amp up investors’ worries. It’s too early to know if that will be the case, though.

Cautious investors may be better off letting the bank trade settle down before getting long individual names. Otherwise, they might prefer to stick with high-quality bank stocks to avoid potential binary risk.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.


Article printed from InvestorPlace Media, https://investorplace.com/2023/03/this-hedge-fund-manager-is-betting-big-on-ubs-stock/.

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