Crash ahead? Crispin Odey’s hedge fund Odey Asset Management is increasing it short stake in used car business Auto Trader
Crispin Odey’s eponymous hedge fund Odey Asset Management has been upping its short stake in Auto Trader over recent weeks.
On Tuesday, the fund increased its short position in the used car business to 1.3 per cent from 1.26 per cent, implying that Odey may just be banking on a crash ahead for Auto Trader’s share price.
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The shares have indeed been on a general decline since June, amid concerns over the used car sector.
“We’re seeing new car sales declining and used car sales flattish in year-to-date. That compares to strong growth in recent years,” said Robert Berg, analyst at Berenberg.
Since current new car sales roughly represent the used car market of the future, this raises warning signs for Auto Trader’s next few years.
There are also concerns about the personal contract purchase (PCP) methods by which many consumers pay for their cars, as the Bank of England earlier this year singled out the automotive sector as it voiced concerns about the amount of debt consumers were taking on.
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“If the Bank of England was to bring in much more thorough checks, and the number of people approved for PCPs was reduced, you would expect that to have an impact on car sales,” Berg said.
Added to that, he noted that consolidation in the sector was throwing up obstacles. “You’re seeing the bigger players try to take a bigger market share. Companies like Auto Trader would rather have high levels of fragmentation, as the bigger market players will drive more of their traffic organically,” Berg explained.
But despite the slipping share price for Auto Trader, and the signs that Odey might be expecting this to continue, analysts have not been quite so ready to drive the pessimism. Berg noted there have been no recent downgrades to analysts’ forecasts, while recommendations are currently tied at a consensus of “buy” or “outperform”.
Read more: Auto Trader share price on the skids as firm reports increased revenue and profit