Investors eye Greece despite debt talks breakdown

A man reads a newspaper next to a kiosk in Thessaloniki on 4 June, 2015.

 

The collapse of debt negotiations over the weekend caused Greek stocks to fall more than 5 percent Monday, leading to losses of more than 1 percent on U.S. exchanges. But a small group of hedge funds continues to view uncertainty in Greece as a chance to make money.

“While the ongoing negotiations are likely to result in volatility, regardless of the outcome there should be attractive European recovery opportunities in both Greece and Europe more broadly,” Gregory Schneiderman, a portfolio manager at $8 billion hedge fund allocator Aurora Investment Management, said in an email Friday.

Schneiderman noted that Greece was not a common position for hedge funds and that investors only see “a limited number of actionable opportunities” directly related to the troubled country.

Hedge funds to bet on a Greek recovery include Third Point and Alden Global Capital via their respective Greek recovery-focused funds, and Perry Capital and Knighthead Capital Management are among those that own Greek government bonds, people familiar with the situation told CNBC.com on Friday.

York Capital Management, Greylock Capital Management and Eaglevale Partners are in on the bullish Greek trade, including both stocks and bonds, according to a CNBC.com report in February.

Representatives for all the firms mentioned either declined to comment or did not respond to requests.

“Greece has a very, very compelling argument from a risk-reward standpoint,” said one investor Friday.

Securities are certainly cheap. Local stocks are down 56 percent over the last 12 months. Financial stocks owned by some hedge funds earlier this year, including Alpha Bank and Piraeus Bank, are down even more (66 percent and 82 percent, respectively). Government bonds also trade at about half their face value.

The fund manager expects the country to stay in the European Uniongiven that most Greeks want to remain and thereby avoid the likely severe economic blow of adopting a new currency. If the current government defaults, it would likely be voted out of power in favor of politicians who would make a deal with European officials anyway, according to the person.

“It’s not how we think the next few weeks go,” the person said, “but rather what the end result is.”

Four ways Twitter can win back investors

Jack Dorsey

 

It’s no real surprise that Twitter’s CEO Dick Costolo has resigned.

Twitter’s huge potential still remains just that; potential not captured. It would not surprise investors if the next quarterly results continue with a string of disappointments. The expectation at this point is for lackluster performance.

Read MoreTwitter will have a tough time finding a new CEO: analyst

The interim CEO Jack Dorsey is a placeholder until the right executive can be found that can restore investor confidence. That confidence will only return when there is clarity about how Twitter will leverage its huge user base combined with a clear vision of how Twitter can continue to be relevant. The opportunity is there but Twitter cannot waste time as competitors continue to focus on growing their market share at Twitter¹s expense.

Twitter needs to do four things to re-engage investors and assure the investing public that the hope of Twitter as an investment is not a mirage.

Make changes to encourage repeat use of the platform

Twitter has a huge number of signed-up users that are dormant in terms of usage. Registered users need to be turned into frequent users.

Twitter needs to make the product easier to use with compelling reasons for repeat use. The key is encouraging engagement.

Innovate, innovate, innovate

Twitter has a huge user base with massive usage around the world. It would be easy to make small, safe adjustments in the platform to not alienate active users. However, that would be a mistake.

Read MoreTwitter would be ‘instant fit’ for Google: Sacca

Twitter needs to think with creativity. The announcement this week that the 140-character limit for direct messages has now been increased to 10,000 characters is the type of change that needs to occur. Twitter cannot be cautious. Time to break the mold and innovate.

Inform the public that MAU is not the only success metric

The investing public focuses on a metric that is not necessarily the whole story when it comes to the health of the business. Monthly Active Users (MAU) is one sign of the level of engagement for Twitter users.

Twitter needs to lay out a clear plan on how it plans to capture opportunity from logout users, Define the metrics that paint a more complete picture of the business.

Define a clear strategic plan

Twitter needs a much clearer strategic plan that needs to be communicated to the investing public. There¹s a reason why the stock has fallen below the closing day IPO price. Investors have lost confidence and that confidence needs to be rebuilt. Just a few of the questions that need answers include:

  • What’s the strategy to engage users?
  • How will Twitter compete against Instagram? Against Facebook? Against Snapchat?
  • How will Twitter increase advertising revenue without alienating users?
  • What is the specific plan to increase usability?
  • How will Twitter deal with cyber bullying?
  • How can Twitter become more of a timeline of events rather than one-off bursts of commentary?
  • How will the company measure its success beyond Monthly Active Users?

These and many other questions need to be thoughtfully addressed by management. Ambiguity won’t do; investors are demanding clarity and an operational vision that resonates. Investors are waiting and are quickly losing patience.

Read MoreHere’s Twitter’s biggest problem

Twitter’s user base is the envy of the Internet and they have the opportunity to leverage huge reach into huge revenues. Twitter has a great problem — hundreds of millions of users waiting for the company to give them another reason to be more active in using the product. The change of management is a first step towards resetting the company’s path and restoring investor confidence.

Commentary by Michael A. Yoshikami, the CEO and founder of Destination Wealth Management in Walnut Creek, California. He is also a CNBC contributor.

Disclosure: Michael Yoshikami does not own shares of Twitter and has no other business relationship with the company. But Destination Wealth Management may buy Twitter for clients.

RBS share sale: What could put off investors?

RBS

 

The U.K. government is planning to put its Royal Bank of Scotlandshares on the block over the next few years – but may not be knocked over by a stampede of investors desperate for the stock.

There are still concerns that the bank has not reached the end of the shrinking and write-offs which have been a key feature of its post-credit crisis years – or proven that it will resume dividends.

George Osborne ready to sell off RBS at a loss
“The dividends are very much a 2017, 2018, 2019 story and that makes it tricky to sell off now,” Michael Browne, a fund manager at Martin Currie who said he would not buy RBS shares today, told CNBC.

And the lack of dividends is not the only cause for concern.

More than 300 institutional investors, and more than 12,000 small retail investors, are suing RBS over its 2008 rights issue, an extremely complicated legal procedure which is not expected to go to trial until December 2016. The claimants, who include many of the top 20 private investors in the bank, argue that the earlier rights issue misled them over RBS’s capital position and exposure to sub-prime mortgages, among other issues. RBS is disputing the claim.

“These guys don’t join these actions unless they think they have a credible case,” Ian Fraser, author of “Shredded: Inside RBS, The Bank That Broke Britain,” told CNBC.

Given that big institutions like Legal & General are currently suing the bank over its last rights issue, it may be difficult to convince them to buy in new shares.

RBS shares slip after first-quarter net loss
RBS is also facing lawsuits from the Federal Housing Finance Agency (FHFA) over the agencies ‘ loss on mortgage-backed securities sold to Fannie Mae and Freddie Mac.

Plus, RBS is in danger of being sued by nearly 300 small- and medium-sized U.K. business over allegations that its now-defunct Global Restructuring Group tried to make profits from their financial problems.

The specter of the Royal Mail privatization last year – which featured an apparently substantial underestimation of the share price, resulting in the government getting less for its stake than the subsequent market valuation – hangs over the RBS sale, too.

BoE’s Carney calls for new penalties for market abuse
Yet the government has a number of important reasons for getting RBS off its hands, even at a loss.

“Capital in RBS is going to be much stronger when they get through the restructuring. When they get there, they’ll have the ability to start paying dividends and doing all the things that normal banks do, and that should be a reason to buy the government shares,” Sandy Chen, banks analyst at Cenkos, who has a buy rating on RBS, told CNBC.

Selling off RBS also means that it will be away from governmental control before the 2020 election.

And don’t forget that RBS is a big play on the health of the U.K. economy, which may not be quite as ship-shape in a few years.

“Almost certainly, between now and 2020, we will have a recession – and it’s hard to sell bank shares in a recession, so why not do that beforehand?” Browne pointed out.