Feb. 23 (Bloomberg) -- Financial companies in Italy fell so far that they were too inexpensive to pass up, according to Barton Biggs, the hedge-fund manager who said he purchased shares in the European nation.
Biggs said today that he bought a basket of Italian stocks three or four weeks ago weighted “heavily” toward banks. Intesa Sanpaolo SpA and Unicredit SpA, the two biggest Italian banks by market value, have fallen to price-earnings ratios of 7.3 and 6, respectively, compared with the valuation of 14.3 for the MSCI World Index.
“The more we studied Italy, the more we felt that not only were Italian companies cheap, but the new government actually had a chance of making some real progress,” Biggs said today during an interview on Bloomberg Television’s “In the Loop” with Betty Liu today. “Something gets that cheap, we’re willing to take a shot at it.”
In December, Italian Prime Minister Mario Monti pushed through 20 billion euros in austerity measures. The European Central Bank loaned banks unlimited funds for three years, driving down Italian bond yields in a sign of increased confidence in the country’s ability to repay its debt.
Biggs, the founder of the $1.4 billion hedge-fund Traxis, said today that his net-long position in stocks is about 75 percent, up from 65 percent a month ago. The FTSE MIB Index, the benchmark measure of Italian equities, has rallied 8 percent this year after retreating 25 percent in 2011.
Italy “has a debt problem, but it’s a sovereign-debt problem where the sovereign debt is owned by Italians,” Biggs said today.
--With assistance from Jimi Corpuz in New York. Editors: Chris Nagi, Nick Baker
To contact the reporters on this story: Andrew Theen in New York at firstname.lastname@example.org; Betty Liu in New York at email@example.com
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