Canadian Housing Taking Heat from Hedgies

The legion of naysayers south of the border is growing.

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The Motley Fool

First, there was an article  about the “man who’s shorting Canada” in the Globe and Mail.  A similar story appeared in this morning’s Wall Street Journal.  Now, Canadian housing has been dragged through the mud at a prominent New York City hedge fund conference that’s still underway.

“The man” that got the ball rolling, Vijai Mohan, is negative on Canada’s housing market as well as our exposure to commodities and has taken out a relatively significant short-bet to express these opinions.  The WSJ article indicated Mohan has been shorting Home Capital Group (TSX:HCG) and Genworth Financial (TSX:MIC).

The term “relative” is important here.  The significance of Mohan’s positions was dampened somewhat when the WSJ revealed his firm only manages $11 million.  Yep – “million”, with an “m”.  Big money to you and me, but in the world of investment management, peanuts.

However, the “Mohan movement” may be gaining traction.  The hedge fund event mentioned above is known as the Ira Sohn Conference.  It’s held annually and provides hedge fund managers with a platform to provide their “top picks” to a room full of paying attendees, all in the name of charity.

One of today’s speakers was hedge fund manager Steve Eisman.  Eisman’s bets against the U.S. housing market, chronicled in the Micheal Lewis book “The Big Short”, are somewhat legendary.  Seemingly, he’s trying to catch lightening in a bottle, again.

In his presentation, Eisman was reportedly all over the Canadian housing market, in a negative way.  Like Mohan, he too reportedly singled out Home Capital.

After trading around the $55 mark for much of the day, Home Capital shares fell by almost 2% after Eisman exposed his position.  Genworth shares followed a similar pattern, although finished the day down just under 1%.

Foolish Takeaway

Although the proceeds go to a good cause, the Ira Sohn conference feels more and more like a “pump your own positions” event every year.  The presenters know that the Twitter-sphere is hanging on their every word and therefore, the importance of presenting a legitimate, money-making idea could well be overshadowed by their attempt to gain the most attention.  For Eisman, mission accomplished.  As for his Home Capital bet (if he in fact has one) – it may turn out to be less successful.

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Fool contributor Iain Butler does not own shares in any of the companies mentioned in this report at this time.  The Motley Fool has no positions in the stocks mentioned above.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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