Friday, 29 May 2015

Financial Orbit 29/05/15

Five sentences or graphics which sum up the Financial Orbit output over the last 24 hours across the website, twitter account and anything else thought about...

1. Japan – mixed but very poor consumption data a standout.  In my opinion forget the zero inflation rate or low 3.3% unemployment rate, this is the really important data point.  Countries that don't have domestic consumption don't tend to grow...even if the yen decline means the local stock market is up for the 11th successive day in a row.


2. European earnings – new Stoxx600 numbers out overnight. 8.6% now expected for FY15 an improvement on the mid 7%+ number last week.  And the reason?  Sharp increase in financials sector hopes, energy +ve momentum too.  Get stock picking...


3. After looking through the top tenth of the amazing BrandZ top 100 brands in the world analysis (link here) in this part of the analysis I took a look at the brands ranked 11-25 here:


4. So many interesting macro insights today with poor GDP numbers...


...and shabby S&P 500 earnings.  

Meanwhile in Greece deposits are falling...


...and dire growth:
 5. And finally...have a good weekend.

The top 100 brands in the world (part 2)

After looking through the top tenth of the amazing BrandZ top 100 brands in the world analysis (link here) in this part of the analysis I will look at the brands ranked 11-25:


As in part 1 I am going to compare brand value to EV (market cap plus net debt) and see what proportion of this EV can be attributed to the brand value per se and what proportion is more...operational.  The broad rule of thumb is that a high brand value of a company's EV may highlight value...especially if that brand value is going up (interestingly true for all the above list except Amazon and ICBC).  

So what are the results? (brand value shown as a % of total company EV)

Tencent 40.7%
Facebook 33.7%
Alibaba 30.9%
Amazon 30.9%
China Mobile 29.0%
Wells Fargo 33.9%
General Electric 21.5%
UPS 53.6%
Disney 21.6%
Mastercard 39.6%
Baidu 61.3%
ICBC 13.1%
Vodafone 27.1%
SAP 40.2%
American Express 33.2%

Well that was interesting.  As before here are the top four.  Unlike the top 10 brands only two have over half their market cap covered by their BrandZ brand value:

Baidu 61.3%
UPS 53.6%
Tencent 40.7%
SAP 40.2%

So are these stocks cheap then?

The last time I mentioned Baidu on www.financialorbit.com was back in January when I observed:

'Good graphic on the market share of China's top search companies (I must re-review Baidu again when they have their next set of numbers)...'


Yes, I must review Baidu.  The brand analysis makes this very clear. 

Next up is UPS.  Way back over a year ago I mused that 'any material plunge below US$100' would be a buying opportunity for the important global logistics firm.  


And what have we seen since then?  Well over the last year a share which has been either side of US$100.  That sounds worthwhile reviewing too. 

Tencent I have reviewed recently (link here) and I await a lower share price here.  Interestingly a filter of 50%+ brand value of market cap would have captured a good buying opportunity earlier this year...

Finally, SAP.  It has been a while since I last wrote on the stock on this site but elsewhere I have undertaken some research and was positive after the Q4/FY numbers publication.  At prevailing I am more neutral but again a filter of 50%+ brand value of market cap would have captured a good buying opportunity earlier this year.  Worth noting down.  

From part 1 I observed the need for a review of Visa to be written (and this will be forthcoming later today).  From part 2 my observation is that Baidu and UPS should also be stocks to focus on.  Research thoughts on these two entities will therefore be published in the next few business days.  

Brands: a good filter inspiration for stock pickers.  

(Part 3 will focus on ranks 26-50).  

A few macro and related stories today

Greece – Lagarde of the IMF notes a ‘Greek exit is a possibility’, meanwhile EU's Moscovici said ‘Grexit not in EC's plans, real progress has been made with serious talks’ whilst other stories centre on ‘EZ take Hard Line, Tell Greece No Fresh Cash Possible In June Unless Outline Of Overall Deal Ready By June 5’(Rtrs Citing Sources). Also, German CSU lawmaker Michelback said ‘German parliament should vote on Greek aid’ (Bild) 

In short: still a complete mess and the clock is ticking…

European earnings – new Stoxx600 numbers out overnight. 8.6% now expected for FY15 an improvement on the mid 7%+ number last week.  And the reason?  Sharp increase in financials sector hopes, energy +ve momentum too.  Get stock picking...

The US equivalent data will be out later which should again show 1%+ only growth in S&P 500 earnings expected in FY15...also there is US GDP to watch out for.  

China – highly volatile today, currently up but earlier noteworthy that ‘from yesterday's high to today's low, the Shanghai Composite lost 11.1%. That's the largest 2-day high-low decline since Jan 22, 2008’ (h/t @David_Scutt).  Meanwhile as Fast FT notes - 'just in time for an historic sell-off - foreign investors rushed into China's equity market at a record pace in the week ended Wednesday, May 27 as preliminary data from EPFR shows China equity funds absorbed $4bn from foreign investors in the week — double the previous record'.

US market split/breadth -
Financial and healthcare stocks have led the advance on the benchmark S&P 500 over the past three. However, six of the ten major sectors have fallen. Only 124 stocks on the New York Stock Exchange hit new 52-week highs in the past week, characterised by UBS research as "a very weak number"


If you mate that with poor absolute earnings growth...not good.  

Japan – mixed but very poor consumption data a standout.  In my opinion forget the zero inflation rate or low 3.3% unemployment rate, this is the really important data point.  Countries that don't have domestic consumption don't tend to grow...even if the yen decline means the local stock market is up for the 11th successive day in a row. 





Thursday, 28 May 2015

Financial Orbit wrap 28/05/15

Five sentences or graphics which sum up the Financial Orbit output over the last 24 hours across the website, twitter account and anything else thought about...

1. Japan - Fast FT note a long winning streak for the local stock market as the yen falls to its lowest level since 2002. Without that yen fall there is no way this would be happening.  Another sign favouring further pressure for a weak currency for any country wanting a stimulus...


2. The Chinese market was (finally) downward volatile today.  A great graphic here on some history here: 


3. Another big deal in the US technology space this time between Avago and Broadcom: 


4.UK GDP was a little dull...and not helped by the trade side which as indicated by this graphic on UK exports to China has been negative.  The pound is too strong OR Chinese growth (and hence demand for imports) has been weak?



 5. And finally...the latest Financial Orbit Speaks enhanced podcast is out (link here).

Financial Orbit Speaks is a regular macroeconomic and stock specific enhanced podcast by Chris Bailey, Founder and Chief Investment Officer of Financial Orbit Limited.

This edition includes thoughts on the US consumer, views from the Greek finance minister, volatility in Japan and China and the power of brands.  



Financial Orbit Speaks 28/05/15







Financial Orbit Speaks is a regular macroeconomic and stock specific enhanced podcast by Chris Bailey, Founder and Chief Investment Officer of Financial Orbit Limited.

This edition includes thoughts on the US consumer, views from the Greek finance minister, volatility in Japan and China and the power of brands.  


You can listen/watch the latest "Financial Orbit Speaks" by clicking above or alternatively here directly on YouTube.

 


Chris Bailey                                                                                 
Founder, Financial Orbit Limited 

Email: chris.bailey@financialorbit.com
Web: www.financialorbit.com
Twitter: @financial_orbit

A few quick macro, thematic and related financial market charts

Just time for a few charts this morning...

A couple on Japan via Fast FT who note a long winning streak for the local stock market as the yen falls to its lowest level since 2002.


As for retail sales in Japan were they good or not?  Off the basis of an easy comparison I am thinking not so good despite the headline 'big number'.  A sliding yen says it all to me still about Japan.  140 against the US dollar here we come...


Meanwhile the Shanghai Composite falls for the first time in 8 days undoubtedly not helped by tighter broker margin requirements. What goes up quickly...

Goodness, these Australian capex numbers are not hot at all...


Finally a couple of structural growth charts.  If we did not know it already the future is mobile...


...and disruption is rising/quicker.  





Financial Orbit wrap 27/05/15

Five sentences or graphics which sum up the Financial Orbit output over the last 24 hours across the website, twitter account and anything else thought about...

1. Greece - I really liked this story'What Would Happen If Greece Doesn’t Pay the IMF: Q&A':

‘Failure to pay the IMF would entitle some of Greece’s other creditors, including the European bailout fund, to declare a default. They would then have the option to demand immediate repayment of all their loans, a process known as acceleration. Other lenders could then follow suit. While calling a default preserves creditors’ claims, acceleration -- the bit that hurts -- isn’t automatic. Each creditor decides on its own’.

2. Look at the precipice the yen is on (h/t for the chart @RaoulGMI).  140+ here we come...


3. I am inspired to write on Randgold Resources following a technical analysis critique (link here)

4. I am not convinced about the US consumer backdrop in my latest Yahoo Finance Contributors column despite the US misery index being at near 50 year lows (link here)


5. I start to review the latest BrandZ 100 survey


Fascinating stuff (link here) and much more to come from this source.