Sunday, 20 April 2014

Stories we should be thinking about

Here are a few finance-centred stories before the markets open on Monday (in Europe and the Americas), to think about:

Macro matters:

Adding to the contrarian feel of the US indices so far this year is this posting from Horan Capital Advisers highlighting how the 'Dow dogs' are outperforming so far this year (link here)


A typically high quality posting from Sober Look on the UK property market with the conclusion that 'UK residents will be paying increasingly more for shelter in the years to come'. Link here


That thought is backed up by a chart in The Times on Saturday which noted that both rental and purchase prices are 'above their long-term average'.  I would say...

 
And a final point on London house prices in a fascinating chart from quartz.com (link here):

 
5+ homes in Atlanta...wow!
 

This 'e-commerce and the future of retailing' presentation by Business Insider (link here) has so many interesting insights.  Here is my favourite:


A variation of 'sell in May and go away' was cited by Dragonfly Capital:


'Are You Ready For The Price Of Food To More Than Double By The End Of This Decade?'  If you are not, you may want to check this link out. 
 
Expect volatility...it is normal.  A great chart cited by Howard Getson at Capitalogix (link here)
'Chinese chocoholics cause cocoa crisis' (link here but paywall required).  'There are no buffer stocks and prices have gone up a lot.  Forecast prices are 20% higher for 2014 than in 2013'.  Not what you want to hear at Easter!
Good WSJ graphic on the evolution of the US housing market in the last year or so: less refinancing AND less purchasing going on...

Headline in the Sunday Times business section today: 'Almost a million on zero-hours contracts'.  That's a lot of people given total employment in the UK is just over 30m. 

Nice Financial Times graphic on Africa


 


Company-related observations:

'Google's growth is ultimately limited'.  Any analytical report with an 'r-squared' accompanying statistical chart of 0.97+ (see below) is worth looking at.  Link here

Seeking Alpha had an interesting gold mining sector M&A potential news:

'Barrick Gold (ABX) and Newmont Mining (NEM) - the world's two largest gold producers - had hoped to have a merger deal announced as soon as Tuesday, reports the WSJ, but talks have broken down. The talks come after a particularly tough year for the gold miners has them shifting focus from empire-building to cutting costs, and analysts note the two have neighboring operations in Nevada, as well as operations in proximity to each other in Peru and Australia'

Pfizer made a bid for AstraZeneca as per The Sunday Times.  Here is a good write-up of the story on Bloomberg (link here)
Toyota aims to more than double it sales in China to 2M a year from 917,000 in 2013 and introduce 15 models in the country by the end of 2017...Toyota unveiled its plans at the Auto China show in Beijing, which has officially kicked off this weekend.
Still optimism towards the Italian banking sector:

French mobile operator SFR, still currently owned by Vivendi, is poised to announce a network-sharing venture with Vodafone in the coming days, CEO Jean-Yves Charlier has said. 


And finally...
Now here's a real bubble...from the 17th Century:

 (cited by Dragonfly Capital)
 
Have a good week

The most popular posts of the last week

The five most popular stories on Financial Orbit over the last - holiday shortened - week and a bonus link to my favourite that did not appear.

1. The most popular post was the weekly regular 'Stories we should be thinking about' which appears on a Sunday evening (GMT).  Link here

2. The second favourite story is this quick analysis of Bank of America based around a key chart from their presentation.  There is also Citigroup linked analysis. 

3. A collection of charts from November (!) was the third most viewed page.  I think it is likely to do with one of the interesting charts on Asian energy demand or scotch.  Link here

4. Another chart selection - but this time from mid April - with information on iron ore and 'all over the place' Chinese data was also one of the top five viewed pages.  Link here

5. For the second week in a row the ADP spin-off analysis made the top five.  Link here

And a bonus link which appeared out of the top five is this one concerning the UK food retailer Tesco who produced an interesting set of numbers in the last week.  Link here

 
 
 
 
 
 
 
 
 
 
 
 
 

Saturday, 19 April 2014

Charts of the day - performers and some thoughts from looking at the last valuation and seasonality over the last ten years

Some charts that have interested me over the last 24 hours.

Wheat and Japan have been the best performers over the last week...


...over the last ten years the next couple of months have been upwards to sideways.  We will see!
 
(h/t Avondale Asset Management)
 
Of course the trouble is that the P/E rating of markets is much higher than much of the last ten years...
 
 
Household leverage in the US is falling...but is still very high in absolute terms
 



 

Friday, 18 April 2014

A couple of Good Friday links

Having been travelling for much of the last few days there is much to catch up on including the IPO of Weibo/impact on SINA and corporate updates from companies as diversified as Phillip Morris, Diageo, Mattel and SAP.  All of this to follow over the next two or three days. 

First though a couple of links/graphics this Good Friday:

MSCI may add China to the emerging market indices (link here).

Real wage growth (again, just about) in the UK.

Thursday, 17 April 2014

Google - awaiting the US$525 to buy more

So Google results did not fully hit hopes.  As Seeking Alpha noted:

'Google (GOOG): Q1 EPS of $6.27 misses by $0.15.

Revenue of $15.42B (+19.1% Y/Y) misses by $90M'

As a longer-term watcher of Google this happens...after one strong quarter expectations get over boosted and hence the numbers 'miss' the following quarter...whilst still showing good absolute progression. 

This time though there is a lapping of very good (Christmas boosted) numbers a quarter ago.  I thought it was interesting that on my 'quick guide' indication to Google growth (paid clicks plus cost per click) the year-on-year statistic was a still impressive 17% but the quarter-on-quarter statistic was -1%:

('Our global aggregate paid click growth was strong this quarter again up 26% year-over-year and down just 1% quarter-over-quarter. Our aggregate cost per click was down 9% year-over-year and flat quarter-over-quarter').
 
This shorter-term flatness can be seen in some of the other metrics e.g. cash flow (still running at an impressive absolute run-rate)...
 
 ...and at the operating profit line...


...where shorter-term cost build up weighed
 
Is there a problem?  Fundamentally no.  Mobile pricing is not horrible and the growth opportunity is material.  YouTube and Android remain formidable growth machines.  Finally the balance sheet is in rude health and this gives further optionality beyond the current development project.
At the time of the share split I wrote a note (link here) which mused that at the 'new' share price level, US$525 was a buy on weakness point.  That thought remains. 
 

Charts today - Japanese confidence, European imbalance, IPO excitements and different views on US housing

Some charts that have caught my attention over the last 24 hours.

Two interesting stories out of Japan today.  First consumer confidence was low...surely nothing to do with the attempt to generate higher prices whilst companies are being reluctant, to date, to raise wages?  An indirect tax increase hardly helps either...


Also the debate over the required shift from Japanese bonds to equities continues...(link here).

A chart to show that Europe is not balanced...
 

 ...whilst to the East, The Economist cover says it all re Russia
 


Meanwhile in the US, 'Obamacare' is slowly, slowly gaining support


The Weibo IPO priced at the bottom of the range...and you can see why given the market backdrop/environment captured by this chart:

Finally, US housing is fine...
 
 
or still way below historic trends?  An important debate for consumer spending/consumption trends (which still dominate GDP growth at the margin)
 



 

Wednesday, 16 April 2014

Bank of America is no Citigroup

Did you wonder why Bank of America shares responded differently to their corporate results than Citigroup did the other day?  Of course part of the explanation was centred on expectations and what the market had factored in with Citigroup post their second Federal Reserve stress test having a relatively low barrier to overcome (link here). 

What also struck me is that the quantitative difficulty posed by the Bank of America numbers as nicely summarised by this graphic:



Normally - as I did with Citigroup to highlight value - I would contrast the tangible book with the tangible return on equity...but Bank of America's challenges with establishing a headline figure on the latter in this set of numbers due to one-offs and related causes a difficulty.

And then look at the quoted history - and the wide spread between the Q413 and Q113 return on tangible equity statistics.  Care to extrapolate or predict the underlying Q114 or Q214 number?  I think not. 

At least tangible book is rising - good news from an asset perspective - but for the share to be as good value as Citigroup today I would need to see that tangible return on equity to be nearer 10%.  Maybe over time...but Citigroup's simplification plan has scope too.