Friday, 29 April 2016

The last week on Financial Orbit

As usual a busy last week on Financial Orbit...

My favourite chart from this week's editions of Financial Orbit Macro - your one-stop shop for a daily global macro briefing - would be this one showing the massive rise in debt levels.  Absolutely critical for understanding not only the rationale for extraordinary stimulus but also why general economic growth levels are patchy.  This is why you need to take account of the macro environment AND probably why it is a stock picking world.  



This week's editions of Financial Orbit Stocks included appraisal of the performance of all the preferred stocks but specifically included detailed updates on the investment cases for: 

Aggreko, Air Liquide, Barclays, BASF, Dow Chemical, DS Smith, Electrolux, Gilead, GlaxoSmithKline, Hershey, Marriott, Umicore

Meanwhile my active investor service Financial Orbit Immediate discussed prospects for Altria, Bunge, Chevron, Exxon-Mobil, Potash Corp, Royal Bank of Scotland, Sandvik and Xerox. 

If you would like any of these company reports please get in contact...or alternatively you can try all of the above services for a free seven day no obligation trial.  If you would like to take up this offer then just send me an email or a tweet as you prefer.  


Financial Orbit's week ahead...

On Monday I will be revealing some data on how the preferred list Financial Orbit Stocks names have performed in April after that wonderful outperformance during the first quarter of the year (link here).  I also will be revealing some changes to the Financial Orbit Immediate service which I think people will like... 

In terms of media appearances you can listen to me on Share Radio on Tuesday and Wednesday mornings (6-9am UK time) talking about markets, economics, breaking company news and politics. 

And don't forget the UK Investor Show (link here) coming up on Saturday 30th April.  I will be on the main stage twice but hanging around the show for the rest of the day so if you want to meet up to chat just get in contact.  



Thanks for reading


Chris Bailey

Founder, Financial Orbit Limited

Email: chris.bailey@financialorbit.com

Twitter: @financial_orbit 

Thursday, 28 April 2016

"Lloyds Bank: geek analysis says the stock is cheap"

I wrote a piece titled "Lloyds Bank: geek analysis says the stock is cheap" which was uploaded just now to the ShareProphets website.  You can find a link to the piece (free sign-up) here.

Sunday, 24 April 2016

Stories we should be thinking about

Ahead of the new working week here are a few finance and related stories to be thinking about.

Macro matters:

An interesting observation from FT.com: 'China’s total debt rose to a record 237 per cent of gross domestic product in the first quarter, far above emerging-market counterparts, raising the risk of a financial crisis or a prolonged slowdown in growth, economists warn'.


Debt build up is never good especially when it is above that of GDP.  So therefore worth a read is this piece in the Japan Times titled 'China's $5 trillion opportunity'.  As I noted on Twitter:

Agree with the suggested medicine but IMO the country currently adopting the greatest supply side reform is...China

China remains as divisive as ever - personally I remain on the side of the cautious bulls...and just to show that all of this really matters for the global economy take a look at this proportional use of the internet chart: 
 (h/t @paul1kirby)

After reading this piece on Greece with the headline...

Athens works on contingent fiscal plan to satisfy lenders and complete review


...it seemed to me that the key line was:

"Govt officials spent the weekend trying to decide how to identify another 3.6 bn euros in fiscal measures"
I still believe that just asking the Greeks for fiscal measures is not going to be enough and that some form of debt rescheduling/restructuring is going to be required.  

Of course Greece is not the only European country with overt economic challenges.  The below graphic shows why the proposed Italian bank bailout is so important: 

This week's Stories we should be thinking about is a Brexit/EU referendum free zone but even excluding this it is fascinating to see how issues such as the rise of student loans...


...could potentially negatively impact on the already stretched house price to earnings multiples: 


Still at least EU's travails have not meant a country appearing in the top 10 largest GDP contractors in 2016.  Much of this is oil-led of course...


...and undoubtedly one of the more fascinating dynamics in the ongoing oil supply-demand debate is how Iran will try to scrabble back the market share lost over the last five or six years: 
(my own view is still to be moderately optimistic about the oil sector - even after the recent run - and I am targeting a US$50+ oil price by the end of the year given I think many underestimate how relatively tight the demand-supply backdrop is especially with capex being spent by the industry falling so rapidly). 

I liked this via @RonStoeferle about hedge funds:


Of course the next iteration should be hedge funds outperforming in 2017-18...

Finally, remember how lucky you are: 



Sector and companies: 

The importance of stock picking is rising...


(h/t @Callum_Thomas and @AlastairWinter)

...and just look at the negative working capital apparent in the Canadian mining sector: 



And just to show how tricky it is out there for company selection I saw this story in the Financial Times

'In total 312 UK public companies warned analysts to lower forecasts in the 12 months to the end of March, against 302 in the previous 12 months. That is the highest level since 2008'.

Of course there are still thinks to be doing.  For example via Seeking Alpha there were some comments on one my Financial Orbit Stocks preferred stocks (i really agree with the implied sentiment in the last line): 

Marriott International (NASDAQ:MAR) looks attractive to Barron's with revenue growth and profits both heading in the right direction. The strong management team and the ample cost savings from the Starwood pickup should support share price gains of as much as 30%. The Marriott model of generating most of its revenue from fees makes it "recession-resistant," adds Nomura.
Marriott closed at $66.54 on Friday which is roughly 18X this year's earnings per share forecast. However, on a 2018 post-merger look the multiple falls to 13X.

A few stories from today's Sunday Times

BHS (a private company - but a big UK retailer) on brink as rescue talks fail...(could be) the worst high street crisis since Woolworths went bust in 2008

Barclays has come under attack from top investors over it plummeting share price and confusing turnaround plans

American hedge fund giant Paulson has launched a scathing attack on the Premier Foods board after the breakdown of the Bisto maker's takeover talks with American rival McCormick...accused the board of corporate arrogance


And finally...

How many of the top and bottom parts of the list have you read / listened to / watched?


Ahead of a new working week...never forget this: 



Have a good week

Free webinar on Tuesday 26 April: Financial Orbit Macro

Free webinar on Tuesday 26 April: Financial Orbit Macro

How accurate are my macro calls made back in early January for 2016 looking? And what other big picture issues should we be worrying about? Covering macroeconomics, sentiment, multi-asset classes and politics, Financial Orbit Founder Chris Bailey will review all the latest developments and answer any questions you have via interactive functionality during a 30 minute webinar session starting at 3pm London time on Tuesday 26 April 2016.

You can access the 30 minute (including Q&A) webinar at 3pm London (10am New York) on Tuesday 26 April at the following link:



I hope you can join me at 3pm London time on Tuesday 26 April.


Chris Bailey
Founder, Financial Orbit Limited

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


PS - if you would like a formal calendar invite please email me and I will send one out to you.  

Saturday, 23 April 2016

"Ashtead: taking advantage of shabby peers"

I wrote a piece titled "Ashtead: taking advantage of shabby peers" which was uploaded just now to the ShareProphets website.  You can find a link to the piece (free sign-up) here.

Friday, 22 April 2016

The last week on Financial Orbit

A busy last week on Financial Orbit...

My favourite chart from this week's editions of Financial Orbit Macro - your one-stop shop for a daily global macro briefing - would be this one contrasting the recent inflows into various asset classes.  Flows matter especially in the shorter-term: as the famous saying goes 'in the short-term the market is a voting machine...'.  This chart reiterated my preference for equities at a big asset allocation level.  


This week's editions of Financial Orbit Stocks included appraisal of the performance of all the preferred stocks but specifically included detailed updates on the investment cases for: 

ABB, AIA, Ashtead, Barclays, BHP Billiton, John Deere, Nokia, Schlumberger, Syngenta and Yum! Brands

Meanwhile my active investor service Financial Orbit Immediate discussed prospects for Alphabet (aka Google), Caterpillar, General Electric, Kimberly-Clark, Netflix, PepsiCo and the best charts from the anti-Brexit document from the UK Treasury.  

If you would like any of these company reports please get in contact...or alternatively you can try all of the above services for a free seven day no obligation trial.  If you would like to take up this offer then just send me an email or a tweet as you prefer.  


Financial Orbit's week ahead...

On Tuesday (3pm UK time) there will be the monthly Financial Orbit Macro webinar.  Hear my thoughts on macro trends and themes plus you have the chance to ask me the questions you want answers too (preferably on macroeconomic and related subjects!)  Webinar log-in details will be published on the Financial Orbit website later on this weekend.  

Meanwhile on Thursday (3pm UK time) there will be the inaugural Financial Orbit Immediate webinar.  Listen to me describing some of my favourite trades at the moment for more active investors.  Again log-in details will be published on the Financial Orbit website later on this weekend. 


In terms of media appearances you can listen to me on Share Radio on Tuesday and Wednesday mornings (6-9am UK time) talking about markets, economics, breaking company news and politics.  I will also be appearing at around 1.40pm on Thursday talking about shares that are moving on that day.


And don't forget the UK Investor Show (link here) coming up on Saturday 30th April.  I will be on the main stage twice but hanging around the show for the rest of the day so if you want to meet up to chat just get in contact.  



Thanks for reading


Chris Bailey

Founder, Financial Orbit Limited

Email: chris.bailey@financialorbit.com

Twitter: @financial_orbit 

Sunday, 17 April 2016

Stories we should be thinking about

Ahead of the new working week here are a few finance and related stories to be thinking about.

Macro matters:

Of course the big Sunday stories are likely to be the Doha oil talks and the Brazilian Presidential impeachment vote.  On the former I see that:

OPEC and non-OPEC ministers finish talks in Doha without an agreement, according to Reuters. They cite an unnamed source.

But whilst we wait for some more clarification/news on these matters...

With the UK EU referendum campaign now formally having kicked off and currently headline close polls (although I do feel that 'remain' will prevail and will pick up support as we get closer to polling day) I liked this which showed who was most/least sensitive when some economic numbers were introduced: 

Meanwhile this business poll of polls looks as you would expect...until you get to the Federation of Small Businesses and a surprisingly close result.  Interesting given that small businesses are the clear majority of job creators in an economy...


Switching to the broader European economy I was pleased to see that the Euro Area's growth is becoming more domestically-oriented.  This is just what you want to see - and mixed with more stimulus at the margin and current low expectations is just why you should be looking at this part of the world in an opportunistic manner: 


Turning to the US economy even though it is still growing faster than its European peer I see a few storms gathering indicating that to expect more than a single rate rise in the US this year feels like a real stretch...and this should keep the US dollar weak (and help support risk assets).  Anyhow back to the numbers/observations, fading industrial sector capacity utilisation...


...consumer credit going up but retail sales failing to respond equivalently.  That suggests a difficult underlying backdrop...


(h/t @LanceRoberts)

...especially if job creation is still quite skewed towards lower paid food/retail/accommodation jobs: 


No wonder Variant Perception's (@VrntPerception) wages long lead indicator is not flashing positively for US corporate profitability (more on the outlook for US corporate profits in the section below): 

At least the Chinese and Japanese have not yet stopped buying US Treasuries: 


Sector and companies: 

Given the above no great surprises that expected 2016 US S&P 500 earnings growth is a paltry 1.4% with only one sector above 10%...
...but still there's that mid-teen expectation for next year.  Of course the former could be too conservative but only if the US dollar fades further...

Excellent report by @UKValueInvestor here on the FTSE 250 valuation.  Such a middle-to-high valuation suggests to me opportunities are at a stock picking rather than a general level only especially given a general higher correlation with the UK (rather than the world) economy where pre-referendum concerns are rising...

...and I see the Financial Times website is running a Sunday story with the headline of:

Brexit doubts freeze business activity

Companies pull back on hiring and investment ahead of vote


A few stories from today's Sunday Times

Astra Zeneca is looking at bidding for Medivation a prostate cancer specialist who potentially have also attracted the interests of Sanofi, Roche and Gilead.  Good luck with AZN in landing this deal then...I still believe shareholders/the board should have snapped the hands off Pfizer the other year. 

HSBC chief executive Stuart Gulliver is expected to leave the bank in the next two years as the yet-to-be-appointed new Chairman will have a say on his successor.  Simplified but hardly covered himself in glory recently (but I still think the shares are cheap)

UK betting companies such as Ladbrokes and William Hill could take a £3m and £2m respective hit if Leicester win the Premier League

EasyJet is considering a bid for troubled airline Monarch with the potential attraction landing slots at Gatwick and increased capacity at Manchester, Birmingham and Luton.  

Elsewhere I see on Seeking Alpha that 'Vermont’s attorney general asks a federal court to force Monsanto, DuPont, Syngenta and other big seed and food companies to turn over internal research related to “potential health or environmental impacts” of GMO crops, as well as pesticides used on them'.  I don't think that it should derail the ChemChina/Syngenta deal in any way...

Interesting to see the shift in hotel development (and hence economic progress) in different parts of Africa: 


And finally...

Water beats soda...



...and a brilliant report here which identifies which was the most successful company to date created in a particular year.  Want to know which was the most successful company created in your year of birth...well now you can. 

(h/t @zackcapp) 


Have a good week