Saturday, 23 August 2014

Trades I have undertaken in the last week

For global markets a thin volume week as the quarter two earnings season took another step towards is finale.  We are down to a single digit number of reporters in both the S&P500 and EuroStoxx 600 indices next week...

So earnings is it looking at this late stage?  Well from a S&P500 perspective a near 68% 'beat' proportion is 'above the long-term average of 63% and is greater than the average over the past four quarters of 67%' as per Thomson Reuters.

Well...that's ok.  What I find interesting is that we have seen (admittedly slowing) downward earnings revision with full year 2014 S&P500 earnings growth 8.7% down compared to 10.8% hopes at the start of the year.  Interesting that two of the three upward earnings revision sectors (health care and utilities) are amongst the best sector performers year-to-date.  Sometimes earnings revision does work!
Turning to Europe and the EuroStoxx600, the current Q2 earnings 'beat' proportion (as per the lastest Thomson Reuters report, link here) is 48% which matches recent averages...but it is the 2014 earnings growth revisions which more catch the eye.  Perfectly conceivable that we end up sub 5% in my view.  No wonder Mario Draghi's Jackson Hole speech had a certain tone to it...

No sector has positive revisions versus the hopes on 1 January this year.

Hardly that surprising given the level of relative economic dynamism as nicely captured in the aforementioned Mr Draghi's speech yesterday by this chart:

Anyhow, to the trades for this week:

Purchases / adds / buys to cover:

Carlsberg - I bought my inaugural position in the Danish-listed beverage company after their troubled Q2 statement impacted by Russian trading conditions (link here).

Volatility - the return to historically low volatility levels induced me to buy back some of the volatility contracts I sold just a few weeks ago. has been some sentiment turnaround...

Sells / take profits / short initiations:

Dollar General - as discussed here I sold more entire position crystalising a nice profit.

Royal Bank of Scotland - following a positive broker view (on provisions write-backs!) I took some profit on the positions added at the sentiment low a few months ago.  I still retain a position and remain hopeful of closer to 400p for my remaining positions.

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