Wednesday, 8 July 2015

Ahead of the earnings deluge...budgets, Barclays, China, Grexit & back to earnings

A slightly different day today with an appearance on Share Radio initially to talk about the (as it was then) upcoming UK budget (you can hear my thoughts here...i was rightly a bit cautious about the housebuilders where assistance did not quite continue as hoped as noted here) but conversation quickly turned to Barclays a share that I own and also a company which today announced their CEO would be leaving.

I have talked positively about simplification in financials before and it was central to my last published thoughts on Barclays last July (link here):

So not easy and certainly not flawless but some hope is apparent.  I stick with the conclusions of my sum-of-the-parts analysis back in June.  In fact I could possibly edge up numbers...but 275p is fine for a target today.  

The shares have performed well over the last year...


...but not enough to save the CEO: in my view and (as discussed on Share Radio earlier) it may well be an ongoing dispute about the future shape of the group (and the size of the investment bank) may well have contributed.  

I still see value.  In fact as I noted in some unpublished notes made back in April when Barclays last formally reported: 

"Barclays – 288p TNAV, core RoE >10% so share should be c. 300p+"

As for the macro...well my Twitter feed was full of analysis on the sheer extent of the share suspensions in the Chinese market.  After the worst day since 2008 on the Hong Kong market and the continued burden of margin (and margin reduction) no surprises to read that short selling has been suspended in most cases for the next six months...


As for Greece well the leftfield scenarios appear to potentially be more prevalent including not only Grexit (I was astonished by some of the rhetoric in this Economist article published overnight regarding a growing inevitability of this outcome) but also the dispute/disagreement potential between the US and Europe.  More on this perhaps another day. 

Fortunately - and with many markets as per the Bespoke study below in 'oversold' territory - the earnings season starts later with both Alcoa and WD-40 reporting.  















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