UBS : Opportunities in European Utilities

 

UBS  most preferred European Utilities  are E.on /EDF/ Enel/ Engie / Fortum / Gas Natural.

+ & – to invest in the sector :

+ Sector’s return to positive earnings growth (5-7%) + favorable earnings revision + Earnings visibility.
+ Relative valuation vs others sectors.
+ High Dividends in Low Bond Yields environment.
+ Global Energy transition should be beneficial.
– Politics & new regulations .
– Risk = Long rates evolution .
+ « Defensivity « of sector in streched market environment.

Enel , Engie and E.on are the cheapest based on P/E metric.
Engie on P/BV point of view.
Gas Natural based on Dividend.

 

Stifel : Macro & Portfolio Strategy – January 2018

• Stifel sees a 5% SP500 correction in Q1 for SP500.
• SP500 seen at roughly current levels by EOY = Active investing environment
• Slide 2 for long term forecast !!! (Note that Stifel forecast has been quite correct in the last 6-7 years in this bull market).
• Slides 6 on long rates and SP500.
• US 10 Yields seen at 2.96% eoy

Link to the Stifel Macro & Portfolio Strategy :  Stifel 050118

 

Naspers as a long term opportunity / cheap exposure to Tencent.

 

Naspers : Tencent stake worth 160 BLN USD while Naspers market cap on JSE at around 112 BLN USD …
Gap is increasing as Naspers stock price corrected , move mainly due to capital outflows linked to political uncertainties in SA.

All other Naspers stake and businesses are valued « negatively » considering Tencent current price !! …  2 solutions : 1/ Tencent price at some point will collapse.
2/ Gap valuation will close in the future via Naspers stock price adjusting . Anyway , buffer at current price is VERY VERY LARGE .

Stock has corrected 22 % from 4100 to 3200 (top to bottom) – see chart below – :  we are at interesting  long term entry levels at current price or better at october
trigger levels  (see green line on chart) around 3000 ZAR which should act as strong support.

 

UBS Target price … ZAR 5250 (Today ZAR 3290)

 

 

 

https://www.fin24.com/Tech/Companies/naspers-considers-structural-options-to-reduce-tencent-value-gap-20171213

 

 

 

IBM … New generation mainframes, cognitive technologies & AI with Watson , blockchain = Bright future.

See also previous post on IBM :   August 26th Post : « Buy IBM »

 

On IBM in TheStreet.com

On IBM as future of Economy (Bloomberg Podcast)

Stifel : Target USD 182

200D MA around USD 156 will now act as support  … not too late to buy for long term on due consolidation .

 

 

 

Brazil / iShares MSCI Brazil (EWZ) : Profit taking on position bought in May

 

Initial blog post May 19th  : http://www.investorid.one/2017/05/19/political-crisis-in-brazil-again-market-moves-overdone-buying-opportunities/

 

Triple Top forming and pending reversal.

RSI & MACD divergences & ADX showing bearish signs.

25% profit booking : Purely Tactical = We remain Positive on Brazil & EM in general for the long term.

 

 

 

 

Franklin Templeton Annual Conference / October 2017

Link to slides below text.

Europe

FT has strong view on european equities…

  • Private consumption led recovery (Slide 10) i.e more potential on the export side if EUR weakens.
    From big budget deficit in peripheral countries to surplus since 2010 for the most (Except Spain) (Slide 12).
    European growth better relative to US in 2016. (Slide 17).
    SEK = Opportunity relative to EURO (Slide 18) : Risksbank to hike rates sooner tha later  EUR-SEK spread to go down.
    Earnings in Europe at crisis low (2010) !!! Not the case for US .. (Slide 20). Momentum improving for EM earnings.
    European recovery well established : Unemployment at lows / IFO / Manufacturing PMI / GDP (Slide 21)
    Support for EURO improving vs 2016 amongst Member states (Slide 22)
    Huge potential recovery for european corporate earnings still 46% below pre-crisis peak….(Slide 23)
    … & at all time lows as % of MSCI World. (Slide 24)
    European Corporates sales recovery … earnings not yet … Margins will improve once we have more inflation. (Slide 25)
    P/B at 1.8 in the lower range for last 20 years. (Slide 27)
    Normalised PE at 18.50 cheaper vs US / DM / 30Y average of 21.50. (Slide 28)
    Headwinds & Tailwinds for next 12m. (Slide 33)

Templeton EUROLAND Equities fund is already in our « Best in class « Funds list »

Emerging markets

… and on EM equities.

  • GDP/Capita : Huge room for growth !!! (Slide 36)
    EM GDP( and trade) in % vs World more than doubled in 20 years .. just the beginning.. (Slide 37)
    EM demography = ++++ (Slide 38)
    Internet usage : Amongst the top 10 countries, 5 are EM . (Slide 39)
    EM Ccies Index … 22% lower compared to 2002 and 24% lower than 2009 at bottom in 2016 // Today still nearly 40% lower to 2011 top. (Slide 44)
    EM equities trading at discount vs DM .. PE 12.40 vs 16.50 , PB 1.8 vs 2.3 with higher earnings growth 14.4% vs 10.40% and higher margins. (Slide 45)
    EM increasing Tech domination : (Slides 49 and follow.)
    EM fundamentals sounder than DM : Banking system , Public & corporate debt , cap to asset ratio. (Slide 54 and follow)
    EM key issues : Fed / US stimulus policy/ USD / Korea / China adjustments .

 

Templeton Emerging Markets Equities fund : Last 2 years performance was very good mainly since Manager change back in 2014 .

 

Franklin Templeton Annual-conference-Presentation_Lux October 2017

 

US Energy sector bottoming vs SP500

 

 

US Energy Sector (XLE Etf ) versus SP500 chart in last 2 years

US Energy stocks bottomed early 2016 at an historic low level versus SP500 (0,025 ratio XLE/SP500) and thereafter bounced 54% in the next 11 months from USD 48 to USD 77 ( Second chart below) . Some technical elements seem to show that we might be in the same situation as early 2016  since the last 10 days or so  with XLE:SP500 ratio bouncing off from same level as in 2016, ADX indicators warning of trend change from down to up, bullish divergences on the ratio and XLE crossing the 50 days MA. Not one indicator is significative on its own but their combination might be a good signal of a trend change for Energy and a period  of catch up versus the main indices (not exclusively on US markets ) . It is good to mention that SP 500 as of end of august was up 11,74% while Energy sector was down 15,33% , a difference of more than 27% YTD and this difference amounts to 38% if we compare Energy to Tech stocks . Market might have decided it has gone to far : Tech stocks have started to correct and energy stocks to bounce.

On oil prices, big Names ( like UBS ) have oil prices targets at USD 60 (WTI oil) currently trading between USD 48 and USd 49.

Global Energy stocks I follow and that are good buys at current prices in my  opinion are amongst others Schlumberger (SLB) , Royal Dutch , Transocean (RIG) , Petrobras (PBR ) , Gazprom,…

 

US Energy Sector (XLE Etf )

« Surprise! Shares of IBM Can Rise 35% » as per Morgan Stanley analyst – Barron’s

 

IBM was just a source of disappointments to his sharehoders in last months ( and years). MS analyst says there are 3 reasons to buy the stock now : 1/ Stock is cheap 2/ Dividend of 4,2% is high 3/ Reasons which pushed stocks down are losing steam : The long shift process from hardware to software and from local machines to cloud is coming to an end and so pressure on revenues which for a part was voluntary, margin and profit. Huge investments of above USD 30bln into Cloud, security business, social, mobile and analytics will start to bear their fruit.

IBM’s stock has lost 33% from USD 179 february top to recent bottom at USD 139, an underperformance of roughy 40% versus SP500. Time to catch up has come …

Technically 1/ IBM’s stock price bounced from the USD 135-140 area  2/ Trend via MACD daily shows a reversal  3/ One can see a positive Price/Momentum divergence on chart     …  Chart Here

I bought stock at Opening yesterday just above USD 143.

Link to : Barron’s on IBM – August 23rd

IBM Vs SP500 – Last 2 y

 

 

Gold Miners ETF (GDX) : Breakout above USD 23

 

GDX recently broke the down trendline (purple) above USD 23 . This could prove to be a strong signal as long as above USd 23 prices are maintained and Gold prices also ends with cleanly breaking the USD 1300 level ( 3rd test since April).  Continuation of US equities market – so far tiny with SP500 down 2.50% – correction initiated 10 days ago might be the trigger for Gold finally surpassing the USD 1300 key level.

Short term, flattening 50 days and 200 days MA + Purple TL will act as support in the USD 22-23 area.

 

 

GDX (Right Scale) vs Gold Price (Left Scale)