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 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
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 )
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.
IBM Vs SP500 – Last 2 y
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)
Twitter : Sold
Profit booked at closing today – USD 18,54 – for a 30,50% profit . Momentum is slowing and reversing after recent after earnings sharp move higher but stock did so far not manage to surpass the USD 19-19,50 resistance zone . Should price go beyond USD 20-20,50 stock technical outlook would improve again. For the mid long term one has to keep in mind that stock remains a potential take over target . We might come back to it on a tactical basis later.
Vale : Buy
After a 5o% dramatice surge in the first 6 weeks of the year, Vale had early may nearly retraced this move bottoming at USD 7,84 with 200 days MA as first support around USD 7,75. Price -Momentum divergence appears and MACD is turning bullish . We buy at closing price today – USD 8,36. Vale is very volatile stock and only for “Dynamic – risk conscious ” investors . STOP LOSS below 200d MA i.e. USD 7,5 closing basis.
Schlumberger : Buy
Technical rationale : 1/ The more than 1 year USD 69-70 support held firmly at recent bottom and stock seems to reverse 2/ MACD turning bullish today 3/ RSI reversing above the 30 level 4/ the final (?) down move since mid april took place in above average volume wich is another potential reversal signal.
Buy at 72,67 // SL 68,50 closing basis.
Transocean (RIG) – USD 11,17 – as same sector alternative and technicals showing same reversal signals but RIG much more volatile than SLB – same remark as for vale … for risk conscious investors and only with tight stops .
Trades since last update dated April 17th :
April 18th : USO / WTI Oil tracker – Take profit limit reached at opening on April 18th @ USD 11 – Plus 7,33% in 1 month – April closing @ USD 10,24.
April 18th : Take profit limit reached on Coeur Mining @ USD 9,85 – Bought @ USD 8,12 1 month ago.
April 19th : Take profit limit reached on Easy Jet @ GBp 1090p – Return of 23%+ including dividend.
April 25th : Stop Loss at 1 EUR reached on NDX put certificate. See April 25th post “NDX no sign of tiring” … US markets broke out and continued higher… a hedge for nothing …
April 25th : Buy 0,5 unit in the CITI Turbo Call Cac 40 KO 4151 @ EUR 11,52 – See same date post.
Tactical Portfolio : Current holdings
Tactical Portfolio : Closed positions
SP500 : Main US indice broke out (See red down moving line) yesterday of its nearly 2 months consolidation phase initiated after March 1st all time high. Chances are great now that SP500 will test and beat previous highs at 2400 . MACD daily is turning positive. Strong supports (Green Channel) remain untested in the 2280-2300 zone .
Companies fundamentals also support current positive market momentum with earnings growth of 11% announced so far for last quarter (77% of SP500 companies reported at this day ) – see below table.
All time high again on NDX 100 . Strong momentum goes on on Tech Companies with only a limited consolidation in recent weeks . Trend indicator turns positive . A big gap occured yesterady in the aftermath of french election which is bullish unless if case it would be closed within 1 or 2 days .
The Chart here below dated Feb 8th shows NatGas seasonality over the year since 2005 : In average, the commodity starts the year on a weak note until February where it picks up quite strongly into June/July. Price tends to stabilize during Summer and thereafter decline into winter /end of year.
Source : The Bespoke IG
In 2017 weakness has persisted until Mid to end February and Natgas has started its up move since then as one can see on below chart (Black line / Left scale) .
Chart here below points out correlation (*) between Nat Gas continuous Contract (left scale) and Gazprom (right scale ) : Nat Gas has started the move mid February as it did in average in last 12 years and Gazprom just (yesterday) follows up & showed (yesterday) a buy signal (MACD buy signal bootom of chart) . Based on past action one can expect a 10 to 15% move to around 5 USD.
(*) Not that obvious as Ruble volatility has perturbated correlation in last 3 years via its effect on Gazprom stock priced in USD.
Barron’s : March 7th , 2017
SP500 shows reversal signal at yesterday’s closing
Second such MACD reversal signal since US election , the first one (1st blue ellipse ) lead to market consolidation in the 2230-2280 range without major correction. I would set initial targets in the 50d MA 2280-2300 previous resistance zone . A move above recent 2400 top would negate current bearish sdignal (less likely scenario) .
Virt Portfolio :
Today’s action : Take profit on tactical positions on Health care tracker (XLV) (+/-12% profit in 3 months – chart shows triple top forming ) , ishares Nasdaq Biotech (IBB) (+/- 11% profit in 3 months ) and on Japan ETF ( +/- 15% profit in 4 moths – Nikkei strong resistance around 20000 level ) and so revert in a neutral positionning in the said sector/country allocations.
October 6th post : USD/JPY
October 10th post : EUR/USD
October 19th post : GBP/USD
October 25th post : Apple
November 7th post : SP500
November 17th post : NIKKEI
November 23rd post : GOLD
December 7th post : DAX
Virt.Portfolio : Closed Trades during Q4
Bristol Meyers Squibb stopped on Oct.10th – Loss 10%
USO (Oil tracker) closed on Oct.11th – Profit 6,5%
Apple closed on Oct.25th – Profit 20,43%
UBS Turbo Put NDX closed – Nov.2d & 3rd – Profit 41,83%
iShares Eurostoxx 600 Banks closed on Nov.28th – Profit 17,55%
ETf Dax Daily 2X closed on Dec 15th – Profit 18,40%