Oil: the Search of a New Equilibrium Continues – Goldman Sachs

In short, Goldman sees oil market equilibrium back around 2016, since the main adjustment course will come from capital. Warns of « high yield defaults potentially beginning if prices were maintained at $40/bbl ». Sees US supply growth slowing to 400k b/d yoy in 4Q15.

BUT, as GS puts it: « To keep all capital sidelined and curtail investment in shale until the market has rebalanced, we believe prices need to stay lower for longer. » That’s a warning.

Now sees marginal cost  at $65/bbl for WTI and $80/bbl for Brent. Lire la suite

Overall, falling oil prices are good news for European earnings

Say Morgan Stanley’s European equity strategists:

« We believe the fall in the oil price is set to translate into a significant boost for European corporate earnings. Energy accounts for around 10% of European earnings – and historical precedent suggest a 50% drop in the oil price should lead to a 25% fall in energy EPS. Earnings for chemicals, utilities and mining, which together account for a further 10% of European earnings, should also experience a net negative impact from lower oil prices. However, the remaining 80% of European corporate earnings should see a net boost of around 13% on our estimates, as lower material costs lead to higher gross margins. In aggregate, we estimate that even on conservative assumptions a 50% drop in the oil price should translate into a net boost of around 7% to European market-level EPS. »

Lire la suite

15 Trades for 2015 from Merrill Lynch

From Michael Hartnett and Brian Leung at Bank of America Merrill Lynch:

« BofAML’s base case for 2015 is bullish US$, bullish volatility, bearish spreads, bullish real estate, bullish stocks, bearish rates and more opportunistic in commodities & EM. We forecast higher global growth, lower liquidity, no deflation, lower expected returns: global stocks 4-8%, US dollar 3-5%, US house prices 3%, corporate bonds 2-4%, 30-year Treasury -5%, and 1-3% for commodities. 2015 has begun bearishly with lower oil, yields and, today, a buy signal for risk assets from our contrarian Bull & Bear Index.

Our bottom lines: Our conviction in US recovery is high. We expect, by late-spring, lower oil, lower currencies and lower rates to start boosting European and Asian
growth economies.

We believe risk assets will ultimately generate positive returns this year, but investors may need to have patience and tolerate large market swings.
Short-term we expect risk assets to rally into the ECB QE event on Jan 22nd but volatility could quickly reappear in February if the ECB package marks “peak QE expectations”, the US earnings season is impacted by the US dollar and “credit events” related to the oil collapse become more visible. We would be more aggressive buyers of risk later in Q1. »

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Europe equities are cheap, but for one (or two) reason(s)

Source: Goldman Sachs

Source: Goldman Sachs

This might look simplistic, but when you look for cheap equities around the world, Europe is not alone. Asia Pacific and even Japanese equities look interesting. Of course, currencies make equity investing a little bit more tricky when you look globally.

The problem with European equities is twofold: first, the debt crisis is far from over (public deficits and debts are astronomically high, economic and earnings growth are subpar and deflation is here); second, all hopes rely on the decision of the ECB to start buying government debt, which from a cautious investor standpoint is worrysome, all the most in a region where economic and political governance is inefficient.

New Tactical Navigator Tool from Nomura Says: « De-Risk »

Nomura recently issued a new tool called « Tactical Navigator » to help investor decide how much risk they should put in/redraw from their allocation. Currently, the message is: go hide yourself. Incidently, recent moves in financial markets says the same thing. YTD (only 10 days) performance for various asset classes show: MSCI World down 0.9%, 10Y Treasuries yield -24bp to 1.95% (!), gold up 2.7% to 1,216$/ounce and € down 2.1% against US$. Lire la suite

Big Picture: earnings consensus figures in the world

Thanks to Deutsche Bank, this single page sums up the consensus view on equity markets around the world: what are the expectations for 2014 -> 2016, what were the revision rates by region/market/sector.

Lire la suite

What stocks hedge funds own the most

Goldman Sachs regularly updates a list of the most owned stocks by hedge funds. Apple, Actavis (involved in M&A deal), Facebook, AIG, Allergan are the top 5… The 45 other names are just a click away…

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Remember how the market was… like a month ago ?

That’s the « world » (European equity market as represented by the Stoxx Europe 600 index actually) on Oct 15, 2014 and on Nov 21, 2014…

Source: Factset

Source: Factset

On Nov 21st (yesterday):

Source: Factset

Source: Factset

As a reminder, volatility on Euro Stoxx 50 (much narrower index) was 28.76 on October 15 (it peaked for the year at 31.52 on the 16th of October). Now it’s 18.91.

In summary, the European stock market has gained 10.8% in a little bit more than a month, while volatility has declined by 34%.

Good reminder of Buffett’s favorite quote from Ben’s Graham: « Be fearful when everyone else is greedy; be greedy when everyone else is fearful ». Works all the time !

US investors’ sharp switch out of Europe gathers pace – Goldman Sachs

From report dated Nov 20, 2014:

« The latest US Treasury TIC data shows record outflows from European equities in September at USD27.4bn. The recent data have been volatile but generally very weak, with 3-month average net outflows of USD13bn per month. That pace of outflow by US investors is larger in absolute terms than that seen in the financial crisis period in late 2008 and into 2009. »

While some investors expected this would calm down, apparently that’s not really the case…  Lire la suite

A more favorable backdrop for risk assets – Barclays

On the back of slightly better global growth in 2015 and most importantly accommodative monetary policies, risk assets should prevail next year, says Barclays in its freshly published outlook. Attached is the summary per asset class, and some key introductory remarks to this 168 page document distributed to investors and clients. Enjoy!

Lire la suite

Is Europe the Next Japan ? (from Goldman)

Well, this question is far from new. Actually it was raised soon after the first tention in EZ sovereign bond market in 2010. As already mentioned on this blog, the theme of a balance sheet recession is rooted deep down the EZ economy. Unfortunatelly, the public and governments don’t seem to properly grasp the issu. But some people do, especially in Japan…  Lire la suite

US corporate selling up, to buy their own shares ! – SocGen

Another very interesting piece of research from SocGen’s quant analyst team, lead by Andrew Lapthorne… Based on Q3 earnings reports from US cos, their conclusions are somewhat surprising, and certainly part of the « things that make you go hmmm…. ». Here are some comments from SG’s quant team:

« Firstly we had expected the debt burden to limit the ability of US corporates to continue buying their own equity, but following a slowdown in Q2, there was actually a big pick up in buybacks during Q3. What we also found interesting is how much US corporate are selling down other investments; net investment and acquisitions are falling 13% YoY and are now down a third from the peak at end 2012. So on the one hand companies are selling their investments, yet many are then simply reinvesting the proceeds back into the equity market via their own share. »

 

Source: SG Cross Asset Research

Source: SG Cross Asset Research

So far, European sales and earnings surprises are on the upside… Credit Suisse

« So far European sales and earnings surprises are on the upside. Utilities and tech have reported the most significant positive surprises so far, while basic materials and industrials have recorded the most significant disappointments. » (source: Credit Suisse).

Source: Credit Suisse

Source: Credit Suisse

Source: Credit Suisse

Source: Credit Suisse

Deflation in Europe: Unlikely but what if? – Credit Suisse

From Andrew Garthwaite and team at Credit Suisse (bold statements from the strategist):

« We put a 10-20% chance on Japanese-style deflation in Europe: We believe deflation is not falling CPI, but falling wages and falling property prices.  Lire la suite

What are the equity markets worth right now ?

From Bank of America Merrill Lynch (report date Nov 7)…

Source: Bank of America Merrill Lynch

Source: Bank of America Merrill Lynch

Here’s a focus on European equity market (through the Stoxx Europe 600 universe):

Source: Bank of America Merrill Lynch

Source: Bank of America Merrill Lynch

 

Oh surprise!

Reuters nous apprend que la mise en Bourse de SPIE a quelques soucis…

« Spie rencontre des difficultés pour séduire des investisseurs en vue de son entrée à la Bourse de Paris dans un contexte de marché difficile, rapportent mercredi deux sources au fait du dossier selon lesquelles le carnet d’ordre n’est pas rempli à la veille de la fixation du prix définitif de l’IPO »

Lire la suite

Tim Geithner on the Daily Show – ext’d interview

 

 

 

 

Berkshire Hathaway, l’événement de l’année

L’AG de Berkshire Hathaway s’est tenue le 3 mai dernier et j’ai eu la chance d’y participer. Voici les papiers publiés sur Morningstar.fr:

Bershire Hathaway: la marque va remplacer Buffett à terme

Vu, entendu à l’AG de Berkshire Hathaway

Berkshire Hathaway: une AG pas comme les autres

Les gérants qui investissent comme Buffett

Alstom: résultats et marges décevants – SG

Société Générale juge « décevants » l’évolution des ventes et des marges d’Alstom. Dans l’ensemble, les résultats du groupe d’ingénierie sont ressortis en-deçà des attentes du consensus, avec une contraction des ventes de 1% au 4è trimestre, une hausse du résultat d’exploitation moins forte que prévu. Les principales « mauvaises » surprises sont venus de l’activité Thermal Power, dont l’amélioration des marges est très inférieures aux estimations de SG.

« Although the cash flow dynamics have started to improve, the reduced guidance is disappointing », conclut SG.

Alstom abaisse ses prévisions pour 2013-14

Alstom a indiqué viser une marge opérationnelle stable en 2013-2014 du fait d’un environnement économique difficile, ce malgré l’annonce de résultats en hausse et d’une bonne résistance des marges. Le résultat net a progressé de 10% à 802M€ et la marge opérationnelle du groupe s’est améliorée de 7,1% à 7,2%, grâce aux efforts de contrôle des coûts. Le groupe d’ingénierie a également indiqué que le free cash flow était redevenu positif à 408M€ au cours de l’exercice clos fin mars. Un dividende de 0,84€/action est proposé.

Lien vers le communiqué de presse.

Vallourec: net rebond des marges, Exane redevient acheteur

Exane BNP Paribas a relevé sa recommandation sur Vallourec de « neutre » à « surperformance », avec un objectif de cours de 47€, après une publication de résultats trimestriels très supérieurs aux attentes. Lire la suite

Sanofi: le « re-rating » est loin d’être terminé

En quelques années, Sanofi s’est transformé : attaqué de toutes parts dans la seconde moitié des années 2000 à cause des craintes de pertes de brevets, victime d’une R&D en panne, le groupe, sous l’impulsion de Chris Viehbacher, s’est redressé et affiche aujourd’hui une santé insolante. Avec une capitalisation boursière de 110 milliards d’euros, il caracole en tête du CAC 40. Lire la suite

Bureau Veritas: une valorisation qui ne supporte pas les déceptions

Société Générale a abaissé son avis sur Bureau Veritas de « achat » à « conserver », avec un objectif de cours revu de 110 à 100€, en raison de prévisions de résultats dégradées d’environ 2% pour 2013. Lire la suite

Bureau Veritas: un sales warning mal venu

L’avertissement de Bureau Veritas sur l’objectif de croissance annuelle (revu de +6-8% à légèrement en-dessous de 6-8%) devrait être mal perçu par le marché, estime Exane, sans toutefois remettre en question l’histoire de croissance sur le moyen terme. Lire la suite

EDF envoie des signaux plutôt rassurants – Exane

Les indications d’EDF évoquant un certain degré de confort quant aux attentes du consensus en matière d’EBITDA et de dividende pour 2013, après la publication du chiffre d’affaires du 1er trimestre, sont plutôt rassurantes selon Exane BNP Paribas. Le courtier maintient son avis « surperformance », avec un objectif de cours de 20€.

EDF a publié des ventes en hausse de 12% à 23,4 milliards d’euros, dont +7,7% lié à Edison (effet périmètre) et +4,7% de croissance organique. L’électricien a confirmé ses objectifs pour 2013.