A thorough review of Greenwald’s course on value investing with lots of very valuable content. For those who haven’t read his classic book Value Investing From Graham to Buffet and Beyond.
Some valuable piece of information and insight on global financial markets, with a somewhat alarming message: « Don’t let the unthinkable become the new normal« .
« The global expansion remains unbalanced, debt levels and financial risks are still too high, productivity growth is too low, and the room for manoeuvre in macroeconomic policy has continued to narrow », warns the BIS, with a global message: current governance and ruling of financial markets around the world is a big mess and there is little progress in aknowledging and fixing that…
It’s sad/funny that this kind of analysis comes at a time when the IMF is sending ultimatums to Greece which replies with democratic call to its people, something IMF’s leaders are probably not accustomed to.
Reknowned investor Guy Spier (Aquamarine Capital) published his autobiobraphy late 2014, a book entitled The Education of a Value Investor (Palgrave MacMillan). As Spier explains himself, the book recounts his journey from Wall Street where he started as a junior investment banker to becoming a Buffett’s groupie (like many value investors, including myself) and a famous value investor, with an outstanding track record (here it is as of end 2012). Lire la suite
Mohnish Pabrai is considered one of the most remarkable investors of his generation. Lire la suite
« We derive no comfort because important people, vocal people, or great numbers of people agree with us. Nor do we derive comfort if they don’t. A public opinion poll is no substitute for thought »
Source: Of Permanent Value, The Story of Warren Buffett, Andrew Kilpatrick, McGraw-Hill, 1998, page 52.
Derivatives specialists at Goldman have put up an interesting piece of research. Unfortunatelly, it only covers the US equity market.
Over the past 9 months, the cost of SPX 55% OTM 5 year equity puts has more than doubled while the cost of 10 year puts is up 50%+. Long-dated options markets appear increasingly concerned about the potential for a decline in the S&P 500. Equity valuation and CDS spreads have been highly correlated with put prices over the past several years, but long-dated put prices have diverged. We see reason for concern as put prices were up a similar amount in 2007 ahead of the financial crisis, diverging from credit and equity at that time as well.
Where Warren Buffett, the most acclaimed and respected investor, converses about Berkshire Hathaway’s past, present and future. A must read !
Barclays’ equity research theme has published a note about the 3 questions investors may ask about ECB QE and its impact on market.
Here’s the summary:
In a summary: cash levels remain high. Deflation in Eurozone is seen as the major risk (along geopolitical tensions). Investors are somewhat still optimistic about global growth, but less so than previous month and their expectations regarding EPS going forward have come up a tide grim.
The most contrarian call is Energy and Materials, but as long as oil prices do not recover, that probably to risky a call.
From Suki Mann, FI strategist at UBS (bold statements from us):
« Corporate bond market capitulation: Is it coming?
We believe that if the ECB announces any kind of corporate bond buying this week, investors could well embark on a fairly aggressive grabfest ahead of the actual commencement of the programme.
Already bereft of supply, decent yield, spreads unchanged into the macro-headwinds; and, plenty of pent-up demand for paper as cash keeps rolling-in to the asset class, we think that the actual announcement could see a lurch tighter in spreads. That is, QE is not in the current price. Some think it is, we don’t.
How much can spreads tighten? The answer ultimately depends on the modalities of the program (size, duration, mix). »
From Srikanth Sankaran & Shrina B. Poojara at Morgan Stanley fixed income research team:
« We maintain a constructive bias on credit heading into Thursday’s ECB meeting. Despite the outperformance of European credit in recent months, we do not think that QE upside is fully priced in. A 20-25bp compression in IG spreads is likely, should the ECB deliver.
Sovereign QE is now our economists’ base case: Our economists’ base case now is €500 billion of government bond purchases and €100 billion of private sector asset purchases. In terms of timing, the complexity of designing a sovereign QE programme makes January 22 an ambitious start day. Announcement in January and execution in March is more realistic, they think. »
Here’s the summary of their views:
Although the bank predicts the European equity market might gain c. 8% over next 6 months from QE’s announcement, its economist are still scratching their heads regarding the ability to implement and the benefits of this kind of measures. Lire la suite
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 $80/bbl for Brent. Lire la suite
Say Morgan Stanley’s European equity strategists:
« We believe the fall in the oil price is set to translate into a significant boost for European corporate earnings. Energy accounts for around 10% of European earnings – and historical precedent suggest a 50% drop in the oil price should lead to a 25% fall in energy EPS. Earnings for chemicals, utilities and mining, which together account for a further 10% of European earnings, should also experience a net negative impact from lower oil prices. However, the remaining 80% of European corporate earnings should see a net boost of around 13% on our estimates, as lower material costs lead to higher gross margins. In aggregate, we estimate that even on conservative assumptions a 50% drop in the oil price should translate into a net boost of around 7% to European market-level EPS. »
From Michael Hartnett and Brian Leung at Bank of America Merrill Lynch:
« BofAML’s base case for 2015 is bullish US$, 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
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. »
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.
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
« St Vincent‘s self-titled album has been named NME’s Album Of The Year 2014″ said NME News on Nov. 26.
Although I could not attend her last gig in Rouen, I saw the band during Rock en Seine festival this summer and it was one great moment! Thanks again!
And yes people, it’s possible to play kick ass rock music in skirt…
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.
Thomson Reuters regularly publishes market consensus on a number of financial assets. Here’s the last package available on their wire. Lire la suite
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…
On Nov 21st (yesterday):
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 !
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
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!
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
The summary of the report follows, but big picture: moderate earnings growth and European equity performance expected in 2015 (+7-8%)… For once, consensus is no longer in a double-digit mood as was late 2013…
h/t Santangel’s Review!
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. »
« 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).
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
From Bank of America Merrill Lynch (report date Nov 7)…
Here’s a focus on European equity market (through the Stoxx Europe 600 universe):
Interesting comment from Jim Reid from Deutsche Bank this morning… Obvisouly markets need to go to rehab but they are fighting for another fix. Lire la suite
Interesting point of view on recent market sell-off. Apparently, now the disconnect goes the other way around…
Declining commodities prices, lower yield should support economic growth in 2015, says Exane BNP Paribas team.
Click image to see the full interactive music graphic(via Concert Hotels).
Great read. A BIG Thank you to Prof. David Kass and students of University of Maryland MBA students… Lire la suite
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 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.
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
Goldman Sachs abandonne son avis acheteur sur EDF et adopte une recommandation « neutre » (objectif 19,40€), après la hausse du titre depuis le mois de décembre (+16%). Lire la suite
Gameloft offre des perspectives de croissance et de revalorisation boursière plus intéressantes qu’Ubisoft, estime Oddo Securities dans une étude publiée aujourd’hui (je renvoie au commentaire publié hier sur Ubisoft, dans lequel je défens une position un peu plus positive que celle d’Oddo). Lire la suite
Total annonce un recul de 7% de son bénéfice net ajusté du 1er trimestre à 2,86 milliards d’euros (-58% sur une base publiée), en raison d’une baisse de la production d’hydrocarbures et du cours du pétrole, entraînant une chute du résultat opérationnel dans l’amont. Le chiffre d’affaires a diminué de 6% à 48,13 milliards d’euros et le résultat opérationnel ajusté de 15% à 5,78 milliards d’euros.
La production d’hydrocarbures a reculé de 2% à 2,323 millions de barils par jour. Sur le période, le cours moyen du baril de Brent a cédé 5% à 112,6$ et le prix moyen de vente de liquides a baissé de 7% à 106,7$.
Alcatel-Lucent a enregistré une perte nette de 353M€ au 1er trimestre (0,16€/action) et a indiqué que la génération de trésorerie disponible (‘free cash flow ») est un « challenge ». L’équipementier de télécommunications a vu ses ventes progresser de 0,6% à 3,23 milliards d’euros, mais a constaté une perte d’exploitation ajustée de 179M€.
La baisse des marges (taux de marge brute à 29,4% contre 30,2% un an plus tôt) s’explique par des volumes en repli, explique le groupe. Toutes les divisions ont été déficitaires sur le trimestre, notamment l’activité Réseaux et plates-formes (-107M€ contre -152M€ au 1er trimestre 2012).
Les travaux de la LGV Tours-Bordeaux et le pôle construction ont soutenu l’activité de Vinci, permettant au groupe de BTP d’enregistrer une progression de 3,4% de son chiffre d’affaires trimestriel, à 8,42 milliards d’euros. Les prises de commandes ont augmenté de 5,5% à 9,1 milliards d’euros. Vinci vise « a minima » une stabilité des ventes annuelles, avant prise en compte de l’intégration d’ANA.