Wednesday, July 6, 2016

Brexit Sell-off Ideas

News 4 July 2016
  • Potential for reversal on Brexit decision politically - however the current asset price volatility is not over. We have only reached the prices leading up the the exit vote - we may see a sell-off from here of a higher magnitutde than past sell-offs. The market is still digesting the news.
  • UK recession signal UK recession signal
  • Last week the volatility was contained within Europe; emerging markets prices held up well; so far.
  • Lots of liquidity expected by central banks - the more decisive and coordinated, the more likely the markets will continue higher - at the continued slow pace.
    • ECB, BOE all hinting at looser QE, and easing
  • Australia’s best fund manager going to cash allocation
  • Good article on Turnbull’s history

Whilst Australia’s politics remain uncertain, a higher allocation to US equities remains the better play.

Twitter (TWTR)

Report earnings: 27/7/2016
Twitter still remains a value proposition in the current market climate. Due to the sell-off since the huge run up; with last two quarterly reports showing flat User growth and decelerating revenue growth. The company still has a high cost for operations, and thus reporting negative earnings.
The climate for large tech companies have changed - with M&A’s becoming possibilities. Linkedin got bought out at 50% premium by MSFT, and there was reports of a bidding war with (CRM).


Report earnings: 27/7/2016
Has a large portion of its revenue from EU and UK, it’s one of the few well branded companies that have been hit heavily; however it’s earnings power is unlikely changed - there will be more opportunities for value accrestive acquisitions

Cameco (CCJ)

Uranium prices can get lower in the short term, but after the company cut supplies and energy demands are not falling.

Potash (POT)

Report earnings: 28/7/2016
Dividend yield of 6.2% may be unsustainable, but the bottom of potash prices have been called by management in the last earnings call.

Fiat Chrysler (FCAU)

This is a position based on the valuation and macroeconomic scenario where auto vehicle sales continues it’s recent trend in line with economic growth and low oil prices driving consumer spending.

Diana Shipping (DSX) , SALT, NVGS, NM

I’m summarising some points from one of the best learning blog

Baltic Index

“Dry bulk is a screaming buy; one of the best entry points in the cycle in the last thirty years. But be prepared to sustain a prolonged period of poor freight market conditions and have plenty of cash reserves and low leverage. In other words, you have to have a longer-term perspective than most investors–three to five years at least.

Since 2009 The Index has been falling to lows
Since 2009 The Index has been falling to lows

Last few months the recovery could be beginning
Last few months the recovery could be beginning

Shipping Cycles (Short Video)

DSX reports: 29/7/2016

SALT reports: 29/7/2016

NVGS reports: 29/7/2016

NM reports: 18/8/2016

Anti Fragility