Equity valuations – party like it’s 1999… and 2007?
Amidst something approaching a euphoric relief rally in global markets following the UK’s vote to leave the EU, investors should not overlook equity valuation metrics, which have historically provided an excellent guide to returns over the long term. As Exhibit 1 shows, relatively low valuations preceded the bull markets in 1994-1999, 2002-2007 and 2009-2013. However, valuation metrics rarely form part of a market narrative and if they feature at all are often dismissed, usually as “it’s different this time”.
Read more...Market Commentary - Housing, Infrastructure, Construction and Services
Marshalls and Lavendon provide us with their half year results this morning and Speedy Hire has announced the sale of its large mechanical fleet to private equity backed rival Ardent.
There was little pattern to the moves yesterday as the market heads into the Bank Holiday and the Fed announcements; few investors are willing to take strong views. Volumes were light and we suspect will remain so until early September.
Market Commentary - Housing, Infrastructure, Construction and Services
CRH and John Laing Group provide Interim Results this morning for the period to end June 2016. The revival of the Merchants continued yesterday with Grafton rising 5.3% and Travis Perkins by 4.0%. Balfour Beatty, Kier and Galliford Try all rose by more than 2% as well.The focus on cyclical caused a lack of interest in Compass, Berendsen, Homeserve and Rentokil which were all down by around 1%. These stocks are drifting only because the attention is elsewhere and have yet to get to prices that rekindle interest. That will happen in time as sentiment swings but we are not at that point, yet.
Read more...Market Commentary - Housing, Infrastructure, Construction and Services
Carillion and Costain have announced very solid half year numbers this morning.
The Brexit Bounce was seen again yesterday and while many HICS stocks are still below their peak for this year 21 of 22 in our closely watched group are at a higher level than the were at close on 24th June. The exception is SIG which is down 4% and the best performer is Interserve which is up 44%
What does the future hold for NATO?
Trump and Corbyn refuse to support Article 5
9/11 was the first time that NATO’s article five – an attack on one member state is an attack all – had been invoked. It sent a powerful message about the strength of the alliance. Every member of NATO, no matter how small, provided assistance to the United States during the campaign in Afghanistan. Fifteen years on and the alliance is arguably in its weakest position since its formation in 1949. Politicians in six major member nations have questioned the point of NATO and only five of the twenty-eight states spent the guideline 2% of GDP on defence. Could this be ‘make or break’ for NATO? And if so what could this mean for the defence industry?
Read more...Market Commentary - Housing, Infrastructure, Construction and Services
The news today from Persimmon on its first six months is positive and Kier has announced some handy wins of places on framework contracts worth in total some £5.3bn. So the conundrum remains about the housebuilders. In cyclical terms now is probably not the right time to buy but the numbers keep looking good and there is no sense in which the volume of demand seems likely to drop.
Read more...A New Year’s resolution for Cobham?
CEO and CFO to move on from the struggling Aerospace & Defence company
Three years ago I, and many others, expected Cobham to be given a fresh lease of life by its new CEO Bob Murphy and CFO Simon Nicholls who joined the company in 2012 and 2013 respectively. Mr Murphy was the first American to take the helm of a business whose largest customer is the US Department of Defence (DoD), and Mr Nicholls was the highly respected CFO of Senior, where he had a reputation for cost cutting and attention to detail. Whilst Cobham has made some progress under their stewardship, the past three years have also been turbulent for the company. Here we stand in 2016; a year which has seen the company profit warn, require a £500m rights issue and the CFO resign. To cap it off, it was announced last Wednesday that Mr Murphy is to leave the company in order to ‘pursue other opportunities’, ending months of speculation over whether he would remain as CEO. So what has gone wrong and what does this change in management mean for the company?
Read more...Market Commentary - Housing, Infrastructure, Construction and Services
Kingspan has delivered strong set of numbers with revenue up 19% to €1.5bn and trading profit up by 50% to €167m. Moves on Friday last week were mixed with Balfour Beatty leading the pack, consolidating the prior day move with a 2.5% increase to close at 260p. There were a few losers on Friday last, the largest being Grafton, down 1.2% to 529p. The weak performance of the stock is potentially unwarranted. Investors might wish to take heed of Kingspan’s statement today regarding sales of insulation panels in Ireland
Read more...Market Commentary - Housing, Infrastructure, Construction and Services
There is no relevant news from HICS sector companies this morning. The HICS sector was positive yesterday with nearly all stocks rising in our closely watched universe of 22. Polypipe restored some of it strength with the biggest rise, up 3.3% to 277p. Homeserve was the weakest performer yesterday, down 0.1% to 572p on low trading volume, with just 76,044 shares traded
Read more...Market Commentary - Housing, Infrastructure, Construction and Services
There is no directly relevant sector news this morning from HICS companies but Kingfisher makes a contribution to our considerations with its Q2 trading update. Items of real relevance from the company include that Brexit has had no real impact on trading from its experience. Balfour Beatty was the biggest riser yesterday, up 3.2% at close having been up over 7% in early trading. The restoration of the dividend will have been discussed extensively at the board, we are certain. While that action was the headline grabber, our view is that it detracts a little from several other considerations.