Category Archives: $JPM

US Financials Update – 6 Months on from Post on April 23rd – take some profit ahead of reporting..

Posted back in April the pull back was a chance to buy some US Financials, and to buy GS which looks the cheapest (prior to that it was C). They were all trading below fair value – now they are above fair value as prospects of higher rates and tax reform. Sometimes strategies do take time to play out.Take some profit, but keep a core position as these stocks may break out to new high if results are good.

Px Vs Fair Values

April: $JPM 84.5 vs 83 Yield 2.3% [Dimon top CEO!]

Now: $JPM 95 vs 90 Yield 2.3% – going to a 100.

April: $C 58 vs 64 Yield 1% – cheapest to Book value – but seems to be the least liked!

$C 69 vs 72 Yield 1% – best performer over 2 years

April: $MS 42 vs 44 Yield 1.9% – reported a great quarter, Gorman is doing a great job…

$MS 49 vs 45 Yield 1.9% –

April: $GS 217 vs 250 Yield 1.4% [ 1.1 x book value] tough quarter, but they will bounce back!

$GS 237 vs 247 Yield 1.4% – they need to report a good quarter.

April: $BAC 22.5 vs 25 Yield 1.4%

$BAC 25 vs 24.5 Yield 1.4%

2CentView has a trading position in GS average cost 225, looking to take some profit at above 245 next week. Also, have a core position, which was trimmed back at 49 ahead of results. Keeping core positions in both – think US rates are going higher.

US Financials Update post results….one is great buying opportunity….

US Financials have had a great run since the US election, but have pulled back as the bond markets have rallied following the failed US Health care bill and a FED which does’nt seem to be in any rush to raise rates soon….

The pull back is a potential buying opportunity, especially Goldman Sachs which reported a disappointing quarter where their fixed income trading revenues disappointed – maybe they were caught offside on the bond rally!
Remember MS which reported a terrible quarter about a year ago – but reported a great quarter in Q1 in – with earnings well exceeding expectations – even great companies have bad quarters – look for these bad quarters as a buying opportunity!

Px Vs Fair Values

$JPM 84.5 vs 83 Yield 2.3% [Dimon top CEO!]

$C 58 vs 64 Yield 1% – cheapest to Book value – but seems to be the least liked!

$MS 42 vs 44 Yield 1.9% – reported a great quarter, Gorman is doing a great job….

$GS 217 vs 250 Yield 1.4% [ 1.1 x book value] tough quarter, but they will bounce back!

$BAC 22.5 vs 24.5 Yield 1.4%

Goldmans is now the CHEAPEST of the banks, and a great buying opportunity. Mnuchin and Cohn, 2 key people in the Trump Administration are ex Goldman!

Tax reform and deregulation is coming – and these will help the banks regardless of interest rates and the shape of the yield curve.

2CentView has a core position in Morgan Stanley, added a trading position in MS at 40.5 and plans to add a trading position on Goldman Sachs tomorrow.

Suggested trade: Buy here at 217, Take profit Target 250, Stop 195.

Post Trump: US Financials surge pretty amazing….should you…

A month ago, to the day, recommended going overweight Financials, as less regulation and steepening yield curve will take bank valuations higher – the run has been pretty amazing – should you take profits?

Fair value updates below – earnings have been revised up so the stocks are still not expensive versus Fair Value, and could go higher:

Px vs FV

$JPM 84 vs 80 Yield 2.1%

$GS 240 vs 225 Yield 1.1%

$MS 43 vs 43 Yield 1.9%

$C 60 vs 60 Yield 1.0%

$C – which was the cheapest – is now trading in line with fair value after a whopping 12% move in one month.

UK Based International Banks

$HSBC 673 vs 650 Yield 5%

$BARC 233 vs 200 Yield 1.49% [Book value = 290, FV unchanged – think it will be a while before analysts re-rate Barclays earnings]

2CentView has a core position in Morgan Stanley and decided to add a position in BARC at 211 which is trading well below book value (around 290). Barclays is the only serious European Investment bank and after reading an article in the FT think they have the right strategy to recover to a more full valuation around 300p (book value).

2CentView also retains a core position in $HSBC.

2CentView is that the financials have the potential to have more to run in the long term – but always to good take some profit after such a good run – but keep a core position.

Post Trump Opps: Financials could benefit…

If you are underweight financials – go equal or overweight to around 20%.

The Trump presidency could be the start of the end of low interest rates as growth and inflation picks up. The yield curve has already started to steepen (implying rates will start to rise).

Insurance companies will also benefit – they sit on a lot of cash – and usually invest it in long term assets.

US Banks have rallied – perhaps a bit too much – earnings estimates will be revised , so fair values below are conservative:

Px vs FV

$BAC  19 vs 19   Yield 1.6%

$JPM 76 vs 70 Yield 2.5%

$GS 204 vs 210 Yield 1.27%

$MS 38 vs 36 Yield 2.1%

$C 53 vs 58 Yield 1.2%

So C is the cheapest – it also one of the few banks trading below tangible Book Value.

2CentView has a core position in Morgan Stanley and may add $C (Citi).

$JPM is a great bank with a great CEO in Jamie Dimon but the stock has overrun a bit.

UK Based International Banks

$HSBC 617 vs 580 Yield 5%

$BARC 200 vs 200 Yield 1.49%

2CentView has a core position in $HSBC.

Also think Insurers will do well in a higher rate environment:

US Names:

$AIG $63 vs $62 Yield 2%

UK Names

$DLG 355 vs 400 Yield 6%

$LGEN 229 vs 251 Yield 6%

2CentView has a core position in $DLG and trading position added at 347.

No need to rush into any of the above – if you like $JPM for example, wait for a pull back to 70 before buying.

However, these stocks will benefit from less regulation and hedge you against rising rates – which could lead to higher mortgage costs and lower property prices…..

Market sell off Savage – quality stocks at lower prices…UPDATE…

Revisiting some the quality stocks tweeted out at the end of August, following a savage sell off.The market is punishing stocks whose guidance is weak – $SAVE, $GPRO and NXPI…but have rewarded big cap tech stocks like $GOOG, $MSFT.
Can FaceBook join the big tech party or will it sell off following its big run this month?

Here is an update on these great companies mentioned on August 23rd:

Biotech:
$GILD (Gilead) FV = 115 vs 109 – hold out for 115.

Financials:
$MS (Morgan Stanley) FV= 39 vs 34 1.75% 14% Cheap
Reported a terrible quarter, but hold  –  stock is back to 33.4 wait another quarter!

$JPM (JP Morgan) FV=72 vs 64 2.77% 12% Cheap
Prospect for lower rates for longer has not hurt the stock – HOLD.

$HSBC (HSBC) FV=625 vs 533 5.9% 18% Cheap
Weak earnings in Barclays and a potential cash call in Standard Chartered, has not hurt the stock that much at 510. Keep a stop of 470.

Social Media/Internet Retail
$FB FaceBook – look to buy around $80 (30% 5Y Growth)
Results next week – if you got in the low 80’s take profit. 2Centview sold some of the core at 104.

$AAPL (Apple) FV = 120 vs 105
Take profit some profit here above 120.

$TWTR (Twitter) FV=28 vs 26
Terrible quarter – but stock holding up – FV Much lower as company lowers growth expectations. Exit for flat or hold if you believe in Dorsey.

$YHOO (Yahoo FV = 36 vs 33 (vs 68.2 in BABA stock)
Take profit above 36.

$BABA FV= 88 vs 68
Take some profit here at 84.

Chips
$SWKS (Skyworks) FV=92 vs 79 14% Cheap
Stock lower following NXPI results – but FV Unchanged. HOLD.

3D Printing
$HPQ (hewlett packard) FV= 36 vs 27.5 2.56% Yield – Separation could add $5 – look at EBAY/Paypal!
HOLD. FV Unchanged.

$SSYS (stratasys) FV = 25 (if you include $6 of cash) vs 28
FV lower. Exit here at $26 unless you believe 3D printing is potential growth story.

Solar
$SPWR FV=26 vs 21.7
Take some profit here at $26. Keep a core if you believe in Solar Power long term.

Oil
$BP FV=470 vs 357 yield 6.8%
FV= 400 now – lower as oil prices expect to stay lower for longer. Hold for the YIELD or take profit if you got in at 357.
$PFC (PetroFac) FV = 930 vs 789 yield = 5%
Stock did get to 940 – where 2CentView took some profit – holding a core.

Insurance
$AV. (Aviva) FV=580 vs 482 yield = 4.4%
FV Unchanged – hold for the yield.
$AIG FV = 65 vs 60 1.88% Yield
Take profit at $65 (now 63.53)

Airlines:
$EZJ (easyJet) FV= 1950 vs 1624 3.4% Yield
HOLD.
$SAVE FV = $56 vs 55
Terrible run sees the stock trade down to $35. FV $10 LOWER. 2CentView has exited the core position.
$AAL FV=$55 vs 40
HOLD. Nice rally to $46.

Market sell off Savage – but now is to time to look for quality stocks at lower prices…

They say that all bull markets have the occasional 10% correction and last week’s Friday’s was brutal – is this a correction in a bull market or the start of a bear market?

One thing for sure, China growth is slowing – probably to around 5% – or even lower and this is what is driving stocks lower – first the commodity crash – and then companies with growth to China – which is almost every company – hence broad sell off.

The fall out of this significant market event is there could be some more selling over the coming weeks with a possibility of the SP500 hitting 1900.

2CentView is that it is not an overall bear market – the US and UK Economy are buoyant – and with interest rates and oil prices set to remain low for some time yet, this should spur growth as consumers spend. So the broader market may correct a 3-5% more then rally as the lower growth in china is fully priced in.

Mark your stocks from 1 to 3 – 1 being those you really want to keep forever, and 3 those you can sell to raise cash and buy companies you really want which were too expensive before – 2CentView has sold FitBit and Man Group.
2CentView strategy is always to take some profits when stocks hit your target – reducing the overall cost basis making to hard to lose money in volatile markets – and it is times like now when you are glad you did!

Here are some great companies to keep an eye on

Biotech:
$GILD (Gilead) FV = 118 vs 105 1.6% Yield 11% Cheap

Financials:
$MS (Morgan Stanley) FV= 39 vs 34 1.75% 14% Cheap
$JPM (JP Morgan) FV=72 vs 64 2.77% 12% Cheap
$HSBC (HSBC) FV=625 vs 533 5.9% 18% Cheap

Social Media/Internet Retail
$FB FaceBook – look to buy around $80 (30% 5Y Growth)
$AAPL (Apple) FV = 120 vs 105
$TWTR (Twitter) FV=40 vs 26
$YHOO (Yahoo FV = 36 vs 33 (vs 68.2 in BABA stock)
$BABA FV= 88 vs 68

Chips
$SWKS (Skyworks) FV=92 vs 79 14% Cheap

3D Printing
$HPQ (hewlett packard) FV= 36 vs 27.5 2.56% Yield – Separation could add $5 – look at EBAY/Paypal!
$SSYS (stratasys) FV = 33 (if you include $6 of cash) vs 28

Solar
$SPWR FV=26 vs 21.7

Oil
$BP FV=470 vs 357 yield 6.8%
$PFC (PetroFac) FV = 930 vs 789 yield = 5%

Insurance
$AV. (Aviva) FV=580 vs 482 yield = 4.4%
$AIG FV = 65 vs 60 1.88% Yield

Airlines:
$EZJ (easyJet) FV= 1950 vs 1624 3.4% Yield
$SAVE FV = $66 vs 55
$AAL FV=$55 vs 40

HSBC FV=650 vs 560px Yield 6% – hated company but quality assets? Academics…

Banks continue to find it hard going – last tweeted about HSBC in July 2014, where the recommended trade was stopped out at 590 as the scandals continue to hit the banking market and HSBC.

Banks are finding it tough going – tighter regulation, ultra low interest rates and legal provisions covering potential heavy fines in all markets – gold, silver, libor, cds etc…

HSBC have also been accused of helping clients from one of their swiss operations avoid paying tax – for which FLint and Gulliver were hung up by a committee in London!

So should you buy now? Academics have shown that Hated Companies which have quality underlying businesses outperform – HSBC do have a quality underlying business, but it is perhaps to big to manage and they need to divest more and ensure core operations are clean. A strong dollar and rising interest rate environment should help also.

Trade: Buy here at 560, target 645 for 15% Plus 6% carry – Stop 520.

Comparables:
$Barc FV = 300 vs 250
$JPM FV = 72 vs 61
$STAN FV=1200 vs 1010

2CentView has trading position in $HSBC opened at 560.

Happy 2015 from 2CentView

Thanks for the all the comments in 2014.

As tweeted at the beginning of 2014 (http://www.2centview.com/2014/01/02/happy-2014-from-2centview-2014/) central bank policies are designed to create real jobs – jobs will not be created unless companies must see real growth – this has certainly happened in the US where unemployment has fallen below the target 6% and gdp growth last reported at 5%!
This has sent the US Indices to records as the majority of companies continue to beat earnings expectations.
As growth begins to accelerate, interest rates are expected to rise as growth is normally accompanied by inflation – but this did not happen – instead of the 10Y US government yield rising to 3% as many predicted it yields kept falling…For some time this created a paradox – the bond market was saying inflation was not a problem – in fact deflation was a bigger problem than inflation – hence growth cannot be possible – but the stock market was saying the opposite? Which market was right?
From the US Perspective, it turned out they both were – what we have seen is amazing drop in oil prices and commodity prices staying low. Oil prices have dropped due to oversupply (fracking, more efficient cars/jets, need to for countries like Venezuela and Iran to keep pumping oil, and a lack of any growth outside the US.
So this means we could have a year of growth with zero inflation – even deflation or disinflation – this could be great for stocks as costs are kept low but prices may not necessarily follow as there is strong demand as people spend their additional cash from their savings on fuel and general confidence in the job prospects.

Only once in the past 13 where there is a 5 in the year has the stock market gone down and David Tepper is making parallels with 1998=2014 and 1999=2015 – both of which saw a russian crisis followed by a great year leading to over valuation from fair valuation.

Stay Invested in stocks in 2015 – the market is not cheap anymore – so finding bargains will be difficult – so look for sells offs like EBOLA to get in!

Would recommend keeping at least 50-60% invested in the US in 2015 (2CentView had 75% in the US invested in 2014).

If you are not invested, here are some starter stocks to get your portfolio going:

Financials – should do well in rising interest environment – so hedge against interest cost rising
$Barc FV=280 vs 243 yield 2.8%
$JPM FV=72 vs 62 yield 2.5%
$GS = 215 vs 194 yield 1.25%
Or if you want exposure to Europe $DB (Deutshe Bank) F=35 vs 25 yield 3% – note:Euro could go much weaker

Social, Mobile, Cloud
No Bargains here – the last was Google at 500 – take a small position in TWTR below 40

Commodoties – with prices at all time low could be an entry point – keep to stops if they keep falling
BHP BIlliton FV=1850 px = 1390 yield = 5.9%
Anglo American FV=1550 px = 1200 yield = 4.5%

BioTech
No bargains here except:
$GILD FV=115 vs 96 9.5 2015 P/E 5% 5Y implied growth!

And finally – look to get into oil stocks when oil finally bottoms out…keep an eye of PetroFac and Halliburton

Happy New Year and all the best for 2015 from the 2CentView team!
Lets hope its good and a bit less volatile!

Banks have been battered in 2014, but is it time to buy after RBS results?…

Banks have been trading at a discount to fair value all year – but instead of converging to fair value, they have just been getting cheaper – the market’s concerns about regulators coming down on them hard for ‘unsound’ business practices and trading complex instruments nobody including themselves really understand and manage the risk….have been justified

JPM 13billion $ Fine
BNP $9bn for dealing in the US with sanctioned countries
HSBC 1.9bn for money laundering

plus other lawsuits, for fixing prices in the gold and silver markets, deceptive practices in dark pool share trading…. !!!

However, is at the times when the news flow is bad and the stocks are really cheap, it is time to buy!….unless you think it will get worse from here …. in which case or trade only half what you want now, and the other half further down.
Morgan Stanley has shown the way of how to generate revenue by focusing on wealth management & investment banking – no need to trade complex debt instruments. Commercial Banks should focus on Lending to businesses, mortgages etc… RBS has shown how profitable that can be in a growing economy!

Some Market prices vs. Fair Values for names with potential upside + Carry

$BARC 275 vs 220 Yield 3%
$HSBC 720 vs 630 Yield 5.2%
$BNP 55 vs 49 Yield 3%
$JPM 64 vs 59 Yield 2.65%

2Centview pick is $HSBC – it should benefit from the growth UK & US Economy and offers an attractive yield. Results due 4th August. Buy here at 6,30 target 700, stop 590
2CentView has a trading position in HSBC at 6.23 and has a core in Morgan Stanley from 2013.