Category Archives: $MS

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.

2CentView Themes – Financials

Less regulation and higher interest rates will take bank valuations higher – they have already had a good run, but will go higher if rates rise at faster pace than expected, so keep a long a position in your favourite stock and if possible overall higher weight (20%) in the sector. Also a good hedge against higher rates, which mean higher mortgage payments.

Px vs FV

$JPM 86 vs 80 Yield 2.2% [Dimon top CEO!]

$C 59.4 vs 64 Yield 1%

$MS 42.3 vs 44 Yield 1.9%

$GS 239.5 vs 228 Yield 1% [2 key Trump appointments are ex Goldman Sachs Bankers]

$BAC 22 vs 23 Yield 1.4%

The regional US Banks could also do well, and perhaps consolidate. Top Picks are:

$KEY 18 vs 18 Yield 2%

$FITB 27 vs 25 Yield 2%

If you are not involved recommend buying anyone of the these top US Banks, $MS and $C still lower than Fair value, 2 key appointments are ex-GS Bankers, Jamie Dimon is a great CEO and JPM is a top firm + either KEY Bank or Fifth Third.

—European Banks—

European Banks are still not great shape and the negative interest rates are causing problems – except for perhaps $HSBC, which has performed well this year as Gulliver simplifies the business model and sells assets.

Deutsche Bank has had a good run since hitting a low of EUR 10, but it is not total clear where it will go from here – a rights issue may be required, the fine of $7billion much lower than the $14billion, but still $2billion higher than provisioned – although around $2billion is deferred over 2 years.

Barclays also has the overhang of a law suit from the SEC over mortgage backed securities sales in 2008. The stock is trading at 60% to book value.

Px vs Fair values:
$DBK 17 vs 18

$BARC 221 vs 200 Yield 1.25%

$LLOY 55 vs 62.5 Yield 4.7%

$HSBC 660 vs 675 Yield 4.7%

2CentView has a core position in $MS and $HSBC and a trading position in Barclays opened at 211.

2CentView performance in 2016

The 2CentView portfolio was up 12% in 2016, which outperformed the S&P500 by 3% but below the FTSE100 which returned 14%.

The objective of the 2CentView system is to outperform the index in rising markets and be at least in line when the major index is flat or falls up to 20%, and outperform if the market corrects more than 20%. The portfolio is benchmarked vs. the SP500 (50%, up 9.5% ) and FTSE100(50%, up 14%), so the outperformed by 0,75% in 2016.

Overall return since 2013, 86% (21.5% annually).

2016 was a volatile and difficult investing year, starting with a sell off in February, triggered by low oil prices and a distressed energy sector. This was followed by Brexit and the election of Donald Trump – both results proving the polls are meaninigless! Many pundits advocating ‘sell all’ following both of these events, but the key was NOT too panic, and look at these events as potential buying opportunities – quality companies will always do well no matter who is in power!

Where it did badly:
2 Core positions were savaged – $FIT (FitBit), $SPWR (SunPower) – both these core positions were down 30% following results, so they traded way through long term stops – 2Centview eventually did exit – the overall pain was not great as 2CentView always sells higher up to reduce the overall cost basis and protect you from the ‘wide arcs’, as the legendary investor Bill Miller says

“Stocks, markets, and money managers’ performance are subject to enantiodromia, the tendency of things to swing to their opposites. Those swings can have wide arcs, and unsustainable trends can sometimes persist beyond the ability of one to endure. That is why most investors are out of stocks at the bottom–they are tired of losing money–and fully invested at the top–they believe their good performance will persist despite their stocks or the market’s being overpriced.”

Trades in $SPD (Sports Direct), $EZJ(EasyJet) [ post Brexit trades],$SKX (Skechers), $VRX (Valeant) were all stopped out.

Where it did well:

Core positions which did well: $MS up 60%, $Z (Zillow group), $ACA (Acacia Mining – gold trade) up 109% were the best performers with other core positions in Apple, FaceBook, Celgene, DLG up between 5 and 15%.

Trades that did well : $LNKD (linked in) – bought by $MSFT, $BOO – boohoo.com (bought after sell off following Trump victory). $DVN – Devon energy  doubled.

Also taken a position in AK Steel and IAG following Trump Election (up 30% and 5% respectively).

The portfolio benefited a bit from the rally in the US$, but the currency exposure is broadly hedged using the $PUS contract.

Main lesson learnt from 2016 – DO NOT PANIC – exiting the market was the worst possible thing you could have done in 2016 – but STICK to your stops if the market or an individual position continues on a downward spiral (both $SPWR and $FIT $9 exit stops were hit).

2CentView is that 2017 could be a great opportunity to make 15-20% if Trump delivers on his election promise, tax cuts and infra-structure spending could really boost company earnings. More on the next tweet for themes for 2017.

Happy 2017  from the 2CentView team.

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…..

$NFLX, $MS – good results, strong rebound after last quarter ….

Netflix and Morgan Stanley reported great results this week.

2Centview has core positions in both these names, and tweeted after they reported terrible quarters that Management should be given time to address issues – Patience is good trait in investing – hold quality companies for the long term.

http://www.2centview.com/2015/10/23/msmorgan-stanley-dont-judge-a-company-by-one-bad-quarter-fv38/

Morgan Stanley – which has had activist investor ValuAct take a large stake, reported a great quarter – even in fixed income trading where costs were cut 25%. Wealth management continues to be strong and Gorman is doing a great job. 2CentView FV = $36, yield 2%. Hold – ValuAct thinks the business is very undervalued.

NetFlix – which dropped to the mid-80s’ after reporting a tough quarter in Q2, popped 20% in one day! Reed Hastings is a great CEO – he is betting BIG by spending huge on 1000 hours of original content – he wants to at least double the subscribers over the next 3 years – they are now in 130 countries…if his bet pays off, $NFLX could be easily be a $100 billion dollar company – see below:

http://www.2centview.com/2015/05/16/nflx-surges-to-new-record-should-you-buy-it-here-the-tam-will-tell/

Hold good quality companies with great visionary CEOs for the long term – the path to success will take time and will not be a straight line!

2CentView Sector Views…

At the beginning of each new year, take a look at your portfolio allocation across different sectors, for which there should be at least 5.

Be Overweight in sectors you think will be do well – up to a maximum of 35% in one sector.

2CentView is overweight in Tech and Financials and underweight in commodity/oil.

This view is unchanged, with core positions in TECH: $FB and $GOOG, $SPWR (Sun Power – solar), $SWKS (Sky works) and $NFLX (Netflix), AND Financials: $MS, $HSBC and $DLG.

Tech will continue to drive costs lower via the cloud and shape the we work and play.

Biotech is also making beakthroughs,  but risky.  2CentView has a core position in $CELG (Celgene) – if  there is a cure for cancer,  there is a good chance CELGENE would be involved.

Financials should do well when rates go higher and economies recover, which the UK and the US are on course.

Top Picks: $MS (Morgan Stanley) 32 vs. FV=$40, Yield 1.7%: Stock was hit hard on last earnings as Fixed Income still shows volatility in earnings. $MS Have addressed this by cutting the department and focus on equity underwriting and wealth management.

$HSBC – 537 vs 620 Yield, 6%. Gulliver is determined to cut down the size of the business and improve return on capital. You are paid a nice 6% dividend while you wait for his turnaround plan to take shape.

Sectors to keep an eye on are Energy and Commodity – but is still perhaps too early. Credit default Swaps are very wide and Earnings too unpredictable and the winter is SO WARM!

Keep plugged into 2CentView to get idea updates in these sectors.

If you want to buy now, 2CentView top pick is $BP , 354 vs 400 FV, Yield 5.5%, solid balance sheet, and can withstand low prices.

Finally always keep a look out for recovery plays – QUALITY companies which have been beaten down but can recover – Rolls Royce (FV=550), G4S (FV=300 vs 225), VRX (FV=185 vs 102).

 

 

2CentView Performance in 2015

The 2CentView portfolio was up 1.5% and flat if you exclude dividends for 2015, which matched the S&P500 but above the FTSE100 which was down 5%.

The portfolio was up nearly 10% mid year, but then the Chinese stock market plunged and was followed an amazing drop in commodity and oil prices, the scale of which no one predicted, sees stocks like Anglo American, Glencore and BHP Billiton drop to record lows.

The objective of the 2CentView system is to outperform the index in rising markets and be at least in line when the major index is flat or falls up to 20%, and outperform if the market corrects more than 20%. The portfolio is benchmarked vs. the SP500 (50%, flat ) and FTSE100(50%, down 5%), so the outperformed by 2,5% in a flat year. Overall return since 2013, 74%.

The exposure to USD/GBP exchange rate is also something to keep an eye on – and 2CentView started using the PUS3 3x Leverage ETFS Short USD, Long GBP to hedge foreign exchange risk, locking in at 1.52.

Where it did badly:
2 Core positions were savaged – SAVE (down 60%), $YHOO (down 50%), $TWTR (down 50%) which cost the portfolio nearly 5% – 2CentView exited these positions, when the 50% threshold was hit. $ACA (Acacia Mining – Gold) was also down 40% due to lower gold prices.

Trades in $AMBA (Amberalla), $GNW (Genworth),$KORS (Michael Kors), $BHP (BHP Billiton) and $AAL (Anglo American) were all stopped out. In the case of $GNW, $BHP and $AAL, these stocks continued to fall and the stop loss system saved the portfolio from losing a lot of money.

Trades in $FIT (FITBIT), $HSBC were hit their targets and were profitable.

Core positions which did well: $FB up 40%, $MRKT, $DLG (Direct Line, up 30%+dividends),$NFLX (NetFlix), $TWOD (Taylor Wimpey, up 50%), $GOOGL up 60%.

Other core positions in $AAPL, $NASDAQ:AAL (American Airlines), $SWKS, $MS, $CELG and Ionis pharma were fairly flat.

Main lesson learnt from 2015 – STICK to your stops – downward moves can be savage – Analysts forecast can severely LAG the market on the downside as well as the upside, so do not fight the market, exit at your stop, re-evaluate and come back in lower down if you still like the stock.

Happy 2016 from the 2CentView team.

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.