It Was A Swiss Move - Part Two
Having weighed in yesterday with a report on the logic of selling US stocks if you are the Swiss central bank, I don't want to go so far as to predict that the selloff which continued today in Asia-Pacific and European markets is inevitable. It's not. Only the US part is certain.
The US equity rise last year (and indeed since the bottom of the global financial crisis in 2009) is highly unlikely to go on. Our country, apart from an appalling administration, faces triple-whammy risks of higher inflation and higher bond yields. And inexperienced Trumpians running the Departments of State and Treasury plus the Federal Reserve.This trio of trouble is not shared by most of the rest of the world.
Another country where the downturn risk is as high as in the US right now is Britain, where the Theresa May government faces a Tory rebellion from hard-Brexit supporters like Jacob Rees-Mogg, Boris Johnson, and Michael Gove. Whether or not they manage to burn PM May who has another lousy track record, they will affect the way the negotiations with the European Union proceed. Unfortunately for stock markets, overthrowing May may open the door to left-leaning Labour under Jeremy Corbyn, a risk the US Democrats will spare us from. She also cut her links to Trump by defending the UK National Health System which he added to his list of stuff to be rude about, which may help her with moderates. So it's bad in Britain but not as bad as here.
In Mexico too I fear a switch to the left in the coming election, which will feature another attempt by the veteran Andres Manuel Lopez Obrador. Mexican polls are showing him ahead but the guy is trying to make nice to business and may not be as Marxist as before.
A curiosity is the mc]uch bigger sell-off in crypto-currencies than the one in stock markets. Are they related? That suggests another idea.
More on what to do now with news from the Americas, Europe, Africa, and Asia.
Fintech in Emerging Markets
*If the bitcoin bust is related to the market drop in financials in Asia, there is an argument for buying the ADR of AIA Group in Hong Kong, which has nothing to do with cyber-currencies but which fell 2.83% in Hong Kong today. AAIGF may also become a target for its former US parent which is back in M&A mode after snatching Validus Holdings of Bermuda. VR Q4 earnings came in at 5¢/sh vs analyst forecasts of 85¢ which explains why it was willing to be sold after a year of P&C carnage.
*Tencent (TCEHY) which is in the same business as the US internet shares which crashed last week is trending upward. Its cheaper 33% owner Naspers (NAPRF ), however, is down over South African political uncertainty.
The Financial Times reports that China is blocking implementation by firms like TCEHY and BABA (Alibaba) to use their knowledge about their customers to assign them credit scores before the Bank of China can create its own credit score system. Tencent last week had to pull its trial system a day after the launch when the CB objected last week. The official program will be tested this year and rolled out nationwide by 2020, leaving sellers exposed. The official explanation is to preserve customer privacy. That's a hoot.
*Take some profits with Vodafone (VOD) which is in talks with John Malone apparently aimed at Unitymedia in Germany, because it faces new competition in the African telephone pay business, why we bought VOD in the first place.
The Frankfurter Allgemeine Zeitung website today features a 6-yr-old Luxembourg firm called mybucks which is offering cellphone “financial inclusion” in Africa markets from Kenya to South Africa with a 2-minute response to credit applications for amounts of 5-100 euros. It uses the cellphone payments history data to decide and of course, it risks non-payment because few Africans have a real credit history. It is listing in Frankfurt. With Global Investing you get German and French news from the source on the day it comes out.
However, use a limit order selling VOD first because it fell 2.4% in London today and over 4.15% here. Second because it was upgraded to buy from add by Numis Securities in London today. And third because mybucks may be in trouble if enough Africans borrow 100 euros, which is real money.
*Bank of Nova Scotia (BNS) was kept at a buy with a target price of C$86 by Bank of Montreal. Unlike most Canadian banks, Scotiabank is big in Latin America and some Asian markets and small in the USA.
Telco-Tech
*Amazon worries have not spread to Argentina rival Mercado Libre. MELI has a delivery and payments system in place which makes it a strong player against AMZN in Latin markets. It was tipped as the next “Tencent” by Steve Sjuggerud's Daily Wealth newsletter, I learned from stockgumshoe.com, which I recommend, by Travis Johnson.
*Nokia remains robust despite the tech sell-off, mainly because it is so Finnish. What else would you buy in Finland? Well, there's Sampo oij which we own directly and Wartsila (accents omitted) which we own through Investor A/B of Sweden. We used to ownKonecranes, Outokumpu, and Amer.
BofA-Merrill today upgraded NOK from neutral to buy. Apparently the latest $1000+ Apple phone has trouble letting you answer the ring, and of course, NOK has an app for that in its intellectual property pile from which it collects nice sales.
*Valuing Infosys is hard. It was upgraded to buy today by Goldman Sachs, from neutral. It was cut to negative from neutral by Susquehanna Financial. Goldman tends to have more clout and also has covered INFY for much longer.
*Amidst the carnage on overseas markets today there is a glimmer of upswings in Argentina, Brazil, Canada, Colombia, Denmark, Finland, Germany, Hong Kong, Israel, and Mexico, not across-the-board, but for stocks out of the limelight or under the radar. The euro has stopped falling. Yet I am maintaining my part sales of Mexichem, MXCHF, where we have lost half our gains to date. It will have its management head handed to it if Lopez Obrador wins the Presidency because its oligarchs are unsympathetic to worker deaths.
*Fanuc, our Japanese robot maker, is down 2.56% in Tokyo but only lost half that amount here because our panic attack actually started on Weds. It automates assembly lines in conjunction with human workers in a host of other businesses, although its main one is car-making. Its revenue grew 35% in the FY half to Sept, and its net rose even faster, by 43%. Apart from autos, you can use robots to make airplanes, or to turn out consumer goods, other metal bashing, food, medical, pharma, solar, etc. FANUY also can automate warehouses for online selling. We are working on another AI play from Asia but its price has risen too high for the present.
Drugs
*I am adding another part sell of GlaxoSmithKline to the sell pile. GSK is falling into the Teva trap as it prepares to bid for the Pfizer over-the-counter drug arm against the much more agile Reckitt-Benckiser (RBGLY, sold). Both remaining PFE contenders fell 2.5% today in UK trading.
GSK did well with its deal to share out with Novartis two years ago, but that was under different management. And it is really a yield play for us, so deals are dangerous for our 5.6% payout level.
*Among the small caps in play is one we sold, Mellanox of Israel, now in trouble because its largest shareholder, Starboard Value Fund, owner of over 10% of MLNX, criticized its board for selling so much stock over the past decade, which was my reason for exiting. It made them more money than we got more recently, however.
*Novo Nordisk now offers its diabetes-weight gain extended-release semaglutide jab at US drugstores as an adjunct to diet and exercise despite risks of thyroid tumors for which users must be monitored. NVO is a keeper for now.
*Another stock in the dumps—despite its market doing better—is Teva, likely to fall back below $20 where it opened here today. It started falling in European (Israeli) trading and this is bad news. Teva over the weekend told its Israeli labs they would no longer do much of its R&D, another blow under its new management. TEVA will report Thursday.
*Analysts in Europe are not mocking Mr 5%, Roche, like I did last week, because of its push with Ocrevus into multiple sclerosis drugs, and its steady-Eddie focus on cancer. Both were underlined by CEO Severin Schwan in the conference call in German. RHHBY head of research Daniel O'Day cited positive feedback from 30,000 MS patients and doctors because of lower side-effects, in a side remark during the German version. I read the German version in the FAZ today and it was different from the English one. Roche is rated buy by Schwab and Reuters, but not by Crédit Suisse.
Roche is down in US trading despite the linguistic gap in part because Bristol-Myers, a US share I own, succeeded in identifying which lung cancer patients would respond to its immune therapy drugs Opdivo and Yervoy combo. It didn't hold its gains but it did zap other cancer-focused drug firms. I got into BMY by heredity as I inherited my shares from my mother who bought them because of her favorite sister dying of cancer. Last year two of my own girlfriends died of non-small cell lung cancer, Sylvia, and Lydia.
*In the margins of my commentary about who was selling last week, (it was the Swiss National Bank), a Switzerland-based reader of TalkMarkets.com remarked that his homeland has more world-leading companies per capita than any other country, and that despite the appreciating franc, more business is moving outside the country and not doing as well as foreign stocks. He sounds even less Germanophone than I am by his name. He also is an artist drawing Swiss-looking pretty women, in pencil, without clothes.
Other Sectors
*Brazil is up and Vale is a winner in the down market, up 2.55%. VALE reports Feb. 27 in both English and Portuguese after the close.
*Cosan says it reports on Feb. 23 at 9 am in Portuguese, and that it will observe a silent period from Feb. 17 to Feb. 22 after the market closes. CZZ will report in Ingles at 10 am at 1 646 828 8246, which is a local call from NYC, with code COSAN. Eu falo portugues thanks to years of aulas na fundacao Gulbenkian.
*A new focus on consumer staples should help two of our food picks, first Irish Greencore which is present in the hot US market. It is not related to soft drinks or coffee Dr. Pepper Snapple or Keurig—except by distributing via Starbucks in the USA. It is a cheap stock for a biggie to buy. Getting a current price, however, is like pulling teeth with Schwab and the pink sheets.
*Grupo Bimbo of Mexico is sitting pretty in the USA with much more than tortillas: Entenmann's, Thomas (English muffins), Arnold bread, bagel thins, Orowheat, Stroehman, Sara Lee are among its brands. Its international business is unlikely to be ruffled by AMLO if he wins Mexico's presidency. It goes back to the 1940s and starting in its earliest years it supported schools and nurseries well before it started trading in 1980 under the Servitje oligarchy. They are much more socially conscious that the heavy industry oligarchs at Mexichem and therefore are less vulnerable.
Its first exports to the US date back to 1984—before its expansion in Latin America. Moreover, it makes marmalade and Nutella (under license.) And it is big on green buildings. Its stock is up 4% today.
*Energy stocks are in focus after being spared last week. Oil companies benefit from higher oil prices as they have cuts their costs. However, BP is down 3.4% despite its new discoveries in the North Sea.
*Ecopetrol (EC) is off 4.62% because of rebel ELN attacks in Colombia where EC is back in civil war mode. As a state-controlled company, it is a target for guerillas still despite a deal with the larger revolutionary group.
*Utilities are mixed with E.On up and Algonquin down. EONGY is German and AQN Canadian. Both are into green energy, AQN more so proportionately.
Funds
*The obvious substitute for bitcoins is gold which also acts as an alternative to stocks and bonds, both of which are losing traction. In theory, gold is supposed to fall when interest rates rise, because it produces no yield, but also supposed to rise when inflation grows. So it is a toss-up. My play on gold is an ETF, SPDR Gold, GLD.
*Ascendas India Trust acquired a huge warehouse complex near Mumbai for INR 4.34 bn upfront plus deferred copays of up to INR 1 bn if future expectations are met. An INR is worth 1.55841 US cents. ACNDF is run our of Singapore and invests in modern Indian office and shops, now joined by warehouses.
*I got executed at $32.15 for Brookfield Renewable, BEP, a sale.
Disclosure: None.