News that venerable US blue-chip AT&T plans to raise money in Canadian markets has led me to look into Mounty preferreds. Canada specializes in floating rate and rate-reset preferred shares which shelter buyers from the impact of higher interest rates. FR preferreds payouts rapidly move with overnight interest (or prime) rate as set by the Bank of Canada (their central bank). This protects you from higher interest rates which normally chop the value of a bond or preferred share when the prime rate rises.

Rate-reset preferreds also change their interest rates but only on a fixed reset data, also called the call date, when the issuer of the bonds also can call or redeem them. Unlike FR preferreds, the change in rates is not automatic and is normally set based on a fixed spread on the 5-year Government of Canada bond. The spread over the GoC bond rate is fixed and goes up when rates rise.

Of course, for now, Saudi investors will not be allowed to buy in Canada but that should unwind soon.

Financials

*Finnish Sampo Oij reported H1 results in euros which came in at 1.153 bn, up from euros 865 mn a year ago, in part thanks to a non-recurring item, the payment of euros 167 mn from Mandatum''s deal with Danske Bank.

But even leaving out the one-off this was a big jump because of good sales and combined ratio in its insurance business. The latter ratio fell to 85.8 from 86.5 last H1. Lower is better.

Its portfolio holdings actually lost value at euros 679 mn this year to date, vs euros 821 mn last year. EPS, however, rose to euros 1.68/sh from 1.34 because of buybacks.

Mark-to-market eps was euros 1.14, down from 1.47 in H1 2017 mainly because of low-interest rates. In euros, the level rose from 1.34/sh to 1.68.

Group return on equity was also down, to 10.2% from 14.1%. Net asset value per share closed the half at euros 21.57 vs euros 25.37/sh a year earlier. The main cause of these moves was the lower euro exchange rate against the dollar and lower yields Sampo raised its debt to euros 3.535 bn from prior midyear level of euros 3.177 bn while chopping other interest-bearing assets which cost more in Britain.

Before tax profits were euros 415 mn, up from 401 mn. Insurer Topdanmark (now consolidated) accounts for a quarter of the total vs 12% before consolidation last year.

Nordea also did well, producing net to SAXPY of euros 388 mn vs prior year's 322 mn. Sampo owns 21.2% of Nordea stock on which it has made good gains. Here the fear is that business may suffer from trade wars and other global uncertainty.

Sampo CEO Kari Stadigh said he expects Sampo businesses to report good operating results for the rest of the year. He said Nordea's contribution to “group profits is expected to be significant.” However, SAXPY also warned that low levels of P&C claims in H1 were the result of dry weather cutting damage claims in the Nordic region which since then has suffered floods and fire.

The press release included quarterly tables on the euro exchange rate in Swedish, Norwegian, and Danish currencies but not dollars.

Pharma

*Danish Novo Nordisk reported yesterday and beat the forecasts. However, it warned about competition and price pressure despite raising guidance for 2018. Net profit in Q2 hit Danish kroner 10.34 bn ($1.61 bn) up 4% from Q2 2017 and ahead of the consensus forecast of DKK10.22 bn. Sales fell to DKK27.41 bn, down DKK1.23 bn from Q2 2017, and below the consensus forecast of DKK27.75 bn. The stock was punished by falling 5.3% to $47.58 here, which is overdone. NVO's problems were partly from the strong kroner which hurt its US sales nipped by ~10%.

Its main drugs in the diabetes space did well in constant currencies in the first half: Victoza up 12% y/y to DKK 11.7 bn but 7% below analysts' forecasts; Saxenda, up 50% y/y to DKK 1.7 bn; Tresiba up 11% to DKK3.7 bn; Xultophy up 165% to DKK 720 mn. However, its biopharma sales fell 1% in local currencies.

While operating profits in DKK in the half were down 8% they were up 4% in constant currencies, at DKK 45.6 bn. H1 net profit was up 7%/sh to DKK 8.66/sh while overall net rose 5% to DKK 21.1 bn.

It launched in Feb.its Ozempic weekly GLP-A jab which already has captured 14% of the US market. It's phase 3 results from 4 trials of oral semaglutide, the daily oral diabetes drug cut down on blood sugar and weight vs other treatments including Victoza. It will pay a DKK 3/sh dividend later this month.

The caution was over sales growth expected to be up 3-5% this year (in local currencies) and operating profit expected to be up 2-5%. Both are below earlier estimate which were in double digits. The maker of innovative drugs uses hedges to protect against the rise of the kroner. In the conference call, the real risk was said to be stronger dollars in 2019, which I think is unlikely. Our ADRs are priced in dollars and so are our dividends, meaning (given that the US is NVO's top market) that we can ignore DKKs.

The big worry is not forex but pricing. Novo CEO Lars Fruergaard Jorgensen told FiercePharma in a post-results interview that diabetes drugs are coming from 5 competitors, and warned that US prices for basal insulin drugs would spiral down next year because of this “continuation of the dynamics we have seen for some years.” Unlike its rivals, NVO is a specialist in diabetes drugs. It prepared for the rivalry by firing 1000 members of its staff 2 years ago and may have to cut headcount by more now.

*GlaxoSmithKline hit a 12-mo high in UK trading (in sterling, not dollars.) The US price at $41.5349 right now is below the 52-wk high of $42.36.

*Ben Reynolds in Sure Dividend (quoted in Wallstreet'sbest) recommended French Sanofi as a “turnaround” with a 4.4% dividend while admitting that there is a “bumpy road ahead” after SNY reported lower revenues above all in the US because of diabetes treatment Lantus facing biogeneric competition. He also warns against the impact of exchange rates on SNY dividends. More below.

*Bavarian Nordic reported phase II trials of its MVA-BN universal RSV vaccine in over-55s produced antibodies and t-cell responses with a single booster jab ad a new high-dose vaccination the next year. It reports Aug. 16. We sold the Danish share.

*After rising in European trading in part because of the strong shekel. Teva fell 2.5% here. Credit Suisse published information about South Korean Celltrion, which is supposed to supply the Israeli firm with the precursor chemical for its migraine drug expected to get FDA okay next month. The English version of the press release (the one read by the Israelis) is more upbeat about timing and restrictions than the more conservative Korean version, according to Ray Kim, the CS Korea analyst, as quoted by Dr. Vivek Divan who covers Teva. The difference is mostly about FDA timing on delayed approvals. Dr. Divan says he is “cautiously optimistic on Fremanezumab approval” after the Kim changes.

*Despite announcing in Nature Medicine today a blood-based tumor mutation assay to determine if a patient would gain from Tecentriq (atezolizumab) against non-small-cell lung cancer, Swiss Roche is off 1.2% in US trading. Yesterday, the FDA approved its first generic drug on the fast path when there is no competition.

*Swedish biopharma startup BioArctic AB (BIOA.B) identified a new target for Alzheimer's disease under its JV with Eisai, which has the right to develop small molecules for treatments, while BIOA.B retains the right to antibody-based treatment. ESALY is very active in Alzheimer research because Japanese are among the oldest populations in major countries.

Energy and Materials

*Delek Group and Noble Energy are reported by Bloomberg to have concluded talks on a deal to take 37% control of the East Gas pipeline to Egypt, on the way to a $15 bn export contract for liquefied natural gas from to Europe. East Gas is owned by Eastern Mediterranean Gas Co., whose investors include Sam Zell and Yosef Maiman. NBL of Texas is a bonus share.

*Wallstreet'sbest also quoted me about BP plc raising its dividend after a 3-year hiatus. Editor Nancy Zambell also quoted a negative article about the UK oil major from a letter published by Cabotwealth which also puts out her monthly. BP will pay 10.25 US cents/sh in dividend tomorrow which is up by a quarter cent. BP was recommended by Goldman Sachs with a £7.3 target price; it is now £5.767 up from yesterday's close of £5.763.

*Geothermal power firm Ormat Technologies reported a Q2 loss of $343,000 because of a volcanic eruption shutting in its Hawaiian power plant, equal to minus 1 cent/sh. Adjusted earnings, omitting one-offs, were plus 32 cents/sh but were still below analyst consensus forecasts of plus 48 cents. ORA revenues beat by $2.3 mn, coming in at $178.3 mn. ORA predicted fully year revenue at $698-622 mn. Of course, the share is down because of the disaster, about 10% YTD and nearly 20% below our purchase price. I am not very good at predicting earthquakes.

*Thanks to its declaration of a 19 cent (US) dividend for August, Canadian Pembina Pipeline. PBA, rose 0.34% on Wednesday. PBA has a good history of raising its dividends. It acquired our Veresen last year.

*Sociedad Quimica y Minera de Chile disappointed the audience at the Santiago Lithium Forum yesterday. SQM said it would grow its business in nitrates, and iodine, and will acquire more assets to produce potassium. It will add lithium assets as well but only when competitively priced. Initially, the stock fell in US trading but then recovered and is now up 1.3%.

Tech

*Tencent rose in US trading after the tech group helped fund the community-based e-commerce platform Haoyiku which raised millions of RMB in a B financing round. As the lead investor, TCEHY kept its link with WeChat part of Haoyiku's future. Tencent was given a new target price of $59 and a buy rating by Barclays analysts, a 30% upside from its current price.

*Mazor Robotics was slashed to sell from hold by Zacks after a meh quarterly report. We invest for longer and remain with MZOR despite the impact of its Medtronics distribution contract in Q2.

Funds

*Latin American Discovery Fund, a closed-end fund, is seeking shareholder approval to liquidate. LDF after its board threw in the towel.

*Japan Smaller Cap fell 3% after it produced a report for our SEC showing how it votes in favor of management in most proxy fights. JOF reported on how pro-management it is yesterday but I didn't write it up; had it shown negative proxy votes I would have.

*Saba Group continues to sell Templeton Emerging Income Fund, TEI, on the assumption that US rate rises will hurt developing country bond markets. Saba is official from Bermuda.

*Oops. Azure Power Global Ltd uses a March 30 fiscal year not a calendar year so it will report on its Q1 and raise more capital, not on its first half.