Zurbaran And Short Sellers
Francisco Zurbaran grew up in Seville, the city which administered Spanish colonies in the 17th century and the main port shipping goods and treasure to and fro. The son of a draper, he became a painter with a naturalistic style, heavy shadows and chiaroscuro, and usually a Catholic religious subject. He nonetheless managed to beat Marc Chagall in depicting Jacob and his dozen sons, in paint rather than stained glass.
Yesterday we went to the Frick Gallery here to see the Jewish family portraits, which are huge and brilliant and rarely seen. Jacob and his eldest 11 sons normally hang in Auckland Castle in the north of England, and Benjamin, bought by a rival of the Durham Bishop when it was auctioned, in a different castle.
A mystery is why after the Inquisition and during the peak of the counter-reformation the paintings were commissioned at all. One theory is that the Spaniards believed that their subjects in America were descended from the 10 lost tribes of Israel, and wanted to ease their way to converting to Catholicism with the paintings, to be hung in a church. In the end, the paintings stayed in Europe. One of the brothers, Zebulon, wears a pair of striped short trousers which recall costumes of Latin American Indians. As a draper's son, Zurbaran was a brilliant painter of clothing and cloth.
Because the castle is being restored, its pictures were allowed to be moved to be shown here and the Frick persuaded the owner of Benjamin to let her picture join the Durham ones. It is a wonderful show.
Yesterday funds had to file their last 13-F report on major holdings changes to the SEC. The main impact of the news is on one of our favorite long-time holdings. But there is gold in other reports as well. The Greenwich, CT-based Bridgewater Capital hedge fund sold short euros 14 bn in stocks in the Dec. quarter, expected a share crash. At least one of our stocks was affected as it was third on the sell list.
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If I am right and Bridgewater now has to buy back the stocks it shorted, our share will rise. My information came from a report in the Frankfurter Allgemeine Zeitung which today covered only the major German stock shorts.
With the dollar expected to sink in part because the US Administration likes that, and with higher interest rates and inflation threatening, I think shorting euro stocks is madness. Currency factors will boost their share prices and dividends when converted into US$s. The only thing to watch out for is companies which do too much selling in the USA.
In the most recent quarter, the eurozone economy grew 0.6% in the quarter, and 2.7% from the prior Q4, ahead of the US 2.3% for the year but behind the 2.5% in Q4. This is not a clarion call for shorting Europe.
Foodies
*Canadian Input Capital, which finances colza farmers, is up 1.2% today. INPCF according to our Canada reporter Martin Ferera faces a crucial year as it expands from financing harvests to financing planting. And now it will also finance farm purchases. Its late report yesterday on Q1 saw sales up 111% year/year and it added a new line of canola trading bringing the total to C$27.86 mn. Its adjusted operating cash flow and adjusted EBITDA of C$10.579 mn and C$10.538 mn were both up 22%. It paid its first dividend in the last quarter of one loony cent. More importantly, it initiated an issuer bid for its own shares for up to 6.6 mn of them. It bought back and canceled 118,200 in Q4 and insiders bought another C$10 mn of its shares, bringing their total stake to 28%.
*Grupo Bimbo of Mexico gained 1.1% today. GRBMF and others rose after Nestle missed.
*Irish Greencore is up 3.27% to $10.73. GNCGY.
Bank-Insurance
The stock we own sold short by the hedge fund was Allianz SE. It is itself a fund manager directly and via bond house Pimco. AZSEY reports on Q4 and 2017 tomorrow and it is expected by the consensus to report a 3% Q4 drop in operating profits, mainly because of the impact on P&C policies of recent disasters. Its net is expected to drop 7% to euros 3.83/sh and its dividend to rise 4% to euros 7.89/sh. This is from 20 analysts covering the stock as reported by Factset. We will know if any of this comes true tomorrow. (Since all the analysts already incorporated the prior quarters into their forecasts you have to wait till Friday to get that.)
*Lloyd's Bank in London closed its arrangement with Standard Life Aberdeen to manage money market accounts for the bank, in which £109 bn was held at the close of last year. SLFPY says it accounted for under 5% of its total revenue but will take a £40 mn charge on its full-year accounts. The arrangement dates back to Aberdeen buying Scottish Widows back in 2013 and getting Lloyds as a shareholder as a result. Lloyd's agreed to a 6-month standstill when Aberdeen and Standard Life merged last year. SLFPY fell 7.5% in UK trading today. I did not see this coming. No analyst warned about this.
*Banco Latino-Americano de Comercio was upgraded to neutral from underweight by JP Morgan analysts. BLX is up 1.5%+. It is Panamanian.
*Santander fell Weds. perhaps because its US venture fund invested in startup Roostify, which offers on-line mortgages. Or because it is in a fight with the fines being imposed by the Mexican competition authorities over its takeover of fellow-Spaniard Banco Popular last summer and fining SAN $20,185 for its misdeeds. SAN is up 2.53% in Madrid today.
*India's Punjab National Bank revealed that it had been the target of a $1.77 bn fraud against its overeass branches. We exited Indian banks last year after the currency conversion move by the govt.
Techno Stocks
*Tung Le at Crédit Suisse today published a report on TowerJazz (TSIM), the Israeli fab maker of power management integrated circuits, radio frequency, and optical sensors. Tung argues that the power IC market is growing so fast it is making up for lower sales in other areas. He expects TSIM to report on Feb. 22 sales of $349 mn, above consensus and up 6% from prior Q4—despite the yen depreciating against its reporting currency, the US$. Tower's biggest customer are: Japanese Panasonic; Vishay which sells power to auto and industrial firms; and Skyworks and Qorvo which buy RF/HPA chips. Despite the currency drag, he rates TSIM outperform with a target price of $40 (from $32.4 now) based on lower yen depreciation, higher demand for power IC, and TSIM gaining from its 3 Japanese fabs despite its being Israeli. TSEM is up 1.93% on this news.
*Nokia is doing a strategic review of its digital health arm because it is exiting virtual reality where its health services like smart watches, weight scales, and other devices had been held. NOK is Finnish.
*Tencent gained 3.36% today on Wall St on Baidu's good results and its planned video spinoff. TCEHY is part of a Chinese FAANG.
*With Jacob Zuma resigning Naspers is up even more sharply, by 5.25% to $57.75. NPSNY owns 1/3 of Tencent. S&P updated its outlook to stable from
Druggies
*In a quarterly SEC filing, Berkshire-Hathaway revealed that it had bought about 2% ($358 mn worth0 of the outstanding shares of Teva by the end of last year presumably because of its sharp price drop. The glory of Warren Buffett boosted TEVA stock 11% after the market closed yesterday and it remains in the stratosphere in morning trading, up 7.7% to $20.82 on huge volumes. TEVA used to make copycat drugs, or generics, but now it is becoming a copy-cat stock buy. It already rose 4.7% yesterday for no reason.
*Shire Pharma of Ireland won US approval for giving its Cinyze for pediatric hereditary angioedema to sufferers. Its stock was rated outperform by Royal Bank of Canada, with a C$181 target price but Chicago trend followers Zacks cut it to sell from hold. Finding the trend is not easy for an Irish firm whose primary listing is in London and whose ADR is on the big board.
*In seekingalpha.com today someone called Laurentian Research, an anonymous paid website, discussed his or her report on Norilsk Nickel citing “a large moat” and that the Russian mining. firm involves political risk but is both big and growing. The writer doesn't cite the gossip I got from London about Oleg Deripaska who is a major shareholder. As for the charms of NILSY, we told you first.
*GlaxoSmithKline got EU approval for its 4-virus Fluarix Tetra flu jab to be given to children as young as 6 months old. The previous guidelines covered only adults and children over 6. GSK meanwhile was raised to hold from sell by Zacks.
*Bonus stock Exelixis achieve a response rate of 54% in phase II trails of its cabozantinib to treat metastatic radio-iodine refractory thyroid cancee. EXEL.
Miners and Industrials
*Mexican Cemex was slashed 5 levels from buy to sell today by UBS, the Swiss bank. I got talked out of doing something similar by Eduardo Garcia. However, the stock rose sharply yesterday after CX announced it would buy control of Lehigh White Cement of the USA from German Heidelberg Cement and leave Cementir of Italy as a minority shareholder. The key risk is the leftist gains in the run-up to Mexico's elections July 1.
*Canadian Cameco was upped two notches from sell to hold by long-term independent stock analysts Argus Reseach. CCJ mines uranium. It was rated neutral by BMO at C$15; downrated to sell by Scotia with a TP of 10.50 and downgraded to neutral with a TP pric e of C$15 by TD securities. All this week!
*Brazilian Vale made a 52-wk high today in London trading, hitting $14.04.
*Ecopetrol of Colombia was up 2.3% in UK trading this morning hitting $17.82.
Funds
*Japan Smaller Capitalization Fund reports that activist investor Karpus has acquired 4.1% of its shares out. That may mean others will copy this move.
*Mexican REIT Fibra Uno rose 2.64% in Mexico City today taking FBASF back up after it fell yesterday by 3.25%. I got an email from JS wondering why I had sold the share; I did not. I only wrote up the nipped dividend I received which was chisled down by E-trade from the actual exchange rate it should have been done at, according to the company and the currency charts. I still own FBASF and like the concept and the payout even if the latter is being clipped because the ADR is unsponsored.
Disclosure: None.