JPMorgan. RCUBE cuts some shorts. GS on the Fiscal cliff victims. MS’ nifty fifty again.

bonjour,

(It’s still tough out there. Looking for the good companies for long only managers is hard. MS published a nice report 2 weeks ago called the Nifty Fifty +. It just makes sense and I like the list they provide. Have a look below in the Strategy section.)

Europe set for lower start, after US banks lost after-hrs as JPM announced surprise US$2bn trading loss, sending its shares plunging 6-7%. Asia also led lower by financials. Macro eyes on PPI + Michigan confidence as well as developments in Greece + Spain.

AFTER HOURS

JPMorgan discloses in 10-Q sees losses tied to chief investment office are larger than projected; has taken significant mark-to-market losses in synthetic credit portfolio.
– Sees corp. division likely posting $800m loss in 2Q vs prior est. $200m adj. net income. Implies a cut of about $520ml off net profit, equal to about 10% of net profit for Q2
– PORTFOLIO STRATEGY FLAWED, SEES RISK FOR COUPLE QTRS
– DIMON SAYS PORTFOLIO STILL HAS A LOT OF RISK, VOLATILITY
– Dimon: ‘It Could Easily Get Worse This Quarter, Or Better’
– DIMON: BANK HAS PRETTY GOOD RISK MANAGEMENT OVERALL
– JPMorgan CDS Reach 119.5bps at 5:34pm vs 111bps Earlier: CMA

Was the $JPM News Leaked? 13,800 May $41 Puts Traded Ahead of the News
Someone bet big time against JPM today, with over 13,000 put contracts traded in the May 41′s (WEEKLIES), 10,000 contracts more than any call contract. Suspicious to say the least. If the news was leaked, this would help shed light as to why the market sold off hard during the final hour of trade and was weak all day, despite robust trading in Europe.
http://ibankcoin.com/news/2012/05/10/was-the-jpm-news-leaked-13800-may-41-puts-traded-ahead-of-the-news/
CURRENT THEMES

On Spanish Banks
If like me, you don’t really know what exactly happed to Bankia, here is a short summary: http://ibexsalad.blogspot.fr/. Spain is going to force its banking industry to ramp up provisions even more, this time to cover performing property loans. The new provisions could total EU30B. Analysts have warned Spanish banks need €100bl extra capital but Centre for European Policy Studies has total amount needed pegged at €270bl. Moody’s has estimated Spanish losses to be approx €306bl. Spanish banks have loan book of approx €1.7tr and still no mark downs on these loans. With sentiment extremely fragile, Spain’s balance sheet lacking in capacity, and the country (for now) refusing any outside money (EFSF/ESM), risks are very high that today’s announcement lacks credibility and only exacerbates the present tensions.

RCUBE

Cutting some shorts.
The picture may not be that bad. RCUBE looks at global earnings momentum and sees a much rosier picture. Earnings Revisions Ratio is key to PMIs, sentiment and confidence indicators.
The trend is better looking at MSCI World Earnings, European earnings and French earnings. It’s not great in China however where the momentum is the weakest and implies that the Chinese bear market is not over yet.

THE TRADE
Cover US equity shorts, thereby increasing the net long exposure to c. 20% of NAV

STRATEGY

JPM (Chang) Emerging Markets Outlook and Strategy.
Will the EM save us? Citi published a note last week using a new acronym EMARP looking at companies exposed to EM with reasonable valuations, MS published one two days ago arguing that the demand for EM assets will outstrip EM supply. And yesterday JPM came out with its EMOS calling for OW positions in EM (fixed income).
This piece contains too many investment recommendations, but for the sake of simplicity:
Inflows to dedicated EM fixed income funds stand at $27bn YTD and have not reversed (not like DM and EM equity funds). JPM likes Venzuela and some dogy markets (NEXGEM???) such as Belize, Dominican Republic, Georgia, Sri Lanka and add Gabon… This sounds like the end.

GS (Fiotakis) Global Markets Daily
How Big is the Sytemic Risk from a stop in Greek Payments?
Most logical outcomes argue that the current Greek adjustment program is nearing an early end.
Which would likely force international lenders to interrupt the stream of funding.
Whether the ECB keeps supporting Greek banks becomes crucial.
To a large extent it will depend on the stance of the next Greek government…
…which will also help confirm or discredit the widely held market view that Greece is a special case indeed.

This is a three week old piece, but I believe it makes a lot of sense if you’re searching for single names ideas.

MS (Carr) European Strategy
A Nifty Fifity + for Europe
In this short note, MS screedn for good companies in financial terms. They look for companies with strong pricing power, reliable growth track record, financially strong, attractive and sustainable dividend yields and exposure to the right markets (high EM exposure, low European exposure). The list:
BMW STAMM, PIRELLI & CO, LVMH, RICHEMONT, ADIDAS, WPP, REED ELSEVIER, EUTELSAT COMM., INDITEX, NEXT, NESTLE, AB INBEV, BRIT. AMER. TOB., SABMILLER, DIAGEO, UNILEVER, IMP. TOBAC GRP, SWEDISH MATCH, RD SHELL, BP, TOTAL, ENI, STATOIL, BG GROUP, REPSOL YPF, SAIPEM ORD, SUBSEA 7, STAND. CHART., OLD MUTUAL, FRESENIUS MC, WILLIAM DEMANT, NOVARTIS, ROCHE, NOVO NORDISK, ASTRAZENECA, BAYER, SCHNEID. ELEC., EADS, ATLAS COPCO, ROLLS-ROYCE, SANDVIK, BAE SYSTEMS, METSO CORP, SGS, AGGREKO, CAPITA, EDENRED, ASML HLDG, ARM, SAP STAMM, SAGE GROUP, ERICSSON, RIO TINTO, BHP BILLITON, ANGLO AMER., SYNGENTA, LINDE, DSM, VODAFONE, TELENOR, BT GROUP.

EUROPEAN EQUITIES

FINANCIALS
– Credit Agricole 1Q rev. EU5.425b vs est. EU5b ; 1Q net income EU252m vs est. EU482m; 1Q loan loss provisions EU1.77b ; Greek losses EU940m
– CNP Assurances 1Q sales EU7b vs est.EU7.63b;  1Q net profit EU275m vs est. EU257m
– Unipol 1Q net EU69.3m; working to achieve 2012 targets
– Axa 1Q sales EU28.06b

– Experian
Raised to Buy vs Hold at Jefferies
– Unicredit PT Cut 6% to EU4.15 at Exane; Kept at Outperform
 
 
 
INDUSTRIAL/MINERS/SERVICES
– Thales 1Q sales EU2.68b vs est. EU2.71b; confirms 2012 targets
– Vallourec 1Q sales EU1.20b vs est. EU1.19b; 1Q Ebitda EU152m vs est. EU163m; 1Q adj. net EU29m vs est. EU48.8m; says that it is cutting production in European mills; sees 2012 sales growth 5% vs previous forecast ~10%; sees FY Ebitda margin ~15%
– Corio 1Q net rental income EU101.2m; 1Q net EU40.1m; sees 2012 direct result in line with 2011

– Pirelli
Kept at Buy as 2012 guidance seems conservative, Citi says; PT unchanged at EU10.5
Buy Thales, good recovery in orders, SocGen says; PT EU33
– CGG Veritas PT Raised to EU29 vs EU26 at Morgan Stanley; Kept at Equalweight
– JCDecaux Upgraded to Buy vs Hold at Berenberg
– Vallourec PT Cut to EU70 vs EU76 at Morgan Stanley; Kept at Overweight; PT Cut to EU43 vs EU51 at JPMorgan; Kept at Neutral
– Vedanta Initiated at Overweight at Barclays; PT 1,660p
– ENRC Initiated at Underweight at Barclays; PT 535p

 
UTILITIES/OIL/HEALTHCARE/CHEMICALS
– EDF 1Q sales EU20.835b vs est. EU20.7b; 2012 production target and financial targets through 2015 are affirmed
– EDP 1Q sales EU4.41b vs est. EU4.26b; 1Q Ebit EU650m vs est. EU633.9b; 1Q net EU337m vs est. EU296m
– Enel 1Q sales EU21.2b; 1Q Ebitda EU4.3b vs est. EU4.2b; 1Q net EU1.18b vs est. EU1.15b
– EON’s pipelines have received bids from GDF Consortium for around €3 billion, reports Les Echos
– Fresenius is to offer 13.8 million shares at €72-€74 each

Buy Shell and Eni on good 1Q delivery, Goldman Sachs says
Sell Weir GROUP, another 14% downside risk, Citi says
– Enel well-hedged though uncertainties remain, Citi says; Buy rating, PT at EU3 unchanged
– Essilor Raised to Neutral vs Sell at Citi
– Repsol-YPF PT Cut to EU16 vs EU17 at Morgan Stanley; Kept at Equalweight; PT Raised 3% to EU19.5 at Exane; Kept at Outperform
– A2A PT Cut to EU0.43 vs EU0.63 at Citi; Kept at Sell
– EDF PT Cut 5% to EU20 at Exane; Kept at Neutral
– AstraZeneca Added to UBS’s UK 1st XI List

 
TMT
– Freenet 1Q  rev. EU744.2m vs est. EU767.3m; 1Q Ebitda EU85.1m vs est. EU80.8m
– Telefonica 1Q sales EU15.51b vs est. EU15.43b; 1Q net income EU748m vs est. EU1.62b ; reiterates FY targets
– Eutelsat cuts its FY rev. and Ebitda forecast; sees FY rev. ~EU1.22b vs previous >EU1.24b; sees FY Ebitda ~EU955m vs previous >EU955m
– Schibsted 1Q sales NK3.6b; 1Q Ebitda NK421m vs est. NK452m; 1Q net NK190m vs est. NK171m

– Ericsson
Raised to Buy vs Neutral at UBS
– Gemalto Initiated at Overweight at Morgan Stanley; PT EU68
 
 
RETAIL/CONSUMER/LUXURY
– Inditex PT Raised to EU80 vs EU75 at Morgan Stanley
– Swedish Match PT Raised to SKr235 vs SKr215 at Morgan Stanley; Kept at Underweight
– Coca-Cola Hellenic Raised to Neutral vs Sell at UBS
 
 
SMALL/MIDCAPS
– Atrium European Real 1Q net rental income EU45.3m; ‘ongoing issues’ in eurozone mean it must ‘continue to exercise caution’ over acquisition and development strategy
– Banca Profilo consolidated 1Q net EU2m
– Deutsche Wohnen 1Q profit EU14.4m; reiterates 2012 forecast
– Dia 1Q gross sales EU2.8b vs est. EU2.43b
– Drillisch 1Q rev. EU84.2m; 1Q Ebitda EU14.8m
– Fondiaria 1Q gross premiums EU2.65b; 1Q net EU60.5m ; solvency Ratio 91.6%
– Indra Sistemas 1Q sales EU714.3m; 1Q net income EU32m; reiterates 2012 objectives
– IVG 1Q Ebit EU50.3m; 1Q net loss EU4.8m; changes FY forecast, will ‘virtually’ break even in 2012
– Medigene 1Q rev. EU1.6m; 1Q net loss from cont ops EU2.3m
– NH Hoteles 1Q rev. EU284.5m vs est. EU302m; 1Q Ebitda 3.5m vs est. EU3m; 1Q net loss EU26.7m
– Sacyr Vallehermoso 1Q sales EU876m; 1Q net income EU28m
– Teleperformance 1Q rev. EU541.8m; organic growth ‘in line’ with 2012 business plan
– Vocento 1Q rev. EU155.9m; 1Q net loss EU3.36m

Buy Autogrill into any quarter-related weakness, Citi says; PT unchanged at EU10
– Beter Bed PT Cut to EU15.60 vs EU18 at ING; Kept at Hold
– Dockwise and Exmar Raised to Buy vs Hold at ING
– Fonciere des Regions Raised to Buy From Hold at SocGen
– Geox Cut to Underperform vs Neutral at Mediobanca; PT lowered to EU1.78 vs EU2.9
– Ingenico Initiated at Equalweight at Morgan Stanley; PT EU33
– John Wood Group Upgraded to Overweight vs Neutral at JPMorgan
– Petra Diamonds Raised to Buy vs Neutral at Goldman
– Telecity Group Raised to Buy vs Neutral at UBS
– Wereldhave Short-Term Buy Removed at UBS

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