The Dawn Patrol – 30.11.12 – GS on top themes for 2013 and on LVMH. Guess who’s back?


Markets slightly down at the opening today. No clear progress on the Fiscal Cliff. Asia up with the Nikkei reaching a seven month high thanks to better IP.
Gold: 1,728.94, EUR 1.2998.

Today, we’ll monitor the HICP Flash, the German retail sales end the EU unemployment rate. In the US, the Chicago Purchasing Manager Index.

Get ready, the snow is here. At least in Val d’Isère, the resort will open tomorrow as planned. I love it when a plan comes together!

Val d’Isère
The snow is here! But this is not the answer…

Conditions d’enneigement

Haut des pistes (2500 m) 40 cm
Bas des pistes (1850 m) 25 cm
Dernière chute de neige 28/11/2012
Risque d’avalanche 0/5

submit remedies concessions to EU regulatory (sales of some business + franting access to air network to competitors)
MORGAN STANLEY’S chief executive wants to use the bank’s excess capital to boost returns for the company’s “long suffering” shareholders. FT

PORSCHE seeks to overturn hedge fund suit ruling in New York. BBG

PORTUGAL TELECOM 3Q net falls 29% Y/y to Eur 63.7

Global demand for aluminum to double between now and 2025, Jacynthe Cote, CEO, RIO TINTO ALCAN, said in a conference in Chongqing.

BRITISH BANKS will have to raise £20bn-£50bn of new capital or dramatically restructure their businesses, the Bank of England said yesterday. The BoE’s new Financial Policy Committee said banks must report capital ratios which reflect a “proper valuation” of their assets and a “realistic assessment of the cost of recent scandals, such as the manipulation of Libor and mis-selling of insurance products. It also said banks should more transparent about their buffers, and that the FSA should encourage a more realistic valuation of their assets, future costs and risks.

METRO is near an agreement to sell its Real grocery stores in eastern Europe to Groupe Auchan of France for about Eur 1bn. BBG

Exane Placing 1.5% Stake in Gecina at EU81.75-EU85 ; Gecina Book Covered at EU83


On Europe :
The Bundestag votes on the Greek rescue package today. The vote is expected to pass, but Merkel may be heading for a bigger rebellion than in a Bundestag vote in July on a rescue package for Spanish banks, which saw 22 members of her centre-right coalition voting against the measure.

On the Fiscal Cliff
Fiscal cliff talks turn sour: US talks to avert the fiscal cliff turned sour after Republicans in Congress rejected what they dubbed a“completely unbalanced and unreasonable” offer from the White House in a round of meetings on Capitol Hill. One Republican aide in the House of Representatives said Tim Geithner presented a plan over the decade for $1.6tn in tax increases, $400bn in spending cuts, at least $50bn in new stimulus and a “permanent” lift in the US borrowing limit. The bid by the White House closely tracks its 2013 budget proposal, meaning Barack Obama has so far been unwilling to make any major concessions. Republicans believe the tax increases are too high and the spending reductions are too few.

Other Stuff
– Japan’s industrial production posted a surprise gain in October, with a 1.8% month-on-month increase compared to expectations of a 2.2% fall. Growth wasconcentrated in the electronics sector, which grew a record 14.7%, but transportation equipment also rose 1.1% on US demand. Year-on-year output was 4.3% lower.

– India GDPQ3 +5.3% match est, farm output +1.2%; mining +1.9%; manufacturing +0.8%; construction +6.7%; financing, insurance +9.4%

To read
– Spiegel says Merkel need not fear the opposition ahead of next year’s election
– The FT says there is a glimmer of hope for peripheral Europe
– The FT says European indecision fuels insidious problems
– Reuters on Japanese monetary policy


LVMH (GS, Hutchings) Buy: Leading the way in luxury; upgrade to Buy
We upgrade LVMH to Buy following its underperformance, which we believe offers a compelling opportunity. Despite being a conglomerate, its positioning is strong in our GS SUSTAIN analysis with its category leading brands and organic margin potential.

Utilities(MS, Scaglia) An uncertain start to 2013. Be selective
We continue to like self-help stories (RWE) and visible regulatory exposure (NG, TRN) or stocks at a deep discount to history (SEV). We would avoid stocks with structural concerns (SSE, REE) or for which the earnings downside cycle is far from complete (E.ON, FUM, GSZ).
Related Research:
National Grid plc: Attractive total return package – Stay Overweight
E.ON: Earnings power revised, stay cautious

Aggreko Rated New Hold At Berenberg, PT 2,010p
Babcock Rated New Buy At Berenberg, PT 1,180p
Bunzl Rated New Sell At Berenberg, PT 890p
Capita Rated New Buy At Berenberg, PT 870p
Hugo Boss Cut Cut Neutral VS Buy at Goldman
Intertek PT Raised to 3,340p From 2,710p at Berenberg
Intertek Raised To Buy From Hold at Berenberg
LVMH Raised to Buy VS Neutral at Goldman
Pennon Raised To Neutral VS Sell at Citi
Rio $5b Cost Savings Difficult to Quantify, JPMorgan Says
Serco Rated New Hold At Berenberg, PT 600p
Sulzer Raised to Accumulate from Neutral at Helvea
Taylor Wimpey Raised To Buy VS Neutral at UBS
TDC Raised to Buy From Neutral at Nomura
TeliaSonera Cut to Neutral From Buy at Nomura
TeliaSonera PT Cut 3% to Sek53 at Exane; Kept at Outperform
Tod’s Cut To Neutral VS Buy Buy at Goldman


GS (Kostin) US Outlook 2013
Look past near-term political risk to improving growth prospects

US economy will gain strength as 2013 progresses
Corporate fundamentals support continued profit cycle expansion
Valuation: 12-month target of 1575 reflects 12% potential return
Strategies to capture growth: market, sectors, stocks :
(1) Stocks will outperform Treasuries; (2) Equities will beat credit returns, although not on a risk-adjusted basis; (3) Cyclical sectors will beat defensive sectors (Materials, Industrials, Information Technology will outperform Consumer Staples, Telecom, and Health Care); (4) Double Sharpe Ratio stocks offer both high risk-adjusted earnings growth and prospective returns ; and (5) Stocks with high BRICs sales exposure will beat domestic-facing firms


The announcement that US fast food chain Burger King is set to make a return to France after a 15-year hiatus has caused huge excitement, even if only two franchises are planned for 2013.

Max Kamir

Louis Capital Markets UK,LLP
Authorised and regulated by the FSA and Banque de France
39-41 rue Cambon
75001 Paris

T +33 (0)1 53 45 10 74
E mkamir


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