Europe

Creative Portfolios

Financials

NLB is evolving into a south-eastern European powerhouse, commanding a market share in excess of 10% in five of the six main countries where it is active (all markets with high entry barriers). A FV of 7%, a PBV of 0.59, an Earnings Yield of 28.6%, a Dividend Yield of 8.9%, and a Total Return Ratio of 4.4x should catch the eye for a value investor. NLB also boasts an impressive PH Score™ of 9 out of 10 (captures fundamental momentum, valuation, and technical indicators).

Insight Investment Research

Industrials

Visible, strong and non-volatile recurring FCF growth - Insight expect outperformance of the company’s Business Plan driven by 5G and the need for network densification to accommodate ever increasing mobile data. Forecasts EBITDaL of €800m in 2026E and Recurring FCF of €727m (vs. €373m 2021E) with the dividend yield increasing from 3.5% 2021E to 8.3% 2026E. Long-term forecasts are also included, modelling BTS programme, organic POP growth and lease cost reductions. Focus is on FCF with detailed DCF/COC/IRR-Ke analysis. TP of €20.3 (+123% upside) is 65% above consensus.

the IDEA!

Industrials

Excellent start to the year but with PNL facing more challenging comps what should investors expect when the Covid tailwind dies down? the IDEA argue that the anticipated downturn in 2H21 results masks what is really happening on an underlying basis. In addition to the strong performance in Parcels, they explain why even a mature business such as Mail has its attractions. Management's FY guidance still looks conservative and the shares are cheap (EV/EBITDA multiple of 5.7x). Shareholders can also enjoy an estimated dividend yield of c.8%.

Industrials

Ongoing margin recovery bodes well for earnings upgrades heading into H2 - plenty of potential in the Pumps division’s oil and gas business as the year progresses; while the Chemtech business should also improve markedly as global regions such as Europe and the Middle East that have been subdued due to the pandemic continue to grow. Other bull points include SUN's continued diversification into less cyclical areas and its proposed IPO of APS which should help to unlock significant shareholder value. 12-month TP CHF 140.00.

TT Equity Research

Technology

Stock craters as the company’s auditor refuses to sign off on accounts - Teun Teeuwisse who specialises in finding high conviction European short ideas can add S30 to his growing list of successful calls which also features Steinhoff and Aryzta. Teun’s research on S30 had previously flagged several accounting concerns including how inflated cash flows and understated debt suggested serious liquidity issues. Following this week's news, the shares now appear to be worthless.

Willis Welby

While analysts have been busy upgrading company estimates over the past several months, Willis Welby notes that c.30% of their coverage (of 180+ stocks) still have lower consensus 2022 numbers vs. those reported in 2018. They see the most potential for earnings upgrades in Consumer Services (incl. Rank, Go Ahead, N Brown, James Fisher, Pendragon) and perhaps surprisingly, Technology, where 8 out of 20 names still have consensus 2022 EBIT numbers that are below 2018 levels (incl. Vitec, Iomart, Quartix).

North America

Unit Economics

Since inception (31st Dec 2020) Nathan Weiss’ model portfolio has generated an impressive +25.09% total return (vs. +11.12% for S&P 500). He is currently 38.3% net long the energy sector (incl. Kayne Anderson Energy Infrastructure, ChampionX, Energy Transfer LP); 17.1% net long ‘re-opening’ names (incl. Dave & Buster’s, Six Flags) and 29.6% short ‘stay at home enablers’ (incl. Stitch Fix, ARK Next Generation Internet, Etsy, Wayfair). He recently increased his short position in DoorDash - sees >50% downside in a matter of months.

MYST Advisors

Despite the recent carnage in the sector, judging by the turnout at MYST’s latest Forum, interest in SPACs has not waned at all. While there was some lively bull vs. bear debates (PureCycle Technologies, Jaws Acquisition Corp, Dragoneer Growth Opportunities Corp), MYST felt the most compelling ideas included Gores Metropoulos II - less expensive and more vertically-integrated Airbnb with experienced sponsor. Mudrick Capital Acquisition Corporation II - leader in the "red hot" collectibles market; new licensing deals and NFT optionality to accelerate growth/GMV.

Huber Research Partners

Communications

As the rumour mill goes into overdrive that NYT is looking to acquire The Athletic, Huber Research provide their take addressing 4 key questions: 1) Does the NYT care about sports and should it? 2) Would adding The Athletic bolster NYT’s expanding, digital platform, which has likely now surpassed 7m paying subs? 3) What is the best structure to manage The Athletics’ potential onboarding? 4) Does a price of c.$500m make any sense? - The acquisition makes strategic sense and should be very beneficial for shareholders. TP $56 (30% upside).

Hedgeye

Consumer Discretionary

The Bunny is Back! Brian McGough is making a very bullish call for this to be a $250 stock in five years (>5x upside from current levels) and he has the model to back it up. This is a once in a generation name where you need to understand what a top-notch management team can do to unlock the power of one of the most recognised brands in the world, extract dollars from a globally undervalued and mismanaged licensing organisation and expand into categories that synch with the counterculture foundation of the brand.

Silk Road Research

Consumer Discretionary

TSLA China analysis: SRR’s latest checks suggest recent controversies are taking a toll with NIO, XPeng and Volkswagen the main beneficiaries. Feedback from dealers was consistent - there has been a clear increase in cancellations and a decline in foot traffic. Prospective buyers are adopting a ‘wait and see’ approach which increases the risk for a downside surprise in registrations over the coming months. Combined with a significant narrowing of lead times for the Model 3 (1-3 weeks from 2-7) and Model Y (1-3 weeks from 3-9) leaves SRR very bearish on near-term prospects.

Gordon Haskett Research Advisors

Consumer Discretionary

A must own name. Expectations were high heading into WSM’s Q121 print - it smashed these expectations, delivering total comp growth of 40.4% with EBIT margin of 15.9% (+950bps). Importantly, results included a much needed 'X-Factor' as management raised FY guidance (which incl. YoY revenue growth in each Qtr.) and LT guidance. There is more than enough evidence that spending on the home area will remain elevated well into 2022, which when coupled with Sonoma's less promotional model and occupancy cost reduction efforts should translate into material earnings upside in the coming quarters.

Energy

Growing momentum in decarbonisation - stock pullback provides an enticing entry point. Improving supply chain dynamics and growing residential storage contributions (potentially +$500m in incremental revenue through 2022) will drive growth for ENPH with potential upside from grid services and portable power. Following similar selloffs, Webber Research also recently upgraded both SolarEdge and TPI Composites to Buy.

Alembic Global Advisors

Materials

Alembic’s analysis suggests that the consensus is either baking in no recovery in 2022 from already deflated H2’21 estimates or not fully factoring in the earnings accretion from the PMMA acquisition - or both! Believes the PMMA deal could be as much as 13% accretive to 2022 EPS; while TSE’s main segments continue to rebound at a healthy clip and product spreads remain favourable. The shares are also currently trading at an attractive FCF yield in the high-teens. Raises TP to $90 (40% upside).

Obex Capital Research

Technology

Besides Cathie Wood is anyone else buying what PLTR’s management are selling?! Aaron Gabin certainly isn't. When commenting on the company's recent earnings call, he described it as a “masterclass in obfuscation". COO Shyam Shankar strings together impressive sounding technology phrases like no other executive ever! PLTR continues its run of (unexplainable) exploding profitability. It also continues its unmatched run of making preposterous claims about its business. The fact that five C-Suite executives have sold $250m in stock since mid Feb only increases Aaron's conviction in his short thesis.

New Constructs

Technology

New Constructs see little room for this recent IPO to generate any profits, let alone come close to achieving the future profits implied by its current valuation. Points to the highly competitive landscape where SQSP's offerings are far from unique and have been commoditised by upstarts and incumbents alike. They also highlight weak margins and pricing power, in addition to flagging several ‘misleading’ financials. Stock is worth at best $4.2bn (vs. a current Mkt/Cap of $7.4bn).

Blueshift Research

Technology

Blueshift primary research finds the effectiveness of cloud-based applications is swiftly diminishing the need to retain in-house IT staff, leaving a dwindling pool of experienced workers clinging to familiar last-generation technologies, instead of staying current on newer IT capabilities. Hence, enterprise technology sales are likely to miss a hoped for rebound in H2 to the direct benefit of the public cloud operators. Positive: Amazon, Datadog, Microsoft. Negative: Cisco, IBM, Snowflake.

Emerging Markets

New Street Research

Communications

Once again Bharti has outperformed Jio operationally, which begs the question why is Jio valued at almost 2x Bharti’s Indian mobile business? The reported Indian Mobile EBITDA gap between the two operators is down to 28% (having been over 100%) and New Street explain why they expect the gap to narrow further. In recent years, EM & Global telco investors have lacked a multi-year high growth liquid investment opportunity. Bharti is that opportunity. TP INR 1,000 (90% upside).

Niko Partners

Communications

Pursuit of global gaming domination; acquisition strategy to continue - Tencent has already closed 50+ video game related deals YTD (vs. 31 in the whole of 2020 and over 5x more than in 2019). Niko Partners discuss how the company's investment strategy has evolved over the last few years and the reasons behind its more aggressive approach in 2021. Topics covered include international expansion (esp. Europe); targeting of high growth areas such as fans of anime content and female gamers; as well as the challenge posed by the likes of Alibaba and Bytedance.

Galliano's Financials Research

Financials

StoneCo to invest up to BRL2.5bn in Banco Inter - while the deal has initially been well received by the market, it does not change Victor Galliano’s view that both Banco Inter and StoneCo face major challenges in justifying their premium valuations (Banco Inter trades at a 45% premium to its core competitor Nubank) especially at a time when competition across the board in digital financial services in Brazil is only intensifying.

Copley Fund Research

Materials

While the turnaround started last year, allocations to the steel sector still remain well below even the levels seen in late 2018. Only 55% of the funds in Copley’s analysis currently hold exposure to the sector. That is 10% lower than in Dec 2018 and some 40% lower than early 2008. Vale, Kumba Iron Ore and Posco are currently fund managers' preferred stocks, but all 3 remain a long way off previous peaks in ownership, so if this is a cycle similar to the one that lasted between early 2016 and late 2018, EM fund ownership has a lot further to go.

Developed Markets

Suttle Economics

After a 2.5yr deceleration phase, UK inflation has begun to rise again. Rates hit a low in August 2020 of 0.2%oya; since then, inflation has moved unevenly. Phil Suttle says we will see 12-month headline and core inflation rise to a new peak of 2.5% in H2/2021, falling back to 2.25%oya by 2022, implying broad stability in inflation throughout next year. This will push the BoE behind both the Fed and BoC in the ordering of first-rate hikes in 2022.

High Frequency Economics

Market participants are concerned about inflation. Yet without exception, central bankers (CBs) are all waiting for unemployment to be reduced before tightening monetary conditions, and CBs are also saying that inflation is not a near-term worry. Carl Weinberg agrees: returning to full employment is the key to price and fiscal stability! His bet is on the CBs; the short end of the yield curve will remain anchored, and the recent steepening will reverse. Indeed, the flattening of the trajectory of bond yields after the sell-off this year may be the start of a market correction.

Andrew Hunt Economics

Andrew Hunt suspects we have passed peak liquidity for this cycle. Even with a potential Fed tapering, the banking system’s dire need to reduce its risk assets will drive further contractions in credit trends within the real and financial sectors. Any weakness in bond prices and the subsequent contraction in the collateral base could result in a more severe tightening in conditions. To keep the liquidity boom rolling, the Fed can only choose to expand its reach over the financial system, at the expense of commercial banks.

4X Global Research

The much larger-than-expected CPI data hasn’t had too much of an impact. Sure, we saw large S&P500 sell-offs and a large USD NEER rally, but they’ve been largely reversed. The USD NEER is back to striking distance of a 3-year low. Olivier Desbarres explains that markets are yet to be convinced that the Fed will signal, let alone deliver, a tightening of monetary policy soon. Markets have the appetite to be long US equities and short USD.

Blonde Money

Helen Thomas has mapped every Senator according to two rankings: their economic ideology and their electoral safety. She uses multiple independent criteria to determine their scores, including majority, incumbency, voting record and policy stance. In doing so, Helen has identified eight crucial Senators that can tip the scales of politics in the US.

Hokenson Demographics

Although generous unemployment benefits are hurting US businesses’ ability to attract workers, Richard Hokenson suggests there are many other factors at play. Over in France, workers on furlough are not returning to their jobs despite continuing to be employed by them; instead, the time off work has allowed workers to re-evaluate their futures. Is the same thing happening in America?

Renaissance Macro Research

In positioning e-USD in a line of Fed initiatives, Chair Powell is highlighting the technology in the face of growing risks of the monetary sovereignty of privately issued stable coins and China’s developments with e-RMB. Whilst e-RMB cannot challenge USD as a reserve currency by any credible means, China’s framework is part of Beijing’s drive for leadership in high-tech innovation as part of the China Standards Plan for 2035, incorporating blockchain, 5G, AI and IoT.

Longview Economics

Harry Colvin explains that the tech sector is significantly oversold relative to financials. With the Q1 move higher in 10yr bond yields, both LONG cyclicals and SHORT tech trades are now crowded. In addition, we are seeing multi-year bearish levels for bonds and a slowdown in cyclical parts of the US economy. The factors at play lead to Harry’s recommendation to move LONG S&P500 tech relative to financials, with half a position at current prices and the other half at a ratio of 3.58. Place stop at a ratio of 3.30 and risk 100bps on this trade.

Michael Taylor’s updated models which take into account recently published Japan Q1 GDP data show we’re going to see downward pressure on TOPIX valuations throughout 2021, starting now. The sustained overvaluation of TOPIX has stemmed from the BOJ’s ETF buying, and will fluctuate with changes in the yearly buying programme. Take up a bearish TOPIX outlook.

Emerging Markets

Totem Macro

The size of monetary and fiscal support in the last year is unparalleled. The populist nature of fiscal transfers everywhere and the government taking the reins of credit creation are the sort of features that typified the 1980’s failed EM policy regimes. Yet the market is only beginning to price in the inevitable outcomes. Recent inflation behaviour is exactly as Whitney Baker described last August: fiscally-primed demand funded by an explosion of money and credit hitting constrained supply, all being reinforced by a falling dollar. The story’s heroes are the rotation-beneficiaries, EM high-yielders and anything not denominated in dollars.

Looking at other times when Chinese economic data was similarly weak, John Karle comments they often anticipated declines in economically sensitive commodities such as crude, copper and lumber. Lower yields have also accompanied the weak data, furthering John’s findings of potential future commodity weaknesses. Lower global growth expectations should be expected going forward.

PRC Macro

Weakness is clear in the economy. Where it comes to effective policy stance from the PBoC, William Hess observes the combination of loose money and neutral credit. For fiscal policy, the effective stance is tantamount to austerity. William sees room for additional drops to onshore futures, but with loose monetary policy we will see the liquidity in the system find its way back into commodities. But importantly, it won’t flow in volume into risk assets and will stay in short-term maturities in the interbank market and rate bonds.

Emvest

Guillaume Coutant is expecting a bearish steepening of the swap curve 2/5y. In the forex market, he expects the Rupee to depreciate vs. both USD and EUR. We will also be seeing underperformance of MSCI India vs. MSCI EM, and a widening of the 5y CDS.

Greenmantle

Niall Ferguson believes a new nuclear deal will be announced in a matter of weeks, being reimplemented towards the end of Q3, allowing oil to once again flow freely. This represents a clear downside risk for oil in the short-term. Nevertheless, Niall expects strong demand recovery in H2/2021 to absorb the increased Iranian supply, cushioning any deal-related selloff.

Intelligence Research

The head of Mexico’s navy ministry recently complained that the judiciary often stymies the Mexican security forces’ efforts to combat criminality. It has heightened concerns about the respect for the separation of law by President Lopez’s government, and will bring the country’s attempts at judicial reform under greater international scrutiny to prevent it from undermining the democratic separation of powers.

ESG

Curation Corp

In order to avoid dangerous levels of climate change by achieving net-zero emissions by 2050, the International Energy Agency (IEA) says that investors should halt all investment in fossil fuels – 90% of electricity generated in 2050 needs to originate from renewable resources. This is a mind-bogglingly huge shift that requires a complete transformation of the global energy system. It’s clear, the world is in trouble and investors need to act before it’s too late.

New Normal Consulting

Paul Hodges explains that sustainability is well on the way to becoming a key driver for the economy, with renewables growth close to exponential. We will see a move to a circular economy as recycling will need to be the main source of plastic by 2050. We will start to see winners & losers emerging as companies start to be judged on the potential success of their Net Zero strategies. In Europe, Germany’s election will reinforce Green policies and boost the €1.8trn NextGenerationEU programme.

Commodities

Renaissance Macro Research

Bitcoin: Head and shoulders above the rest Bitcoin has recently cracked and completed an important head and shoulders top and is now oversold. Jeff deGraaf expects a rally to $50,000 at which point investors should turn to selling into the distribution.

Ironsides Macroeconomics

While there is evidence that the recent 44% crypto drop stemmed from actions from Beijing and validated rumours that the US Treasury is seeking to increase reporting of crypto transactions, Barry Knapp, argues that expectations of smaller deficit spending from the Biden Administration and the growing risk of the Fed being behind the inflation curve were the necessary conditions for the crypto crash. If deficit financed spending expectations turn higher again, expect speculative assets like Bitcoin to heat back up along with a resumption of the 1Q21 rates rally.

Commodity Intelligence

The deployment of floating solar panels is soaring in popularity, with experts hailing it as the “third pillar” of solar power after rooftop and ground deployment. 35 countries now boast 350 floating solar panel facilities and the sheer volume of power lines required to accommodate new installations will ensure copper must stay flowing if Net Zero 2050 is to be reached.