Is it finally time to buy Cyclicals?

AIR Capital

At a time when economists are slashing year-end targets for major equity indices, star asset managers are forecasting the dollar’s demise, the collapse of the US economy and gold prices surging further, the real story has already begun and it’s the exact opposite. Recent sector rotation suggests markets are anticipating a brief global GDP contraction, followed by a rapid and robust rebound. Q1 results in Europe are strong. Companies are quickly adjusting supply chains to outmanoeuvre Trump’s tariffs. By early Jun, the tariff story will be old news and business will be almost back to normal. Stop overthinking and trust corporate agility. The real opportunity is in quality cyclicals - cash-rich, order-heavy, sector-dominating companies with rock-solid fundamentals. AIR’s top picks include Airbus, ASM International, Renault, Rexel, Schneider and Vestas Wind.

- 02 May, 2025

Stocks flagging as "high risk" for DSI and Inventory Breakdown

Forensic Alpha

Most companies provide a detailed breakdown of overall inventory in the notes to the accounts, showing how it splits into "Finished Goods", "Work in Progress" and "Raw Materials". Forensic Alpha’s systems can now extract this data and analyse changes over time to alert investors of any concerning patterns. European stocks flagging as "high risk" for both DSI and Inventory Breakdown include GN Store Nord, Pandora, SCA and Vestas Wind Systems.

- 08 December, 2023

Vestas (VWS DC) Denmark

Energy

Forensic Alpha

This wind turbine manufacturer has previously been on Forensic Alpha’s radar due to a litany of flags, including rising contract assets, use of supply chain financing and weak cash flow. The publication of H1 financial statements only adds to their concerns. At best it appears Vestas is a business that requires much more working capital investment than it did in the past, resulting in the poor cash generation investors have become used to. At worst the company may be booking revenue to accrual accounts (some of it through JVs and associates) that may never materialise as cash.

- 16 September, 2022

Screening UK & Europe: Combining quality, momentum and expectations indicators

Willis Welby

Methodology - the initial universes are stocks with $2bn+ M/Cap in the UK and $5.5bn+ across Europe. After that Willis Welby starts with a quality cut off based on their measure of Intrinsic Return on Capital Employed. They then narrow down using a combination of share price momentum and EBIT revisions before incorporating their expectations analysis via their measure of the implied to Y3 EBITM ratio. This month sees 6 stocks enter the UK screen (including Rio Tinto, Flutter, Renishaw) and 17 names added to the European version (including Nestle, Hapag-Lloyd, Roche, Vestas, Aker).

- 22 July, 2022

FTSEurofirst 80 Index: Bullish & Bearish Themes

Technical Analysis

Messels

Recycling and Renewable Energy stocks such as Umicore, Vestas Wind and Siemens Gamesa are rallying from medium term support. Selective Seafood and Tobacco stocks remain defensive including SalMar, Mowi and Scandinavian Tobacco. Banks are generally rallying in ranges; favours CaixaBank and Sabadell which have already broken out and extend relative bases.

Industrials have broken uptrends and are now losing relative momentum such as Schneider, Atlas Copco and Alfa Laval. Luxury Goods renew their 4-month price and relative tops including Pandora, LVMH, Dior and Hermes. IT Hardware and Semiconductors renew their 5-month price and relative tops; SeSa, BE Semiconductor, Infineon and Nordic Semiconductor are highlighted.

- 27 May, 2022

Vestas Wind Systems (VWS DC) Denmark

Energy

Forensic Alpha

Blowing through cash - while VWS has delivered impressive top line growth over the past two years, declining cash conversion has received far less attention. The extent of the problem has been masked by the significant increase in the use of supply chain finance since 2019. Management points the finger at elevated capex, though Forensic Alpha’s analysis shows that capex is not out of line with peers. Additionally, the rapid growth in contract assets for the services business may raise questions around the quality of earnings which the market is rating so highly.

- 21 January, 2022