Early premarket gappers
- Gapping up:
- MESO +98.5%, BNGO +22.6%, SECO +21.2%, LLY +19.1%, ORIC +11.1%, NIO +8.2%, BOOT +6.5%, PACB +6%, BLUE +5.6%, EXEL +5.2%, BIDU +4.7%, BIIB +4.5%, TLYS +3.9%, AZZ +3.6%, TAST +3.1%, RYI +2.9%, VXX +2.9%, KXIN +2.3%, NSTG +2.3%, GILD +2.3%, EBS +2.1%, AVTR +2%, ALNY +1.5%, DYN +1.4%, ATRA +1.4%, EXAS +1.4%, GTY +1.3%, PKI +1%
- Gapping down:
- TWTR -6.8%, BA -3.1%, SNN -3%, CATM -2.9%, SPNE -2.7%, LULU -2.6%, VFC -1.2%, IWM -1%, NTUS -0.9%, NVCR -0.8%, SPY -0.7%, DIA -0.7%, STAA -0.7%, QQQ -0.6%
Stock markets’ extreme valuation gaps divide veteran investors
Oaktree’s Howard Marks says valuation metrics unhelpful, after GMO’s Jeremy Grantham warns investors off tech stocks
Two high-profile investors have offered differing strategies to deal with the dizzying valuation gap between growth stocks and beaten-up sectors: trust in bargains, or set aside traditional valuations.
So-called value stocks in sectors such as finance and energy — badly hit in the coronavirus crisis — have accelerated their recovery in the past week, buoyed by the Democratic party’s gains in Senate run-offs last week that point to enhanced government support for the US economy. Meanwhile, growth stocks, particularly in US tech, continue to break records with only minor setbacks.
But in a memo to clients on Monday, veteran distressed debt specialist Howard Marks warned that while it was “easy to be seduced” by low valuations, “investing on the basis of rote formulas and readily available fundamental, quantitative metrics should not be particularly profitable”.
The Oaktree Capital founder’s comments come days after Jeremy Grantham, co-founder of GMO, warned of a “bubble that is beginning to look like a real humdinger” in stocks. For him, one solution is to avoid big tech as much as “your career and business risk will allow” and to focus instead on emerging markets and on value stocks.
The contrasting viewpoints reflect the difficulty fund managers face in reducing dependence on a small clutch of tech stocks and hedging against the risk of a market pullback while also resisting cheap stocks whose valuations fail to keep pace.
In his memo, Mr Marks said the apparent distinction between growth and value stocks is neither “essential, natural or helpful, especially in the complex world in which we find ourselves today”. Often, he said, “if something carries a low valuation, there’s probably a good reason”.
Unlike in previous decades, granular data on companies and markets are now easy to come by, making picking out overlooked bargains more of a challenge, he said. As such it “doesn’t make sense” for value investors to avoid highly-valued stocks or popular Big Tech names, he added.
Mr Grantham, meanwhile, wrote last week that he is “waiting for the last dance” in exuberant markets. “Make no mistake . . . this could very well be the most important event of your investing lives,” he said, pointing to examples of “crazy” investor behaviour.
“Value stocks have had their worst-ever relative decade [compared to growth] ending in 2019, followed by their worst ever year in 2020, with spreads between growth and value performance averaging between 20 and 30 percentage points,” he said. Emerging markets equities have similarly suffered their worst run compared with the US in about half a century.
“We believe it is in the overlap of these two ideas, value and emerging, that your relative bets should go,” he concluded.
>>> Up
* ADVA Optical Raised to Buy at Commerzbank; PT 11 euros (+)
* Andritz Raised to Buy at Erste Group; PT 46.30 euros (+)
* Chemring Group Raised to Buy at Peel Hunt; PT 350 pence
* Commerzbank Raised to Market Perform at KBW; PT 5.72 euros
* Gjensidige Raised to Buy at Pareto Securities; PT 215 kroner
* ITV Raised to Overweight at Morgan Stanley; PT 125 pence
* J. Martins Raised to Buy at JB Capital Markets; PT 16.90 euros (+)
* Lenzing Raised to Buy at Deutsche Bank; PT 94 euros
* Lundin Energy Raised to Overweight at Morgan Stanley
* Primary Health Raised to Buy at Peel Hunt
* Skanska Raised to Buy at Handelsbanken; PT 260 kronor
* Sonova Raised to Hold at Bank Vontobel; PT 245 Swiss francs (+)
* Spire Healthcare PT Raised to 180 pence at Liberum
* Unilever PT Cut to 3,600 pence at Morgan Stanley
>>> Down
* BASF Cut to Underweight at JPMorgan; PT 62.50 euros
* EDP Renovaveis Cut to Neutral at JPMorgan; PT 21.30 euros
* Elementis Cut to Neutral at JPMorgan; PT 130 pence
* Euronav Cut to Sell at Cleaves Securities; PT $7.50
* Fresenius Medical Cut to Underperform at Jefferies; PT 60 euros
* Lloyds Cut to Hold at Investec; PT 38 pence (+)
* MTU Aero Cut to Sell at Citi; PT 164 euros
* Naturgy Cut to Sell at Goldman; PT 19.50 euros
* Recipharm Cut to Hold at Jefferies; PT 220 kronor
* Snam Cut to Neutral at JPMorgan; PT 4.90 euros
* Straumann Cut to Hold at Stifel; PT 1,100 Swiss francs
* Stroeer Cut to Equal-Weight at Morgan Stanley; PT 75 euros
>>> Initiation
* Alstom Resumed Neutral at Citi
* Fashionette Rated New Buy at Hauck & Aufhaeuser; PT 44 euros (+)
* Hunter Group Cut to Sell at Cleaves Securities; PT 3 kroner
* TechnipFMC Reinstated Buy at Berenberg; PT $11.01
>>> Call
* Chemring Well-Placed and Outlook Positive, Peel Hunt Upgrades
* Europe Mid-Cap Oil 4Qs Could Show Further Impairments, Citi Says
* Morgan Stanley Raises European Energy Shares on Value Rotation
* EUROPEAN ENERGY SECTOR RAISED TO OVERWEIGHT AT MORGAN STANLEY
* Fresenius Medical Gets Only Sell Rating as Jefferies Downgrades
* MTU Aero a ‘Great Company,’ But Sell on Balance of Risk: Citi (+)
* Nordea, DNB Most Attractive Nordic Banks: Berenberg (+)
* Skanska May Benefit From Positive U.S. Sentiment: Handelsbanken (+)
* Vivendi, S4 Among Top Media Picks, ITV Raised at Morgan Stanley
* Volvo, SKF, Epiroc Among Machinery Stocks to ‘Trade Well’ :Citi
- EQT (6EQ TH) +1.7%
-
Siemens Energy (ENR TH) +1.7%
- Siemens Energy Hits Record High at 34.24 Euros
- Carnival Plc (POH1 TH) +1.7%
-
TechnipFMC (1T1 TH) +1.6%
- Europe Mid-Cap Oil 4Qs Could Show Further Impairments, Citi Says
- Vestas (VWS TH) +1.6%
- Iberdrola (IBE1 TH) +1.6%
- Taylor Wimpey (TWW TH) +1.5%
- Reckitt (3RB TH) +1.4%
-
Novo Nordisk (NOVC TH) +1.4%
- Zur Rose Joins Novo Nordisk to Offer Health Services for Obese
- Uniper (UN01 TH) -2.1%
- Veolia (VVD TH) -2.2%
- Thyssenkrupp (TKA TH) -2.2%
- Campari (58H TH) -2.3%
- Mowi (PND TH) -2.9%
-
MTU Aero (MTX TH) -2.9%
- MTU Aero a ‘Great Company,’ But Sell on Balance of Risk: Citi
- TUI (TUI1 TH) -3.1%
- Shares rose 23% on Friday; see story
- BHP Group PLC (BIL TH) -3.5%
- Telefonica (TNE5 TH) -3.6%
- NEL (D7G TH) -3.8%
- Stock gained 19% last week
DAX:
- Daimler (DAI TH) -1.2%
- Deutsche Bank (DBK TH) -1.7%
- BASF (BAS TH) -1.7%
- BASF Cut to Underweight at JPMorgan; PT 62.50 euros
- Fresenius Medical (FME TH) -1.9%
- Fresenius Medical Gets Only Sell Rating as Jefferies Downgrades
- MTU Aero (MTX TH) -2.9%
- MTU Aero a ‘Great Company,’ But Sell on Balance of Risk: Citi
MDAX:
- Siemens Energy (ENR TH) +2%
- Siemens Energy Hits Record High at 34.24 Euros
- Shop Apotheke (SAE TH) +1.7%
- Shop Apotheke Prelim FY Revenue EU968.2M
- Metro AG (B4B TH) +1.3%
- Hochtief (HOT TH) +1%
- United Internet (UTDI TH) +0.7%
- United Internet Access Event Set By Commerzbank for Jan. 11-13
- Nemetschek (NEM TH) -1.4%
- Nemetschek Seminar Scheduled By Commerzbank for Jan. 11-13
- Varta (VAR1 TH) -1.6%
- Varta Seminar Scheduled By Commerzbank for Jan. 11-13
- Commerzbank (CBK TH) -1.9%
- Commerzbank Seminar Scheduled By Commerzbank for Jan. 11-13
- Uniper (UN01 TH) -2.1%
- Uniper Non-Deal Roadshow Scheduled By Commerzbank for Jan. 11-13
- Hugo Boss (BOSS TH) -2.2%
- Hugo Boss Seminar Scheduled By Commerzbank for Jan. 11-13
SDAX:
- Westwing (WEW TH) +7.6%
- Hamburger Hafen (HHFA TH) +5.3%
- Corestate (CCAP TH) +5.2%
- SMA Solar (S92 TH) +3.6%
- Hornbach Holding (HBH TH) +3.5%
- Global Fashion Group (GFG TH) -1.6%
- Sixt (SIX2 TH) -1.7%
- LPKF (LPK TH) -1.7%
- Patrizia (PAT TH) -2.8%
- Zeal Network (TIMA TH) -8.2%
The dollar rose Monday and most Asian stocks slipped along with U.S. equity futures as traders weighed the implications of higher Treasury yields amid President-elect Joe Biden’s push for huge fiscal aid.
The dollar climbed a third day against major peers and Treasury futures were flat. Japan’s equity market is shut for a holiday and cash Treasuries won’t trade until the London open. China stocks underperformed, while South Korea pared an advance of as much as 3.6%. S&P 500 and European futures ticked lower.
U.S. stocks hit a record Friday after Biden said he’ll lay out proposals this week for trillions of dollars in fiscal support to counter the economic toll of surging virus cases. Oil pared some of last week’s jump and gold fell further.
Nikkei Closed Hang Seng +0.21% CSI -0.71% Shanghai -0.89% Shenzen -1.46%
Eur$ 1.2220 CNH 6.4857 CNY 6.4857 JPY 104.20 GBP 1.35 CHF 0.8887 RUB 74.5612 TRY 7.3845 WTI$ 51.66 --1.09%
S&P -0.65% Nasdaq -0.49% EuroStoxx -0.30% FTSE -0.18% Dax -0.32% SMI -0.24%
Macro :
- Europe Stocks Post Best Start to Year Since 2009 on Stimulus Bet
- What to Watch in Commodities: OPEC, Gold, Gundlach, Crops, China
- North Korea Greets Biden With Plans to Boost Nuclear Arsenal
- Two-Day Bitcoin Plunge Shakes Faith in Cryptocurrency Boom -- BTC 35,200
- Morgan Stanley Raises European Energy Shares on Value Rotation
Keep an eye on :
- AIR FP : Airbus Unit Gets Regulator Approval for Ticket-Price Platform
- AIR FP : Airbus Delivered 566 Aircraft in 2020 Including 446 A320
- ADX SM : Spain Textile Retailer Mayoral Buys 6% Stake in Audax: Expansion
- BSLN SW : Basilea Prelim FY Revenue About CHF128M
- BCART BB : Biocartis Meets ‘20 Installed Base, Cartridge Volume, Cash Goals
- BMW GY : BMW Beats Lexus, Mercedes-Benz for 2020 U.S. Luxury-Sales Crown
- BDRILL NO : Borr Drilling Adds $35.1M Over About 480 Days to Total Backlog
- CAI AV : Starwood’s BidCo to Begin Public Offer for Rest of CA Immo
- CCL US : Carnival’s Aida Extends Pause of Cruise Season Through February
- ACA FP : Credit Agricole, F2i Sign Deal on EF Solare Stake
- LOUD GY : DEAG Plans Delisting After Apeiron Investment Unit Offer
- DBK GY : Deutsche Bank Is Said to Agree to Pay $100 Million Over Bribery Violations
- DTE GY : Deutsche Telekom Preparing Sale of T-Mobile’s Dutch Unit: FD
- EZJ LN : EasyJet Announces $1.87B New Five-Year Term Loan Facility
- ELE SM : Endesa Mulls Buying Pitma’s Aldro: El Confidencial
- ENT LN : IAC Chairman Doubts MGM Resort’s Bid for Entain Will Succeed: FT
- ERICB SS : Samsung Escalates Ericsson 5G Royalty Fight With U.S. Trade Case
- ENX FP : Euronext Says Trading on Optiq Segment IDD Halted
- FCA IM : Fiat Idles Plants in Canada, Mexico to Cope with Chip Shortage
- FCA IM : S&P Welcomes Fiat Chrysler to the High Grade Club: Credit React
- FISV US : Fiserv ‘Considerably Undervalued’ Given Clover Unit, Cowen Says
- FTK GY : FlatexDEGIRO Sees Customer Base Growing to at Least 1.6M in 2021
- HEIJM NA : FrieslandCampina Appoints Hans Janssen Finance Chief From May 1
- INTC US : Samsung Surges After Intel Is Said to Consider Chip Outsourcing
- INP FP : Interparfums Sa: Interparfums signs a purchase option for the acquisition of its future headquarters
- MCRO LN : Micro Focus CFO Brian McArthur-Muscroft Intends to Leave
- NIO US : China EV Maker Nio to Unveil New Sedan as Valuation Eclipses GM
- NOKIA FH : Nokia Gets Tele2 Order for 5G Core Deployment in Sweden, Baltics
- OVS IM : OVS Says Assignment of Stefanel Assets Confirmed
- RNO FP : Renault to Revive Bestselling Cars With Electric Makeover: Rtrs
- REP SM : Repsol, Critera Sell Stakes in E-Motorbike Maker: Economista
- RDSA LN : Shell Restarts Prelude FLNG Production After 11-Month Shutdown
- RMG LN : Royal Mail to Name Simon Thompson as CEO: Sky News
- SAE GY : Shop Apotheke Prelim FY Revenue EU968.2M
- SUN SW : Sulzer to Buy Nordic Water For CHF128M
- TMV GY : TeamViewer Prelim FY Adjusted Ebitda Margin About 56%
- TGS NO : TGS 4Q Net Revenue $118M
>>> Up
* Chemring Group Raised to Buy at Peel Hunt; PT 350 pence
* Commerzbank Raised to Market Perform at KBW; PT 5.72 euros
* Gjensidige Raised to Buy at Pareto Securities; PT 215 kroner
* ITV Raised to Overweight at Morgan Stanley; PT 125 pence
* Lenzing Raised to Buy at Deutsche Bank; PT 94 euros
* Lundin Energy Raised to Overweight at Morgan Stanley
* Primary Health Raised to Buy at Peel Hunt
* Skanska Raised to Buy at Handelsbanken; PT 260 kronor
* Spire Healthcare PT Raised to 180 pence at Liberum
* Unilever PT Cut to 3,600 pence at Morgan Stanley
>>> Down
* BASF Cut to Underweight at JPMorgan; PT 62.50 euros
* EDP Renovaveis Cut to Neutral at JPMorgan; PT 21.30 euros
* Elementis Cut to Neutral at JPMorgan; PT 130 pence
* Euronav Cut to Sell at Cleaves Securities; PT $7.50
* Fresenius Medical Cut to Underperform at Jefferies; PT 60 euros
* MTU Aero Cut to Sell at Citi; PT 164 euros
* Naturgy Cut to Sell at Goldman; PT 19.50 euros
* Recipharm Cut to Hold at Jefferies; PT 220 kronor
* Snam Cut to Neutral at JPMorgan; PT 4.90 euros
* Straumann Cut to Hold at Stifel; PT 1,100 Swiss francs
* Stroeer Cut to Equal-Weight at Morgan Stanley; PT 75 euros
>>> Initiation
* Alstom Resumed Neutral at Citi
* Hunter Group Cut to Sell at Cleaves Securities; PT 3 kroner
* TechnipFMC Reinstated Buy at Berenberg; PT $11.01
>>> Call
* Chemring Well-Placed and Outlook Positive, Peel Hunt Upgrades
* Europe Mid-Cap Oil 4Qs Could Show Further Impairments, Citi Says
* Morgan Stanley Raises European Energy Shares on Value Rotation
* EUROPEAN ENERGY SECTOR RAISED TO OVERWEIGHT AT MORGAN STANLEY
* Fresenius Medical Gets Only Sell Rating as Jefferies Downgrades
* Vivendi, S4 Among Top Media Picks, ITV Raised at Morgan Stanley
* Volvo, SKF, Epiroc Among Machinery Stocks to ‘Trade Well’ :Citi