(MS) PSA - GM Europe - Will you be my valentine ?

Peugeot - GM Europe - will you be my valentine?

Automotive News this am has reports of Peugeot talks with GM to "deepen existing relationship". Very tough to make
informed analysis given we don't know what "deepening relationship" means - but historical brand and earnings performance suggests a tough combination. Remain UW.

Peugeot needs to get bigger - Automotive News this am has reports of talks with
GM to "deepen existing relationship". Shares up 5%. Very tough to make informed
analysis given we don't know what "deepening relationship" means. Previous
attempts at European combination with GM have failed - FCA first then Peugeot
previously. Peugeot still has purchasing and joint platform development with
GM - and this makes sense and reduces costs for both. Both companies now face
huge investments in future mobility / EV - both from a very low volume base. In
our view, Peugeot needs to get bigger to compete with Renault/Nissan and VW -
and maybe this is the first attempt. PSA group announced today that: 'it is
exploring numerous strategic initiatives aiming at improving its profitability and
operational efficiency, including a potential acquisition of Opel / Vauxhall'. GM
has not commented.

We highlight the following considerations should a potential deal materialise:
We do not think any full merger would be easy. Obstacles to any potential
merger might be - 1 - GM Europe has lost money for many years despite huge
restructuring attempts for German workforce; 2) Opel brand is almost as lowly
ranked as Peugeot and Citroen brands, which normally populate the lower ranks
of JD Power consumer rankings - Opel has gone from 10%+ European market
share to 7% in last 6-7 years; 3) Opel is heavily overexposed to UK and German
markets - the two markets in Europe that are most extended relative to trend -
and most likely to start rolling over in FY17 in cyclical terms (PLUS more GBP
exposure); and 4) building large scale production volumes in Europe to amortise
rising investment costs is like fighting the last war - VW and Renault /Nissan
alliance did this 10 years ago. The real war will come when the winners start
launching successful next generation cars and we believe PSA has considerable
ground to make to close the gap with peers. Who knows what the deal could be
- but a full European merger does not look to be an obvious winner in terms of
market share or historical profitability. general motors

Conclusion: there may be logic to a deal, but would it improve earnings from
current levels?: A potential Peugeot combination with Opel in Europe, if confirmed, could be advantageous in terms of long-term competitiveness and
economies of scale. However, we see little or no potential for earnings upside -
again depending on the terms of any potential deal . In fact, we believe any deal
highlights the need for Peugeot to invest for the future, and to amortise that
over a larger base. Even with a deal, we continue to believe that Peugeot's
earnings expectations have already peaked. Auto OEM share prices simply do not
re-rate in a period of flat earnings, when margins may have peaked. Once again -
investors should buy OEMs on bad news, not good news. The re-rating since
December seems to only reflect a new optimistic global growth outlook. We do
not think this will last. We stay Underweight, PT €12.

>>> Omega Advisors (Leon Cooperman) discloses updated portfolio positions in 13F

Omega Advisors (Leon Cooperman) discloses updated portfolio positions in 13F filing: New ZNGA, APC positions, lowered NAVI, FDC, CIM positions
Highlights from 2016 Q4 filing as compared to 2016 Q3 filing:
  • New positions in: ZNGA (~1 mln shares), WRD (~0.45 mln), APC (~0.35 mln), OMAM (~0.12 mln), PES (~0.1 mln), TUSK (~0.1 mln), GOLF (~0.07 mln), BLUE (~0.05 mln), SCMP (~0.05 mln), VLY (~0.05 mln)
  • Increased positions in: TIME (to ~3.89 mln shares from ~0.9 mln shares), GPOR (to ~1.02 mln from ~0.3 mln), FNF (to ~1.35 mln from ~0.85 mln), DVMT (to ~0.45 mln from ~0.15 mln), P (to ~3.01 mln from ~2.72 mln) FGL (to ~0.33 mln from ~0.07 mln), MDCA (to ~0.3 mln from ~0.19 mln) SHPG (to ~0.45 mln from ~0.36 mln),
  • Maintained positions in: HES (~0.94 mln shares
  • Closed positions in: CLF (from ~1.14 mln shares), MSI (from ~1.03 mln), EPD (from ~0.79 mln), SSNC (from ~0.7 mln), LILAK(from ~0.54 mln), RICE (from ~0.4 mln), PE (from ~0.32 mln), CHK (from ~0.27 mln), EA (from ~0.27 mln), CTRP (from ~0.19 mln)
  • Decreased positions in: NAVI (to ~3.75 mln shares from ~11.32 mln shares), FDC (to ~8.57 mln from ~12.95 mln), CIM (to ~0.06 mln from ~2.94 mln), SNR (to ~0.51 mln from ~3.07 mln), HRG (to ~7.11 mln from ~9.61 mln), OMF (to ~0.86 mln from ~3.11 mln), NRZ (to ~0.75 mln from ~2.94 mln), AER (to ~2.27 mln from ~4.06 mln), TRCO (to ~1.79 mln from ~3.47 mln), NBR (to ~0.29 mln from ~1.65 mln), AIG (to ~1.41 mln shares from ~2.4 mln shares), DAL (to ~0.08 mln from ~0.98 mln), SYF (to ~0.94 mln from ~1.71 mln), PFSI (to ~1.62 mln from ~2.31 mln), MGM (to ~1.58 mln from ~2.25 mln), NAO(to ~0.7 mln from ~1.34 mln), ASPS (to ~1.81 mln from ~2.22 mln), ETP (to ~0.84 mln from ~1.24 mln), LORL (to ~1.21 mln from ~1.59 mln), NBR (to ~0.29 mln from ~1.65 mln)

>>> Temasek Holdings discloses updated portfolio positions in 13F filing; new p

Temasek Holdings discloses updated portfolio positions in 13F filing; new positions in ZTO, AR, ATH -- closed position in BEAV
Temasek Holdings discloses updated portfolio positions in 13F filing: Highlights from 2016 Q4 filing as compared to 2016 Q3 filing:
  • New positions in: ZTO (~12.18 mln shares), AR (~9.76 mln), ATH (~2.31 mln), PPG (~1.67 mln), V (~1.52 mln), MA (~0.27 mln), NQ (~0.24 mln)
  • Increased positions in: CTRP (to ~4.78 mln shares from ~0.35 mln shares)
  • Maintained positions in: LVLT (~65.03 mln shares), INFO (~21.17 mln shares), GILD (~13.83 mln shares), TMO (~2.9 mln shares)
  • Closed positions in: BEAV (from ~2.13 mln shares)
  • Decreased positions in: AMRS (to ~61.12 mln shares from ~69.59 mln shares), SYF (to ~1.12 mln from ~6.56 mln), UNVR (to ~18.17 mln from ~22.64 mln), BABA (to ~35.5 mln from ~39.56 mln

>>> TPG-AXON Management discloses updated portfolio positions in 13F filing: New

TPG-AXON Management discloses updated portfolio positions in 13F filing: New adds MCK, FB, GOOGL; Closed HCA
Highlights from 2016 Q4 filing as compared to 2016 Q3 filing:
  • New positions in: CNC (~0.15 mln shares), MCK (~0.07 mln), TRU (~0.05 mln), FB (~0.04 mln), EFX (~0.01 mln), GOOG (~0 mln), GOOGL (~0 mln)
  • Closed positions in: HCA (from ~0.27 mln shares)
  • Decreased positions in: TSX:AYA (to ~5.91 mln shares from ~7.98 mln shares), AGN (to ~0.13 mln from ~0.88 mln), ADPT (to ~1.1 mln from ~1.53 mln), SABR (to ~0.31 mln from ~0.63 mln), TSN (to ~0.14 mln from ~0.46 mln)

(BofA-ML) Global & European Fund Manager

Global
Icarus takes flight

1. FMS cash dips in Feb to 4.9% from 5.1%, but cash level high (10-year avg = 4.5%) & FMS Cash Rule still in "buy" territory. Our Bull & Bear indicator moves up to 6.3; we remain long stocks & commodities until "sell” signal triggered (B&B>8.0).

2. FMS shows macro optimism surging: 23% say "boom” (vs 1% one year ago) and 18% say “goldilocks” (vs 6% one year ago); meanwhile 15% say “stagflation” (a 3-month low) and while 43% expect “secular stagnation” this figure down sharply from 88% one year ago.

3. FMS ranks most likely bear market catalysts as follows: "protectionism" = 34%, "higher rates" = 28%, "financial event" = 18%, "weaker EPS" = 15%. FMS says best protectionist investment (and thus barometer of protectionist risk) = gold.

4. FMS says most "crowded" trade = long US dollar (= big reason US$ down YTD). FMS asset allocation & positioning (Exhibit 1) continue to reflect "up-in-$" expectations... longs in Japan, banks, tech. More hawkish Yellen at “Humphrey Hawkins” could provide upside catalyst for US$ given dovish market pricing of rate hikes. But Feb FMS shows consensus strong-$ view faltering at margin with rotation to EM (biggest MoM jump in 11 months), energy & materials (largest OWs since spring’12).

5. FMS says a contrarian macro bear (expecting weaker growth) would sell banks, US dollar, Japan, and buy bonds, utilities, staples. Meanwhile the contrarian macro bull (expecting higher inflation) would reduce cash, sell REITs, tech, and buy sterling, EM, industrials.

European
Global investors gradually more positive on Europe…

The proportion of global asset allocators overweighting European equities increases to net 23% OW vs net 17% last month, now marginally above the long-run average. On a valuation basis, European stocks are seen as the second cheapest of all regions, with net 24% saying they are undervalued. In contrast, 78% believe US stocks are overvalued.

…but not so much for France - a contrarian opportunity

European politics makes a return as the top tail-risk to global markets. Sentiment towards French equities drops to its lowest level in almost two-years and France is now the least-preferred equity index in Europe (Chart 41). Our Style Cycle framework suggests French stocks should perform best under current macro conditions (see link).

European macro outlook is unambiguously bullish

Net 63% of European fund managers expect positive economic growth on a 12-month horizon; net 89% expect strengthening inflation and net 68% expect positive profit growth. European monetary conditions are seen as accommodative by net 55% of investors. The main reasons for optimism are global macro conditions and a pick-up in capex. In spite of this, European fund managers have raised their cash levels over the month, comfortably above the 10-year average level.

Consensus has conviction in long Tech/short Utilities

The biggest overweight reported by European fund managers is for Technology (net 32% are OW), while the biggest underweight is for Utilities (net 47% are UW). Both these sectors trigger our contrarian trading signal of avoiding sectors with >net 30% OW and buying sectors with >40% UW. Note that within Europe, Utilities have low

Quality Value characteristics and are not defensive. Aside from Technology, month-onmonth sentiment improved for Banks, Basic resources (strongest sentiment in two years) and Healthcare (the most-preferred defensive sector).