WSJ : U.S. Stocks Overvalued? Time to Look at Europe

U.S. Stocks Overvalued? Time to Look at Europe
Balance of political risks seems to have shifted

The market’s political pendulum may be swinging back. Hope for U.S. President Donald Trump’s new administration has been driving U.S. markets, while fear of populist upheaval has gripped Europe. The balance of risks are now shifting in Europe’s favor.

Tuesday’s 1.2% drop in the S&P 500 is mostly notable for how long it has been since the market has seen such an event. The last time the index fell more than 1% was in October. But it also represents a challenge to a market that has been running on hopes for good things to happen, namely optimism about corporate tax reform and growth. Bond markets have been more circumspect, with yields locked in a relatively narrow range since December.

By contrast, the conversation in Europe has been all about avoiding bad things, especially the risks posed by 2017’s electoral calendar. The French presidential elections are set to dominate headlines in the next two months, but the closely watched Dutch vote passed without drama. And meanwhile, the European economy has been moving ahead. In February, IHS Markit’s eurozone composite purchasing managers index hit a near six-year high at 56. The European Central Bank has started to sound more confident as the threat of deflation has passed.

Importantly, European companies seem finally to be emerging from an earnings drought. The results for the final quarter of 2016 showed a net 20% of the 450 companies tracked by UBS beating earnings expectations, the best result for six years. Meanwhile, flows out of European equities continued even as the eurozone PMI climbed last year, Citigroup notes. While the S&P 500 has set a record high this year, the Stoxx Europe 600 is still some 10% below its 2015 peak.

On forward earnings multiples, the spread between S&P 500 and the Stoxx Europe 600 is close to its widest over the past five years. Should America under-deliver the good news and Europe skate through the bad, European stocks should end up being the winners.

FT : Two Akzo Nobel shareholders call for engagement with PPG

Two leading shareholders in Akzo Nobel have called on the company to “engage” with PPG Industries, after the Dutch paints and chemicals group rejected a revised €22.4bn takeover bid from its US rival.

The maker of Dulux paints on Wednesday revealed it had dismissed a second cash-and-shares approach from PPG, saying the offer undervalued the company, was not in the best interest of shareholders and raised concerns around antitrust and potential job cuts.

Activist hedge fund Elliot Advisors, a top five shareholder with more than 3 per cent of the stock, spoke out against the decision.

“Elliott urges Akzo Nobel to engage with PPG immediately to determine whether PPG is prepared to bid at a level that provides adequate consideration to Akzo Nobel shareholders and whether PPG can adequately address all relevant stakeholder considerations,” it said in a statement.

Another top 20 shareholder, Columbia Threadneedle, made a similar intervention.

David Dudding, portfolio manager at Columbia Threadneedle Investments, told the FT: “We see strong logic in a combination of Akzo Nobel and PPG and the potential benefits this offers all stakeholders. Akzo needs to recognise this and engage.”

VEB, an influential Dutch shareholder group, called for the company to consider the deal.

Paul Koster, director of VEB, told the FT: “They can’t just shut the door. I can understand them saying it is too low. But when a second bid comes in from a serious player, then you should talk to each other.”

Akzo Nobel’s chief executive Ton Büchner said the the company had “listened carefully” to shareholders and taken their views into consideration when arriving at the decision, which was taken unanimously by its boards.

A combination would require “substantial divestitures” on competition grounds, the Dutch group said.

PPG’s second bid was at €90 per ordinary share, including a dividend about to be paid, comprised of cash of €57.50 and 0.331 share of PPG common stock. It said this represented a 40 per cent premium to Akzo Nobel’s undisturbed share price of 8 March, before details of the initial bid were announced, and was a €7 increase on the original offer.

Shares in Akzo Nobel slipped 2.25 per cent to €74.88 on Wednesday.

(TechCrunch) Instagram grows to 1M active advertisers, plans to add more data an

--> interesting as really ladding with SnapChat - maybe time to revisit the long FB Short Snap

Instagram grows to 1M active advertisers, plans to add more data and direct booking
Instagram’s advertiser base has doubled again.

The Facebook-owned photo and video app is announcing that it now has 1 million monthly active advertisers, compared to 500,000 in September and 200,000 just over a year ago.

Some of that growth can be attributed to the simple fact that a lot of people use Instagram — 150 million every day, as of January. But James Quarles, who leads Instagram’s ad business, said the platform stands out in a few key ways, beyond just attracting a lot of eyeballs.

First, he said Instagram is a place where people follow their passions, whether that’s “a very mainstream thing like following their favorite musician, or a niche business like candy art.” One sign that that’s paid off for companies with a presence on Instagram: 80 percent users follow a business.

Second, there’s the “ease and simplicity” of using Instagram. For example, Quarles said, “It takes only four taps to place an ad on a business profile.”

And lastly, he said Instagram is trying to “produce visible action” — it’s not just about getting users to like a photo or follow an account, but also convincing them to visit your website and maybe buy a product.
Quarles didn’t just use our call to boast about Instagram’s continued growth. He also talked about new features that the service will be adding for advertisers in the comings. For one thing, he said it will be adding insights data around multi-image posts and Instagram Stories.

In addition, businesses will soon be able to add a button to their profiles for that allows users to make a booking or appointment directly through Instagram. This enables Instagram to become more of “a primary storefront for the businesses,” Quarles said, while making it easier for consumers to engage with businesses “just by swiping your finger.”

>>> US Gapping Up

Gapping up
In reaction to strong earnings/guidance:
  • DLTH +19.4%, WGO +6.7%, VKTX +5.6%, FDX +2.8%, SLW +2.8%, HQY +2.7%, AYA +1.6%, MDP +1.1%, PBR +0.9%
Select metals/mining names showing strength:
  • X +1.3%, AG +1.2%, AKS +1.1%, SBGL +0.8%, HMY +0.8%, ABX +0.7%, CLF+0.6%, AU +0.5%, RIO +0.5%
Other news:
  • UNXL +23.7% (enters into a long-term agreement w/ a 'major U.S.-based PC maker' to supply XTouch touch screen sensors on a multiple year basis)
  • IDXG +12.2% (continued strength after closing near highs)
  • MBRX +12.1% (granted orphan designation by the FDA for liposomal annamycin for the treatment of acute myeloid leukemia)
  • BEBE +8.7% (modestly rebounding)
  • ACHN +4.4% (announces that the U.S. Patent and Trademark Office has issued the first U.S. Patent to Achillion resulting from its complement factor D research program), CMCM +2.2% (continued strength)
  • OPK +1.4% (confirms orphan drug designation from the FDA for oligonucleotide-based AntagoNAT for the treatment of Dravet Syndrome)
  • SNAP +1.1% (initiated with a Buy at Drexel Hamilton; $30 tgt)
  • VRX +0.7% (closed its previously announced refinancing transactions; extends maturities of term loan debt to 2022 and provides increased operational flexibility)
  • SHPG +0.7% (granted Fast Track designation for recombinant ADAMTS13)
Analyst comments:
  • URBN +1.5% (upgraded to Overweight from Sector Weight at KeyBanc Capital Mkts)
  • SNAP +1.2% (initiated with a Buy at Drexel Hamilton)
  • BBVA +1% (upgraded to Overweight from Equal Weight at Barclays)
  • LC +0.8% (upgraded to Neutral from Underperform at Wedbush)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:
  • COE -10.7%, IMMY -7.9%, NKE -5.5%, PERY -3.2%, QIWI -0.9%, SCS -0.6%
Select financial related names showing weakness:
  • ING -4.7% (media outlets run headlines tied to last week's annual report in which the company revealed that 'ING Bank is the subject of criminal investigations by Dutch authorities regarding various requirements related to the on-boarding of clients, money laundering and corrupt practices')
  • LYG -1.7%, BCS -1.5%, RBS -1.5%, PUK -1.4%, CS -1.1%, BAC -0.9%, HSBC-0.7%, JPM -0.7%
Select oil/gas related names showing early weakness:
  • SDRL -2.9%, RIG -1.3%, MRO -1.3%, APC -1.2%, STO -1.2%, CHK -0.7%, .
Other news:
  • SHLD -17.6% (discloses in 10-K that its operating results indicate substantial doubt exists related to the Company's ability to continue as a going concern)
  • IMMY -7.9% (entered into agreements with two accredited investors for a registered direct placement of 1,312,000 shares of common stock at a price of $2.40 per share), RGNX -6.1% (prices offering of 3.7 mln shares of common stock at $20.50 per share)
  • ADAP -4% (Adaptimmune Therapeutics to offer and sell ADSs in underwritten public offering)
  • DEA -2.4% (prices 4.3 mln common stock offering, all offered in connection with the forward sales agreements, at $19.00/share)
  • WLL -1.9% (Moody's upgrades Whiting's CFR to B2, Positive Outlook)
  • CALA -0.5% (offering of 6,830,000 shares of its common stock priced at $10.25/share)
Analyst comments:
  • FTR -7.6% (downgraded to Sell from Neutral at Goldman)
  • AAL -1.9% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
  • TDG -1.9% (downgraded to Market Perform from Outperform at Cowen)

>>> NIKE: Color on Quarter --> -5.85 Pre-open : 1mil shares traded

NIKE: Color on Quarter (58.01)
  • Wedbush notes NKE reported mixed results with headwinds in North America (NA) and f/x still pressuring sales and margins. They still believe futures are an important directional indicator to the story and these declined 1% currency neutral (CN) or -4% reported. While the company is making progress on accelerating its innovation pipeline and engagement with consumers, this is more than offset in the medium-term by weakness in other areas of the business and the retail backdrop in NA (reflective of the 9% futures decline in the region). They still contend that other brands continue to be in the sweet spot of what consumers currently demand, particularly on a wholesale level, and they don't see that changing in the near future.
  • Stifel cuts tgt to $66 from $68. FY3Q results highlight Nike's global diversification and financial flexibility and the FY18 outlook points to largely sound fundamentals with revenue growth in all regions, operating margin expansion, and constant currency EPS growth in line with long-run objectives (mid-teens). Unfortunately, North America remains a challenge and FX pressures to earnings are projected to stiffen in FY18, masking expectations for constant currency progress in reported EPS. Their FY18 and FY19 estimates come in though they continue to view Nike as well-positioned to succeed long-term, and look beyond FX pressures in FY18 to FY19 earnings power as a basis for valuation.
  • TAG ntoes Nike's report was mixed. The quarter itself was fine with an in line sales result, while a weaker-than-expected gross margin was more than offset by well-managed SG&A. However, futures came in a little light (due in part to some timing-related issues for China futures) and the co noted that the promotional environment in North America is worse than they expected it to be relative to 90 days ago. In addition, F/X sounds like it will be a greater headwind in FY18. However, there are also several positives here that show that their thesis is playing out: 1) better results in basketball (Nike cited market share gains vs. losses LY); 2) actual results outpacing last quarter's futures by ~500 bps, up from ~100 bps last quarter; 3) progress in North America (CC sales accelerated on a two-year basis, margins were higher, and inventory was down 8%); and 4) a strong plan dubbed the "triple-double," that will essentially 2x innovation, speed, and direct. While the path continues to be choppy, they believe Nike is gaining traction and heading in the right direction, which should drive better operating results and stock price performance.
  • FBR & Co likes Nike's innovation pipeline, int'l runway, and LT margin catalysts, but they remain on the sidelines and look for improved rev growth, margin execution, and lower inventory growth.