(BofA-ML) A PM’s guide to stock picking


Reversal of reversal: Momentum back in vogue

The reversals seen in April were largely undone in May as Momentum and Growth

led once again, and Risk and Value lagged. The top five factors last month were all

Momentum strategies, with returns ranging from 4% to 5%. Momentum factors

closed the YTD performance gap with Growth, coming in second place year to date.

Growth stocks continue to work; quality mixed

All of the growth factors we track beat the benchmark in May, with Upward Estimate

Revisions (+2.7%) faring best. So far in 2015, Quality factors (High ROA, High

ROE, High ROC) were mixed with returns ranging from -0.3% to +1.1%.

Risk and value lag, with Energy largely to blame

Weakness in the Energy sector last month weighed on attributes correlated with

Energy stocks –value and risk. Value underperformed, owing partly to these factors’

high exposure to Energy stocks, with Low EV/EBITDA and Low Price / Cash Flow

finishing among the bottom five. High EPS Estimate Dispersion (-6.7%), a risk factor,

posted the weakest returns in May, also attributable to Energy where a wider range of

crude forecasts has driven up dispersion of EPS estimates.

High Beta may be the best summer rental

With the sell-off in riskier stocks for most of this year, High Beta stocks are now

trading at a record discount to their Low Beta counterparts. History suggests High

Beta might perform quite well from here relative to low beta. Since 1986, valuations at

similar extremes were followed by High Beta beating Low Beta by over 11ppt on

average in the subsequent three months. See page 45 for a High Beta screen.

Strong dollar shrugged off, Foreign Exposure leads YTD

Stocks of companies with a high proportion of overseas sales (Foreign Exposure)

saw a second month of outperformance after lagging in 1Q amid dollar strength.

High Foreign Exposure now leads the index with a +2.6% return year-to-date.

Divvy growth led, high yield lagged last month

Rates volatility may have weighed on High Dividend Yield (-1.0%), while the less

rate-sensitive Dividend Growth (+2.2%) handily beat the index. With economic data

on the mend, and the Fed slated to hike rates in 2H15, we prefer Dividend Growth

to Dividend Yield, as the latter tends to lag as rates rise.

 

(Betaville) A Quindell update...

A Quindell update... {http://betaville123.blogspot.co.uk/2015/06/a-quindell-update.html}

It's been a while since I have written anything on Quindell so I thought I would put together a piece for loyal Betaville readers and followers of the company.

Top sources tell me that Quindell - which recently completed the sale of its professional services division to Slater & Gordon for £640 million - has now received a takeover offer of between £20 million and £30 million for PT Health, a Canadian healthcare and rehabilitation services company.

Quindell has also had offers totalling around £30 million for other parts of the business, according to my well-placed sources.

Now to be clear, a spokesperson for Quindell declined to comment on the above although "people close to the company" claimed the information isn't correct.

Still, I'm inclined to go with my sources on this one as they have been absolutely on the money on this story since I first revealed Slater & Gordon's interest in purchasing Quindell's legal services division earlier this year.

Once Quindell completes the disposals of these non-core divisions, it will be left with Himex, a black box monitoring system for cars, and the Ingenie insurance brokerage, which uses telematics to broker car insurance policies.

The board is also planning to begin the process of handing back around £500 million to shareholders via a share reconstruction after Quindell restates its accounts.

Quindell's auditors are due to hand back its accounts on June 23rd, according to my sources, so the market should see the company restate its accounts later this summer.

Although the restatement of the historic accounts is likely to involve some big numbers, I have been told most of it is connected to the disposed professional/legal services division. Quindell may even get a tax credit to offset future tax on profits following the restatement of accounts, according to my sources.

Meanwhile, the return of cash to shareholders is expected to begin in Autumn 2015, possibly via a share buyback.

(BFW) Alstom Says Any EU Concerns on GE Purchase Are ‘Normal Step’

BN 06/12 07:05 *ALSTOM SAYS WILL TRY TO SHOW POSITIVE IMPACT OF PURCHASE TO EU
BN 06/12 07:03 *ALSTOM SAYS ANY EU LETTER WON'T PREJUDICE OUTCOME OF REVIEW
BN 06/12 07:02 *ALSTOM SAYS ANY EU CONCERNS ON GE PURCHASE ARE `NORMAL STEP'
Alstom Says Any EU Concerns on GE Purchase Are ‘Normal Step’
2015-06-12 07:05:39.173 GMT


By Gaurav Panchal
(Bloomberg) -- Alstom says press comments “statement of
objections” would be issued by European Commission associated
with investigation of sale of Energy businesses to GE is usual
step in a phase II merger case, doesn’t prejudge outcome of
investigation.

* Says this will allow GE, Alstom to address specific matters
pointed out by investigating team
* Says will continue to provide evidence on positive impact of
this deal for Europe, including future competitive landscape
* Statement: Link
* ALSTOM/GE STREET WRAP: Deal Likely to Get EC Nod, UBS Says
Link
* June 11: EU May Say GE/Alstom Harms Competition: Reuters
Link

Link to Company News:{0629846D BB <Equity> CN <GO>}
Link to Company News:{ALO FP <Equity> CN <GO>}
Link to Company News:{GE US <Equity> CN <GO>}

For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}

To contact the editor responsible for this story:
Gaurav Panchal at +44-20-3525-0511 or
gpanchal2@bloomberg.net

(BofA-ML) Alstom : A state of objection?

Imminent list of objections normal procedure in such deals
Market newswires are claiming that General Electric (GE) will have to face a list of
objections from the European Commission (EC) regarding its planned purchase of
Alstom Energy (AE) imminently (this is normal procedure for well advanced deals).
In essence, this ‘objections’ document should present the EC’s concerns on how the
GE-AE deal could be anti-competitive. The ultimate sanction would be to block the
deal unless GE provides adequate remedies or compelling arguments that a state of
credible competition exists.

This ‘list of objections’ news flow’ has affected the Alstom share price negatively,
increasing fears that the Alstom Energy deal with GE will be blocked and leave
Alstom as a vulnerable stand-alone company with structural headwinds and poor
cash flow/balance sheet. Our view is firmly in the camp that the deal will go ahead
as planned – we think there are just too many participants (Alstom, GE, French
government) who want the deal to happen.

Alstom worth Eur32 with deal, maybe c.Eur19-20 without
Our analysis suggests that if the GE/Alstom Energy deal is blocked, then Alstom
energy/transport may be worth around Eur19-20. This is mainly because of the
structural headwinds that Alstom Energy is likely to face, and of course the absence
of the GE bid. Our price objective for new Alstom assuming the Energy deal goes
ahead is Eur32, which is based on applying a 11.5x EV/ calendar 2016e EBITA or
0.65x EV/Sales which see as fair given the backlog visibility and margin opportunity.

GE/Alstom has over 50% of Europe gas turbine market
A combination of GE/Alstom would have just over 50% of the European gas turbine
market with very strong positions in France, Spain and the UK. Most countries have
four or more suppliers and we see no reason why competitors other than Siemens
could not continue to offer products/services The exceptions have been Germany (a
Siemens dominated market) and also the UK (Alstom/GE dominated).

(Reuters) LULU : Founder Chip Wilson looking at sale of entire Lululemon stake

Founder Chip Wilson looking at sale of entire Lululemon stake

Chip Wilson, who founded Lululemon Athletica Inc (LULU.O) and left its board earlier this year after disagreements with fellow directors, is now looking to potentially sell his family's estimated $1.3 billion stake in the yogawear maker.

A sale would give Wilson a huge war chest to throw into his family's latest venture - Kit and Ace - a Canadian apparel start-up. The retailer is set to open stores in Australia, Britain and Japan this year.

Sources familiar with the situation have previously said the Wilson family is expected to invest as much as $300 million to fund the expansion and rollout of Kit & Ace stores in the coming years.

Lululemon, which disclosed the news of the potential sale of the Wilson family's stake in a regulatory filing on Thursday, said Wilson, his wife and other entities that they control may look to sell all their shares.

"The prospectus supplement filed by Lululemon simply enables Chip Wilson to sell his shares in the future, if he chooses to do so, on the same basis as any other stockholder," a spokesman for Wilson said in an email.
Lululemon shares were down about 2 percent at $65.40 on Nasdaq.

According to sources familiar with the matter, Wilson left the board earlier this year after it failed to move forward on governance reforms that he had pushed for last year.
Lululemon, which is pursuing international expansion in the face of growing competition, averted a proxy war last year when Wilson agreed to sell half his stake in the company to Advent International, a private equity firm.

When Lululemon's board reached a settlement that essentially ended a face-off with Wilson last year, it said it would have an independent expert review its governance policies and the composition of its board. It has yet to outline any of the review's findings or make changes to its governance practices.

Wilson and his family, who have the right to nominate one member of the board, did not pick a nominee for election to the board at Lululemon's shareholder meeting earlier this month.
Wilson told Reuters in April that he had difficulty finding a qualified candidate willing to join the board given that the review he pushed for had not led to anticipated changes to the board's structure, make-up and plurality voting system.

Lululemon could not immediately be reached for comment on the potential sale of the Wilson family's stake or the status of the review.