David Fuller and Eoin Treacy's Comment of the Day
Category - Autonomies

    Email of the day on yields and P/Es for Autonomies and Dividend Aristocrats

    “Fantastic commentary and impeccable timing as always. Thank you both so much.

    “I have been looking through the Autonomies and Aristocrats following your various commentaries. I wonder if it is possible (and easy) to provide us with an updated list and table on their current EY and DY, possibly including ranking and comparison over say 3 years, i.e. price and EY and DY for each period. Obviously price action is paramount but it would be good to be able to assess possible opportunities for topping up in the market and possible best fade fundamental returns. Thanks once again for a superb service.”

     

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    Apple Unveils Watch, Bigger-Screen IPhones in Product Blitz

    This article by Adam Satariano and Tim Higgins for Bloomberg may be of interest to subscribers. Here is a section: 

    “Apple Watch is the most personal device we have ever created,” Cook said at the event. “We set out to create the best watch in the world.”

    Cook unveiled the watch after earlier introducing Apple Pay, the mobile payments system. Apple is partnering with credit-card companies including American Express Co., MasterCard Inc. and Visa Inc. for the service, which will be offered in the U.S. starting next month.

    In introducing a mobile-payments service, Apple squarely took aim at existing payments services. “Our vision is to replace this and we’re going to start by focusing on payments,” Cook said as a picture of an old wallet was flashed on screen.

    The company also posted an image of a leather billfold on its website with a message saying, “Wallet, your days are numbered.”

    Apple Pay will work with services including mobile car- booking application Uber Technologies Inc., restaurant reservation system OpenTable and daily deals company Groupon Inc., the company said.

     

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    Email of the day on agriculture and Amazon

    Hello, could you take a look at the agricultural sector (Deere, CNH, Monsanto, Potash) and also could you comment Amazon? I find it too expensive, but I fear that they are building a monopoly in the retail sector, so it is expensive now, but nobody can really compete , especially book stores or electronic retailers

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    Email of the day on retirement planning

    I was wondering if I can tap in on your common sense approach to retirement planning for global citizen (read UK/US). I know this may be outside areas you wish to comment on - but thought I would try. Given the amount of noise and exaggerated return assumptions (which is only possible for active portfolio traders/managers), I felt some common sense feedback will be helpful to help me (and some of my colleagues) think through this. 

    Question - Given the Potential for a Japan like situation in Western world (low I admit): e.g i) a) low rate of returns in Fixed income, b) potential sideways equity market c) propensity for looser money policies by Central banks (leading to inflation in asset classes that squeeze traditional middle class assets, public services etc.) & d) Jobless growth I ) What would be a) a sensible portfolio return to expect for retirees planning retirement for next ten years (if one is not an active stock picker and trader) b) What asset allocation would you suggest. c) what inflation should one plan for ? II) Any sensible websites or material you could direct me to research this ? Many Thanks

     

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    Twin Corn Ears Push U.S. Yields to Bin-Busting Crop

    This article by Jeff Wilson for Bloomberg may be of interest to subscribers. Here is a section: 

    Crop conditions are the best in a decade for this time of year, government data show, with 75 percent rated good or excellent as of July 27. The USDA probably will boost its production estimate in its monthly crop report on Aug. 12, said The Linn Group, a broker and adviser. The U.S. is the world’s largest grower and exporter.

    “There will not be enough storage space for all the extra bushels this fall,” said Roy Huckabay, an executive vice president at The Linn Group in Chicago. He predicted on July 1 that the crop would increase 2.8 percent to 14.314 billion bushels with yields around 170 bushels an acre.

     

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    Adidas Drops Most in 17 Yrs, Berenberg Sees Credibility On Line

    This note by Heather Burke for Bloomberg may be of interest to subscribers. Here it is in full:

    Management communication, credibility “appear on the line” after profit warning, Berenberg says in note.

    In golf, mkt “over-bloated” with inventory, U.S. chains such as Dicks have to right size existing goods, cut future orders

    TaylorMade-adidas Golf restructuring may cost ~EU25m-EU30m ex loss of sales, profit anticipated in 2H14

    In Russia has done an about-face, will now accelerate store closings, big effect is associated loss of 2H sales, profit, as E. Europe ~14% sales, 20% Ebit, Russia is >90% of that region

    Scope of downgrade hard to quantify

    Baader Bank says share price reaction “adequate,” sees potential downside revision for mkt consensus of 20%-25%

    Profit warning expected, but sharper than seen.

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    Tapping into growth

    Thanks to a subscriber for this report from Deutsche Bank focusing on European brewers. Here is a section: 

    Beer takes share from a readily addressable market in the form of cheaper,  often illicit and non-commercial alcohol. The level of local alcohol in a market  is strongly correlated to national income as per Figure 9.

    This readily available market accounts for over 50% to 90% of alcohol consumption in Africa, with growing markets like Nigeria, Democratic Republic of Congo and Ethiopia particularly attractive. Other emerging markets have lower, but nevertheless interesting figures which range from 15% to 40%. Markets like Latin American Ecuador and Peru and Asian markets such as Myanmar and Cambodia looking interesting to the brewers. 

    Beer is a luxury 
    The barrier to conversion from illicit alcohol to beer is the affordability of beer.  Per capita consumption in a market is relation to the amount of time a consumer has to work to afford a beer. As seen in Figure 11, the first inflection point for growth acceleration is around 120 minutes of work to afford a beer.

    A second inflection can be found at 30 minutes worked for a beer. Not only does beer consumption accelerate to the levels seen in developed markets, consumers also move up in the portfolio towards more premium brands. 

    There are market dependent limits to per capita growth 
    There is a limit to how much alcohol and beer one can drink. For beer, the per capita average of 10 liters of pure alcohol translates to 200 liters which approximates consumption in core beer markets such as Germany and Czech. 

    As markets mature, our analysis indicates a range of 70-90 liters per capita being the developed market norm over time. For most emerging markets with favorable population and illicit alcohol profiles, this is a growth destination; for developed markets this may translate into more declines.

     

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    What Do Chinese Dumplings Have to Do With Global Warming?

    This article by Nicola Twilley for the New York Times may be of interest to subscribers. Here is a section:

    An artificial winter has begun to stretch across the country, through its fields and its ports, its logistics hubs and freeways. China had 250 million cubic feet of refrigerated storage capacity in 2007; by 2017, the country is on track to have 20 times that. At five billion cubic feet, China will surpass even the United States, which has led the world in cold storage ever since artificial refrigeration was invented. And even that translates to only 3.7 cubic feet of cold storage per capita, or roughly a third of what Americans currently have — meaning that the Chinese refrigeration boom is only just beginning.

    And

    Despite the expansion in frozen foods and refrigerators, the critical growth area is what’s known in the logistics business as the “cold chain” — the seamless network of temperature-controlled space through which perishable food is supposed to travel on its way from farm to refrigerator. In the United States, at least 70 percent of all the food we eat each year passes through a cold chain. By contrast, in China, less than a quarter of the country’s meat supply is slaughtered, transported, stored or sold under refrigeration. The equivalent number for fruit and vegetables is just 5 percent.

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