The team here at Libra Investment Services have been analysing global economies and markets for the best part of 40 years and, over that time have seen how the interaction of macro and micro trends, stock level financials and thematic and sector dynamics influence and, ultimately, drive the complex adaptive system that is the financial market. […]
Category: View from the Edge
Thoughts prompted by the Apollo signal product
In the same way that many investment advisors failed to sell certain stocks when the time arose (see previous posts) they may not have the skillset or process that allows them gauge when to buy. In markets such as this, an answer is to be found in Benjamin Graham’s Margin of safety. The principle of […]
As someone who has been around long enough to be following Tesco’s stock market journey since the late 1980’s I found myself bemused by the share price reaction to the news that Asda was on the verge of announcing a price war. Over the years we have got used to price wars, particularly the threat […]
A series of individual stock concerns in both the US and Europe – think Glaxo Smith Kline, Moderna, Astra Zeneca, Eli Lilly, Smith and Nephew, Merck and even Novo Norsdisk added to the fact that the new Trump administration may not be friendly for the sector has seen the sector in a Trump Slump.
Since we ‘called the bottom’ for the sector as you can see from the blog comment on April 14 and the Apollo Margin of Safety chart, the SX7P has rallied from €140 to €157 (12%) but as of today, the sector has not only come back to value (the Apollo FV for the sector is €157.35) but broken above that level and the upper boundary of the FV range.
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On the Move
The Travel sector entered the re-rating phase on January 10 and since then the good news has just kept coming. When Factor risk changes you need to know especially when accompanied by our idiosyncratic signals of momentum and volatility (Accelerator and Risk Adjusted return signals). This combination forms the basis of our Smart Alpha strategy and why it works as well as it does. For as long as the sector is re-rating and there is an Acc long signal you know you are in a good place and when it changes, the dynamics of the stock / sector / market change.
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Hitting The Target
The story of this sector has been one that demonstrates perfectly the Apollo Investment Cycle as we have seen the move from Value to Re-rating and Growth. We now have a group of low volatility Re-rating and Growth stocks – otherwise known as Quality and as we look at the group today we see the majority showing Accelerator Long signals to fully support the investment case that investors have been buying into.
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Risky Business
What we witnessed was the market re-rating the sector, taking it from trading at extreme discount to FV in October 2022, to trading at historically high premium in late February / March 2023 – an extraordinary re-rating to a point where red flags in the form of the Apollo Risk Adjusted Return signals were appearing.
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Looking for clues
Outside of Banks the clues at a stock, sector and market level that give guidance to investors as to what to do or not do right now are few and far between. Both the S&P 500 and Stoxx 600 are no longer in the re-rating phase of the Apollo investment cycle and that points to more volatile times and as a consequence many sectors have transitioned from Re-rating to De-rating or Value
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Gimme Credit
The consequence of recent events (SVB) meant that the market had to reconsider the discount rate being applied to future cash and the repricing meant the sector has come back to the Orange line – FV. A moment that we call ‘back to value’ – zero premium to present value so surely an opportunity to buy?