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Weekly Research Report – 15 April 2019

Clay Carter

Global equity markets were mixed for the week, but U.S. markets ended the week on a high note (note column %Chg below) after strong reports from the big banks kicked off the earnings season, Disney’s new streaming service was well received, and there was a big takeover in the oil patch (Chevron buying Anadarko). The S&P 500 posted its third straight week of gains. Financials (banks), materials (industrial metals) and industrials were among the outperformers. The AUD rally was a spoiler for Australian investors however.

Weekly returns to 12 April 2019
(AUD 5-day return far right- hand column)

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Source: Bloomberg

Rates/Commodities

  • 10-Year Treasury yield: +3bp to 2.55%
  • Gold: +0.3% to $1,293.7/oz
  • Natural gas: -0.4% to 2.654
  • WTI crude oil: +1.1% to $63.8/bbl
  • AUD/USD: +1.0% to 71.76
     

Notable company news

Anadarko Petroleum (NYSE: APC)

Anadarko is to be acquired by Chevron for $65/share in a cash-and-stock deal valued at US$33Bn. That price represents a 39% premium to last Thursday’s close. The deal is expected to close in H2 2019 contingent on APC shareholder approval. Chevron noted that the combination will enhance its shale position in the Permian by creating a substantial corridor across attractive acreage in the Delaware basin as well as add to its deep water and LNG potential. Chevron highlighted significant operating and capital synergies and forecast the deal would be accretive to Free Cash Flow and EPS within one year of closing. Anadarko finished up 32% on Friday.

Both Anadarko and Chevron are held in Macrovue’s Big Oil thematic share portfolio.

Disney (NYSE: DIS)

Disney announced that its “Disney+” streaming service will launch in the U.S. on 12 November 2019 for $6.99 a month - roughly half the price of Netflix, the 800 lb. gorilla of streaming. It will offer programming from Disney’s biggest franchises, such as Star Wars and Marvel Studios, as well as new original programming. In the first year consumers will have some 25 episodic series to choose from, some of which will come from Disney’s new Fox assets like “The Simpsons.” They will also have original content with nine original pieces launching in November. Disney said it expects to have between 60 million and 90 million subscribers by the end of fiscal 2024. Disney stock ended up 11.5% on Friday on the news.

Disney is held in Macrovue’s Entertainment thematic share portfolio.
 

LVMH (EPA: MC)

On Wednesday 10 April 2019 LVMH announced that its first-quarter sales rose 16% reported and 11% organic to 12.5 billion euros (US$14.1 billion) which handily beat analysts’ estimates. The key positive surprises stemmed from Fashion and Leather Goods (F&LG), up a very strong +15% organic on a tough comparison (this was the 11th quarter of double- digit organic sales growth at LVMH F&LG), Wines & Spirits (+9%) and Selective Retailing (+8%). All geographic regions were said to have performed strongly. These numbers were well received by the market for LVMH and the luxury goods sector. LVMH's shares were up 4.3% percent in session trading, hitting a record high of EUR388.34 and lifting the shares of peers such as Gucci-owner Kering, Hermes, Burberry and Moncler.

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LVMH, the world’s largest luxury retailer, is held in Macrovue’s Luxury Goods thematic share portfolio.
 

The week ahead

It’s a fairly normal economic calendar with several important reports such as March retail sales, as well as the housing reports, especially starts and permits. Industrial production data is a good way of tracking economic progress. The leading indicators remain an important measure as well. The Fed “Beige Book” will provide anecdotal evidence about business conditions around the country. But at the end of the day the biggest stories will be the Q1 earnings reports.

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Source: briefing.com
 

Charts of the week

1. The platforms: Facebook, Google (YouTube), Instagram, etc...

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Facebook and Twitter are held in Macrovue’s Social Media thematic share portfolio.
Alphabet (GOOGL) is held in three of Macrovue’s thematic portfolios - Artificial Intelligence, Disruptive Technologies and Tech Stars.

  
2. And why you never never buy a hot IPO. 

LYFT down 23.6% since market debut on 29 March!

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Source: Bloomberg

Uber and Pinterest IPOs on the way in coming weeks. Will they be more reasonably priced?

 

Quote of the day

“If the Fed had done its job properly, which it has not, the Stock Market would have been up 5000 to 10,000 additional points, and GDP would have been well over 4% instead of 3%... with almost no inflation. Quantitative tightening was a killer, should have done the exact opposite!” 

President Trump in a weekend tweet...

FYI - the value of the U.S. stock market has risen by $9.1 trillion, or 35.6% in USD, since Election Day in 2016, according to Wilshire Associates.

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