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Comments of the Day
07 July 2020
Video commentary for July 6th 2020
Eoin Treacy's view
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: China shares and Renminbi surge, additional liquidity fuels acceleration in tech leaders, European shares firm, gold steady, oil quiet, bitcoin firms.
Chinese Stocks Surge as Individual Investors Pile Into Market
This article from the Wall Street Journal may be of interest to subscribers. Here is a section:
A front-page editorial in China Securities Journal said fostering a “healthy bull market” is important given China’s increasingly complicated international relations, intense financial and technological competition, and the challenge of controlling internal financial risks.
Steven Leung, executive director of institutional sales at UOB Kay Hian in Hong Kong, said the editorial had bolstered investor confidence. He said some mainland investors were also buying shares anticipating that coming changes, such as an overhaul of the Shanghai Composite, would attract more global investment.
Eoin Treacy's view
“China’s bull markets are state sponsored” has been my short hand for analysing the Chinese market for much of the last decade.
The primary indices have inconsistent trends, where large surges have been followed by collapses and volatile ranging. The defining characteristic of broad advances has been overt government support for prices.
Eoin's personal portfolio: stock market index long initiated July 6th 2020
Eoin Treacy's view
One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change. I'll change the title to the date of publication of new details so you will know when the information was provided.
Email of the day on psychological perception stages of a new bull market
Your comment on psychological perception stages. I find it most interesting that in the financial press in the UK at this point in time, the "g" word is very rarely mentioned by any of the financial journalists I follow, let alone recommending any gold mining companies. I wonder if this could be a sign that we are still in the latter stages of the "disbelief" phase regarding gold as an investment despite all the signs that a bull market is now underway.
Eoin Treacy's view
Thank you for this question. There is a ‘stealth’ bull market underway in gold and a number of miners have posted impressive returns over the last 18 months. That is being overshadowed, right now, by the continued outperformance of large cap technology companies which are now accelerating higher.
Prospering in the pandemic: the market winners
Thanks to a subscriber for this article by Tom Braithwaite for the Financial Times. Here is a section:
We also ranked them. It would have been nice to use profits or sales as the gauge of success. But the lag in reporting and different calendars made that impractical, even for public companies. So we stuck with a market measure, accepting that — in the saying attributed to value investing doyen Benjamin Graham — the market is only a “voting machine” in the short run, rather than a “weighing machine”.
But which market measure? For the main rankings of the top 100, we opted for equity value added. That list included some of the clear “winners” from the pandemic, such as Netflix and Zoom Video. But it has one obvious flaw: it favoured those that were already large. Companies including Nestle, L’Oréal and Alibaba made the cut despite single-digit percentage gains in value.
If we had used percentage gains, the list would have had the opposite problem, favouring smaller companies, penny stocks that can swing wildly on trades of modest value. However, we still wanted to assemble an alternative ranking to highlight some less known but still significant winners. To do this, we used percentage gains but with a $10bn floor for market cap.
This brings into the top 100 companies that escaped the original list such as Ocado, the UK online supermarket that has reinvented itself as a global tech supplier to other grocers, and Peloton, whose stationary bikes equipped with video screens for online classes have surged in popularity as gyms closed. But otherwise the top 100 has a lot of the original big names such as Tesla, Pinduoduo and PayPal.
If the floor is $1bn, there is a lot more shuffling around. On this measure, Novavax comes top, with a 1,900 per cent rise in value. There is little mystery behind this: Novavax has a vaccine candidate for Covid-19 and is racing to expand its manufacturing capacity.
Eoin Treacy's view
There is no doubt that for some companies the COVID-19 crisis has been a gift. It accelerated customer acquisition efforts while also lower lowering borrowing costs and boosting liquidity. High growth companies that reside online, instead on Main Street, were already gaining market share from brick and mortar. That process has not gone into overdrive as the number of retail bankruptcies surges.
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