Systematic Ideas - Long ABB (ABBN SW) & Santander (SAN SM) - 26 Oct
Long ABB (ABBN SW)
A glance through the results shows growth across all metrics, which is something that we believe the market will value positively. Interestingly, this was the crucial statement by the CEO today - "The combination of a stronger market orientation and a focus on high growth segments, such as electric vehicle charging, robotics and food and beverage, is paying off". Further, the statement says that the Electrification Products and Robotics & Motion divisions improved margins sequentially. Comparing peers YTD, this is relatively unusually positive (c.f. GE & SIE GY)
ABB’s management team is incrementally focusing on growth areas. This has to be positive for the shareholders. ABB’s growing revenues, expanding margins, focus on high growth areas and generation a Free Cash Flow yield far in excess of what a local investor achieves owning Swiss Government bonds. That differential is over 4% and will take a long time to close. In the meantime, equity owners should enjoy the FCF yield i.e. get paid for owning the stock while the management delivers growth.
Our systematic models are all aligned for a strong run from here. Get long. Once the highs of 2007 just above 26.00 get taken out, there is blue skies ahead and the stock has potential to continue its outperformance of bellwether peers (Fig. 1).
Long Santander (SAN SM)
Santander released strong Q3 results earlier this morning with earnings rising in 8 out of their 10 core markets. The group is making significant progress in the acquisition of Banco Popular having agreed to sell Popular’s real estate portfolio for 30 billion Euros as well as gaining 10 billion Euros in customer deposits.
The bank’s main markets—Europe and Latam— had been weak for some time but they’re now showing signs of strength as Santander added 1.7 million account over the past year. Latam customer growth and lending has been among the key positive surprises.
Q3 profits are up 17% YoY and profits for the first 9 months of 2017 are up 10% YoY on the back of improving credit quality and cost control. Net interest income & fee income we up 12% and 15% respectively too.
Santander is well positioned to break out of this long term under performance vs the SXXP Index (Fig. 2) and looks ready for the next leg higher.
ABB specializes in power and automation technologies. Co. provides a broad range of products, systems, solutions and services that are designed to boost industrial productivity, increase power grid reliability, and enhance energy efficiency. Co.'s automation businesses serve a full range of industries with process optimization, control, measurement and protection applications. Co.'s power businesses focus on power transmission, distribution and power-plant automation, and support electric, gas and water utilities, as well as industrial and commercial customers.
Deydun Markets
Deydun Markets, founded in 2010 and based in London, is a specialist quantamental research boutique. The client base includes institutional equity investors across the spectrum audience primarily from fundamentally driven long term investors to long / short high turnover hedge funds. Deydun covers all global markets through a macro lens as well as bottom up stock picking with the major overlay being the proprietary quantitative models that we have built over the years. The models are rebalanced to suit clients specific needs including quarterly, semi-annual and up to annual rebalance.
Deydun specialises in providing real-time securities recommendations including providing market timing advice and actionable short-only strategies. They use robust quantitative approaches to help isolate alpha for their clients. The systematic models attempt to be:
Right at the right time
- Avoid drawdowns
- Maximise diversification
The differentiated suite of empirical models that Deydun has developed adapt dynamically to mean reversion and momentum states.
The Deydun service is delivered through notes, “Key Thoughts”, that highlight new stock ideas and track the real-time performance of all the Live Book as well as those in the (unique) Flip Book when they have changed the side of the recommendation. These prove outstanding records of divining alpha in very liquid global equities. The models typically achieve 15% to 35% CAGRs in blind forward and real time proofing over one to two business cycles.
Deydun endeavours to provide each client with independent and relevant ideas and transparently track all their calls. Tier one clients receive a bespoke portfolio service and often share their positions to enhance the impact of the Deydun service.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.