Systematic Ideas - Long Randgold Resources (RRS LN) & Short M&S (MKS LN)
Long Randgold Resources (RRS LN)
Randgold resources has underperformed EU peers by ~45% over the past year. It has also underperformed the broader market by ~25% in the same time. This seems a tad overdone given the underlying commodity currently trades 3% below the 2016 highs.
Recent Q2 results were a strong beat with productions costs reducing even further to $600 per ounce for 2017 vs the $639 per ounce for 2016. RRS uses a $1,000 benchmark for gold prices and should fare well ahead of their conservative cash generation expectations given gold trades well above that.
Fig 1. shows the relative position of Randgold Resources vs the broader Stoxx 600 Index as well as the EU miners Index and is crossing over to the leading quadrant against both Indices on a monthly time frame. The stock looks like it is entering a durable period of outperformance. Buy here.
Short Marks & Spencer (MKS LN)
Marks & Spencer recently reported disappointing Q1 performance in Food, LFL sales were down for the year in Clothing & Home as well (albeit better than expected decline). Competition from online (food as well as clothing) retailers is only going to get more aggressive as time passes and this is an underlying theme of market share moving from in-store to online which is here to stay.
With revenues remaining subdued in spite of their push into apparel, margin pressures from the company’s massive real estate portfolio are likely to come to the fore over the coming quarters. UK Consumer outlook remains subdued and could remain this way into 2018. Given the current backdrop we believe there is a relatively low probability for any increase in dividend and should keep investors away.
The stock currently trades at a 20% premium to peers in P/E (blended forward) terms. This is the highest premium the stock has traded at over the last 5 years and looks unsustainable given the points above. So we short M&S here as we see the stock underperforming.
Randgold Resources is engaged in gold mining, exploration and related activities. Co.'s activities are focused on West and Central Africa. In Mali, Co. has an 80% controlling interest in the Loulo mine through Societe des Mines de Loulo SA. The Loulo mine is mining from two underground mines. Co. also has an 80% controlling interest in the Gounkoto mine through Societe des Mines de Gounkoto SA. Co. owns 50% of Morila Limited, which in turn owns 80% of Societe des Mines de Morila SA, the owner of the Morila mine in Mali. In addition, Co. owns an effective 89.7% controlling interest in the Tongon mine located in the neighboring country of Cote d'Ivoire.
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.