YWR: Global Factor Model
Disclosure: This is market commentary and personal views only. These are not investment recommendations. For that seek professional help.
Hope everyone is having a Happy Holidays.
Let’s review the final data of the year and find some money making ideas for 2024.
December Top 20
Turkey, Turkey, Turkey… 4 of the top 20 are Turkish Banks. The YWR AI likes 3x earnings, and positive earnings trends. We talked about Turkish stocks in June (Two Pieces of Advice) and they had a good rally off the lows, but they’ve been treading water recently in $ terms. It was interesting to read Rajiv Jain recently pitching Turkey on a Barrons Roundtable. Brave man. For most people the only way to play this is the Turkey ETF (TUR US).
Raffeissen is another one. It’s generating a 16% ROE, but trading at 3x earnings and 0.3x book because 50% of earnings come from their Russian subsidiary.
Eurazeo… a EUR 34bn AUM French private equity firm you’ve never heard of, but with a market cap of EUR 6 billion and planning to return EUR 2.3bn in capital (2024-2027) to shareholders through buybacks and dividends. Here’s the shareholder letter.
Cadence is a regional bank with operations in Texas and the Southeast.
Hankook…we’ll talk about tires later, but these results look pretty good.
Industry Level Trends
Banks are still the most highly represented sector in the top 300 ranked stocks. These are all European and Turkish Banks, but I predict more US banks will join the list in 2024. Cadence and Capital One are the top ranked US Major Banks. Capital One looks interesting.
Autos is Stellantis, Oshkosh, Mazda, Great Wall Motor, Kia, Toyota.
Refining is Tupras and Koc in Turkey, Idemitsu and Cosmo in Japan, Thai Oil and PBF Energy in the US.
Steel is a new one with CSN in Brazil, US Steel, and Yamato Kogyo and Kobe on the list. Kobe has been repeatedly ranking well. Same with Nippon Steel. Fortescue and Kumba Iron Ore are classified by FactSet as steel stocks for some reason, even though they are iron ore miners.
One a month to month basis the trend in banks has been the most persistent. Autos and Utilities have also been a constant but fading. Previously, Airlines and Insurance were top 5 sectors, but have been replaced with Refining and Steel.
Sector Level Estimate Momentum (Tableau)
The rankings above are based on the total YWR score which is a combination of earnings momentum, price momentum and valuations.
But I’ve uploaded the ranking data to a Tableau dashboard so you can look at the data at a sector level for earnings momentum and valuations individually and then click into to see the stocks which are driving the sector ranking.
For, example it’s interesting to see Beverages have the best earnings momentum. When you click in to see what’s going on you see it’s a global list of Coca Cola subsidiaries (Swire is a Coca Cola bottler too).
What’s going on with Coca Cola?
Automotive Aftermarket is also a top earnings momentum sector, but when you click into the stocks, it’s all tire companies (Goodyear, Hankook, Yokohama, Pirelli).
So what’s up with tires?
As a side note
and I have been working on the theme of people trying to make their ICE cars last longer and thinking of ways to play that through replacement parts, but I don’t really see how tires is a play on that. ‘s post on the Cost of Car Ownership is good. People are freaking out about the cost of auto repairs. I especially loved the video on the cost of repairing a Rivian.Contrarian Corner
We’ve been highlighting stocks and sectors with good momentum, but let’s take a look at the stinkers. There could be a great trade in here for 2024.
Fertilizers are cow manure.
Fertiliser stocks have some of the worst earnings momentum of any sector. You could play for a rebound with Yara, OCI, Nutrien, Sabic Agri-Nutrients, Fertiglobe or Mosaic.
Other commodity sectors like precious metals, chemicals and contract drilling have also been rough on a relative basis.
BTW, commodity related equities were rated as the least favorite sector for 2024, along with cash in the November BofA Investor Survey.
So you know what that means…
Also, interesting to see Cable TV is another terrible sector for earning momentum. Yes, we know the problem, but is it possible some PE funds with $3 trillion in cash they don’t know what to do with decide to buy publicly traded cable companies?
Country Level Trends
The US has the highest number of stocks in the YWR top 300 and has been pulling away.
Japan and China are still in the top 5 but the number of stocks for each have been in decline. Great Britain entered the top 5 last month along with Taiwan.
Below are the links to:
YWR Tableau Dashboard
YWR Rankings spreadsheet for over 3,000 stocks.
Until the weekend.
Erik