YWR: Global Factor Model
Disclosure: This is market commentary and personal views only. These are not investment recommendations. For that seek professional help.
It’s time for the monthly data scan of the interesting stocks and sector trends from the YWR Global Factor Model.
The Top 20 best ranked stocks.
Turkey….I know…you hate it, but the computer loves it. Strong positive earnings revisions momentum, P/E’s of 2 and the stocks are trending up. 6 of the top 20 stocks (out of 3,000) are Turkish.
Harmony Gold.. an interesting one. Harmony is a South African deep level gold miner producing 1.5 million ounces. Back of the envelope it should make over $500mn at $2,000/oz (8x P/E). The extra optionality/hidden value is that the new Indonesian government seems to want the long-lost Wafi-Golpu project (copper-gold mine) to go ahead. Everyone has written off Wafi-Golpu as something which will never happen and don’t give it any value in the Harmony share price, but it might be coming into reality at exactly the right time.
Whitehaven Coal (YWR is playing coal through Glencore).
Industry Level Trends
European Banks (BPER, Banca Monte Paschi,Sabadell, Banca Commercial Portugues), we love them and understand why they will keep working (What would you do with EUR 250 billion?).
The computer’s second favorite sector is Autos. Nobody likes car stocks or parts companies, and yet they are super cheap and we see the set up for why they can have a great 2024 (Killer Autos). In Dirty Divs we own Mercedes.
The computer likes Utilities and I should dig into this more, because nobody is paying attention to utilities. It looks like they’re getting delayed electric price increases, and in the meantime fuel costs have dropped. Each company has different regulatory agreements, so it takes a bit of digging to understand each situation.
Big picture shouldn’t we be REALLY interested in utilities longer term? If governments are shifting us to electric everything, then doesn’t that make utilities a growth sector? The negative for me is the dividend yields are not as good as you would expect (3-5%), but maybe it’s like the banks and the future dividends will be much higher.
Oil Refining has popped up as a great sector. It’s KOC and TUPRAS in Turkey. In the US it’s CVR, PBF, DINO, Marathon, PSX. I’ve owned Phillips 66 since the spin out from Conoco and it’s been great. Refining is similar like coal. New players don’t want to get into the business, massive regulatory barriers to entry, and yet we still need it. The incumbents make a fortune and pay it out in dividends and share buybacks.
I should have jumped on the Insurance trade, but it felt too similar to the banks. Interest rates are higher so the insurers are getting 2x more investment income from their portfolios. Meanwhile, the terms on new contracts have tightened over the last few years and we are seeing it come through in the results.
An acquaintance of mine, who is a London underwriter, was telling me about this earlier this year. He said the industry wrote a lot of good business over COVID and that we will see it come through the numbers over time.
Country Trends
The US is still a leading country for top ranked stocks.
Japan still looks good (Kobe Steel, Mazda, Toyota, the Japanese utilities) .
China has stabilised. BYD Electronic (285 HK) is the top ranked stock. Great Wall Motor also scores well (2333 HK).
Taiwan popped up last month as a top 5 country. I look at the stocks and it’s mostly mid-cap ($3-$10 billion market cap) electronics companies I’m not familiar with. But the stocks rank well, so maybe we should be getting to know these companies.
It’s good to finally see Great Britain make the Top 5. We’ve been highlighting this is the most hated/cheapest market in the world. The top ranked stocks are Stellantis, Associated British Foods, 3i, Marks & Spencer, and also Dark Trace (AI based cybersecurity).
wrote this week about the highly discounted closed end investment trusts listed in the UK. We also covered two of these in Venture Cap Giveaway Weekend.Global Factor Model and Tableau
Below is the link to the data and full rankings for all 3,000 global stocks in the Factor Ranking Model.
I’ve also included a link to the Tableau Dashboard I created. It’s a visual way to look at the data on a sector basis and then click into each sector to see the stocks.