YWR: Global Factor Model
It’s our favorite day of the month. Factor model day. It’s where we review the earnings, value and price trends on 3,400 stocks globally to find new trends and ideas.
The Top 20 List
What’s new in the Top 20 ranked stocks? This used to be full of Turkish stocks, but less so now (3). What's new is Taiwanese semiconductor stocks (SK Hynix, WT Microelectronics, Powertech). In fact Taiwan is becoming a bit of a thing as we will see in the country data below.
GM sticks out to me. As you know we’ve done a lot on the auto trade idea (What’s so interesting about Autos?, Killer Autos, The Secret Bull Case for Autos).
GM scores well because it has strong estimate revision momentum and is trading on a P/E of 4.5x. BTW, the consensus 2024 estimate of $8.50 is at the low end of GM’s guidance ($8.50-9.50), so there could be more upside to estimates.
In the chart below you see GM’s share price has gone nowhere despite the fact the company has never been this profitable.
Then again charts, schmarts. And we all know value stocks never make money. Why care about a stupid car stock?
But what if I told you I had some secret edge for you? Yup. And I’m only going to share this with my YWR subscribers…. Keep this on the down low! OK?
OK. Here it is.
Last week I was having beers with a trader for a MASSIVE fund. I can’t tell you which one. And this trader said his team had just come out of their IC meeting and decided they LOVE…. GM! They think it is super undervalued, and their fund is going to buy a huge position in the stock. They are going to make it their biggest position.
He said they are probably going to end up buying $10bn worth for the fund. He’s already given the order to Goldman, Barclays and Citi and the instructions are to just get it done. Don’t be picky about the price. He said it is such a big position that even if they buy shares every day it will still take all year to complete. The trader recommended that we front run his fund’s buy order and make lots of money.
Oh wait… actually the fund is GM itself and they already told you what they are going to do. And they want you to front run them. That’s the whole point. The MCAP of GM is $45bn.
Accelerated share repurchase program
In connection with GM's ASR program, GM will advance an aggregate of $10.0 billion to the executing banks and will immediately receive and retire $6.8 billion worth of GM's common stock. GM had approximately 1.37 billion shares of common stock outstanding prior to the ASR.
The ASR program is expected to conclude in the fourth quarter of 2024. The ASR program will be executed by Bank of America, N.A., Goldman Sachs & Co. LLC, Barclays Bank PLC and Citibank, N.A.
Outside of the ASR program, GM will have $1.4 billion of capacity remaining under its share repurchase authorization for additional, opportunistic share repurchases.
https://investor.gm.com/news-releases/news-release-details/gm-reinstates-2023-earnings-guidance-and-announces-10-billion
Industry Ranking Trends
Banks are still the most widely represented sector amongst the top 300 ranked stocks, but the absolute number is down, and Semiconductors are #2.
The number of highly ranked banks in the YWR 300 is sliding because their estimate momentum is falling. The positive effect from higher interest rates was last year’s news.
The new, new is AI data centres, Pharma and investment managers.
When we use the YWR Tableau dashboard (link at the bottom of the post) to drill down into earnings momentum specifically, at the sector level, we see something is cooking in trucking, insurance and investment managers. When we click into investment managers we see the big PE firms are scoring well.
Country Ranking Trends
Top 5 countries in the YWR 300.
I’m increasingly of the view that Japan, Taiwan and South Korea are the new Europe. As I go through the top ranked stocks I am always coming across Taiwanese electronics companies I have never heard of. And how many of us have been to Taiwan?
But the monster trend is the US. As we learned in Seven Reason Rates go Higher, the US is the new China.
The US is showing the best momentum at the country level. Japan, China, Taiwan; everything is falling relative to the US.
What’s also amazing is that China has completely dropped out of the top 5. Back in May 2023 it was the top ranked country with 100 companies in the YWR 300.
China seems dead and yet it is my Surprise Market for 2024.
Below is a link to the full February dataset for all 3,400 companies.
I’ve also provided a link to the Tableau dashboard so you can click into the trends at the sector level.