#$san

[trnpts]

La gran banca pierde diez puntos de peso en el Ibex en la última década

Las caídas en Bolsa reducen la influencia del sector al 28%. El peso de Santander cae del 16,5% 14,3% en año y medio.

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[dragonflycap]

5 Trade Ideas for Monday: Arconic, Boeing, Santander, Steelcase and Unilever

5 Trade ideas excerpted from the detailed analysis and plan for premium subscribers:

I apologize for this abbreviated version. I got caught off guard to attend a family event away from home this weekend and have not replaced my laptop yet so could not work when the kids were asleep. I did pick the Top 10 before leaving, but the write is now stating at 7pm Sunday night. Just charts here this week. Back full scale next week.

Arconic, Ticker: $ARNC

Arconic, $ARNC, is a reversal trade.

Boeing, Ticker: $BA

Boeing, $BA, is a reversal trade.

Banco Santander, Ticker: $SAN

Banco Santander, $SAN, is a possible breakout trade.

Steelcase, Ticker: $SCS

Steelcase, $SCS, is a possible range break trade.

Unilever, Ticker: $UL

Unilever, $UL, is a continuation trade.

After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which heading into May, sees the equity markets making and testing highs again, but in a mixed fashion with strength shifting to the SPY and QQQ and away from the IWM.

Elsewhere look for Gold to continue the pullback in its uptrend while Crude Oil consolidates deciding if it is a bottom or just a pause. The US Dollar Index continues to move lower while US Treasuries are biased lower in consolidation. The Shanghai Composite seems to have found support and Emerging Markets are biased to continue higher.

Volatility is back at abnormally low levels and looks to remain very low going forward, keeping the bias higher for the equity index ETF's SPY, IWM and QQQ. Their charts show strength in the SPY and QQQ in the short term but the IWM rolling over. On the longer timeframe it is similar with the QQQ leading and the SPY turning up, but the IWM stalling at resistance. Use this information as you prepare for the coming week and trad'em well.

Spring Sale Starts Today! Find Deals here

[charlessizemore]

Hunting for Value in European Stocks

I’ve been bullish on European stocks for the past year based on their vastly cheaper valuations relative to the American market. I’m not quite willing to jump into the Greek market just yet, as there aren’t many liquid stocks to choose from, and those that are available aren’t quite as cheap as I’d like to see, given the macro risk. But, European stocks as a whole are a fantastic bargain, and the recent selloff presents a great buying opportunity. 

I’ll start with a broad play on developed Europe, the Vanguard FTSE Europe ETF (VGK). 

VGK gives you exactly what you want from a Vanguard index fund: instant diversification, tax efficiency and rock-bottom fees. VGK holds a basket of 540 stocks spread across the major economies of the eurozone, as well as non-eurozone countries Norway, Switzerland, and the United Kingdom. As a passive index investment, VGK only turns over about 7% of its portfolio per year, and its expense ratio is a negligible 0.12%. 

VGK’s largest country weighting, at 31%, goes to the United Kingdom. France, Germany and Switzerland each chip in 14%, and after that the weightings trail off. “Problem children” Spain and Italy make up only 5.2% and 3.7%, respectively. Looking at industrial sectors, VGK has a pretty conservative bent. About half the portfolio is invested in financials, health care and consumer staples. 

If you’re looking for instant exposure to the major markets of Europe, this is it. But, if you’re looking to play a rebound in the markets hardest hit by the Greek fiasco, you might find that VGK is a little too conservative. 

For more aggressive investors, my next recommendation is the iShares MSCI Spain ETF (EWP). There are relatively few Greek stocks that trade as ADRs, and any investment in Greece should be viewed as a coin toss in this environment: Heads, Greece really does stay in the eurozone and Greek stocks rally; tails, we eventually get a Grexit and Greek financial assets drop by another 50% or more. The returns potential is huge, but there is simply too much downside risk for me to get comfortable. 

Spain, however, represents a nice risk/reward trade off. While Greece’s economy remained depressed, the Spanish economy is expected to grow 2.8% this year. Regional unrest is a problem, and Catalonia may very well push forward with a referendum on independence. Spain has had regional unrest since the Franco dictatorship, yet life seems to have a way of moving on. 

Looking at Spanish stocks, there’s a lot to like. By Research Affiliates estimates, Spanish stocks trade at a cyclically-adjusted price/earnings ratio (“CAPE”) of just 12, which is less than half the CAPE valuation currently being sported by American stocks. 

Spanish stocks also have relatively little exposure to the Spanish economy. Spanish multinationals are active across Europe, and taking advantage of common language and cultural ties, they also have an outsized presence in Latin America. 

EWP gives a nice basket of Spanish stocks, including household names like Banco Santander (SAN), Telefonica (TEF) and Zara’s parent company Inditex (IDEXY). 

Finally, let’s drill down to an individual stock that I expect to perform very well: German luxury automaker Daimler AG (DDAIF). 

Traditional auto stocks have been out of favor of late, as investors have flocked to sexier growth stories like Tesla Motors (TSLA). Yet, at current prices, Daimler offers a value that is hard to ignore. DDAIF stock trades hands at just 10 times earnings and sports a dividend yield of 3%. Furthermore, after lagging its German rivals for years, Daimler has done a nice job playing catch-up with a redesigned product lineup. 

If China’s market rout slides into a real “hard landing,” Daimler will feel the pinch, as China makes up a good 13% of revenue. Yet, as recently as last month, Daimler announced that it expects to see sales growth of at least 10% this year in China. 

Disclosure: Long DDAIF, EWP, SAN, TEF.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog. 

Photo credit: Chema Concellon

[charlessizemore]

Best International Opportunity for the Second Quarter: Spain

With the first quarter down, we don’t have much to show for it. Year to date, the market is flat.

But, that doesn’t mean it’s been boring. It’s been a choppy, volatile year as investors have tried to digest plunging crude oil prices, mixed economic data, and the never-ending speculation over when — or if — the Fed will ever raise rates. 

Adding to all of this, the U.S. market is very expensive, by historical norms. The S&P 500 is trading at a cyclically-adjusted P/E ratio (“CAPE”) of 27.1 — roughly the valuation at the market tops in 1929 and 2007. The only time in history the market has been more expensive was during the 1990s dot-com bubble. Looking forward, this implies annual returns over the next decade of less than 0.5%, or roughly what you might earn on a CD.

Yet, overseas — and particularly in Europe — the picture is a lot brighter. CAPE ratios are lower, implying better expected returns, but this only tells half the story. European stocks are even cheaper than they look, thanks to the double whammy of investors awarding a lower price multiple to already-depressed earnings. (Earnings have been depressed for years by the economic malaise and policy uncertainty following the 2010-2012 eurozone crisis.)    

Europe is cheap. But, within a cheap continent, Spain, as represented by the iShares MSCI Spain ETF (EWP) is a particularly cheap country. And, while Spain is certainly not without its problems (Catalonia is still threatening to secede…), its economy is finally on the mend. Spain’s economy is expected to grow at a 2.5% clip this quarter, and the unemployment rate has been steadily ticking down for the past 12 months. The country is still a mess, but it’s quietly getting its house in order. 

Take a look at the country chart, produced by Research Affiliates, which lists the CAPE (also called the “Shiller P/E”) and the expected returns over the next decade. Research Affiliates expects the Spanish market to return 7% per year. I would be thrilled with a decade of 7% annual returns in Spanish equities, but I think these figures could actually prove to be a little too conservative. Let’s dig into the specifics. 

Research Affiliates builds its return estimates from four pieces: dividend yield, real economic growth, valuation and currency movement. The Spanish stock market currently yields 5%, and Research Affiliates estimates a rather conservative 1.3% real-growth rate. Despite the low CAPE valuation at just 11.6, earnings multiple expansion only accounts for 0.1%. The remaining 0.7% comes from expected appreciation in the euro. 

The high dividend yield speaks for itself, though I expect Spanish companies to boost their dividends at a healthy clip going forward. Some of Spain’s biggest companies by market cap — including Telefonica  (TEF) and Banco Santander (SAN) — have had to slash their dividends over the past few years. But, the pain has now already been taken, and as the Spanish economy improves, I expect to see decent dividend growth. 

The estimate of 1.3% annual growth seems a little on the low side, but I’ll be generous and give Research Affiliates a pass on this one. And, after the massive run the dollar has had, 0.7% attributed to euro appreciation doesn’t seem completely unreasonable. 

It’s the valuation that I think is grossly undervalued here. With eurozone bond yields at record lows, European stocks should be trading at premiums to their long-term averages. But, in Spain’s case, the CAPE of 11.6 is significantly below its long-term average of 15.6. Rather than add 0.1% to annual returns, I believe 0.5%-1.0% seems more reasonable. That would put us closer to 8% annual returns. 

Does any of this guarantee that Spain will outperform over the next quarter? No, of course not. But, I would use any selloffs in the Spanish market as buying opportunities. At current prices, Spain is a developed market offering the potential for emerging-market returns.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog.

Photo credit: TheGiantVermin

[dragonflycap]

5 Trade Ideas for Monday: Abbott, Ashland, Cerner, Dillard’s & Santander

5 Trade ideas excerpted from the detailed analysis and plan for premium subscribers.

Abbott Laboratories, Ticker: $ABT

Abbott Laboratories, $ABT, has been a darling of the trading world. It moved higher in February after a broad basing. And since then has been in a range between 46.10 and 48. Friday's candle confirmed a reversal higher and gives a good entry for a long term position or short term trade.

Ashland, Ticker: $ASH

Ashland, $ASH, moved higher off of the October low and consolidated around 118. After that it made another run higher and has been consolidating since in an ascending triangle. The RSI has held bullish and the MACD is about to cross up for a buy signal.

Cerner, Ticker: $CERN

Cerner, $CERN, has had a strong trend higher since May 2014. The recent activity since December has created trend support and it touched that last week. It also pulled back to close a gap before moving higher Friday. The RSI is bullish and rising and the MACD is pulling back, but appears to be leveling at the signal line.

Dillard's, Ticker: $DDS

Dillard's, $DDS, had struggled at the 125 level for several months before moving through it in February. That leg higher has created rising trend support which it touched last week. With strong RSI and a MACD leveling at strong levels this could have a lot more in it to the upside.

Banco Santander, Ticker: $SAN

Banco Santander, $SAN, had been in a falling trend from June 2014 until it accelerated down the first few days of January. Since then it has consolidated in a bottoming process. Last week it made a new higher high, in building a bull flag. The strong and bullish RSI along with the rising and bullish MACD support a continuation higher.

If you like what you see sign up here for how to trade these, more ideas and deeper analysis.

After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which, Heading into Quarter end and a holiday shortened week the Equity markets look short term vulnerable in their long term uptrends.

Elsewhere look for Gold to try higher in its short term uptrend but with trepidation while Crude Oil consolidates back in a channel. The US Dollar Index may continue to consolidate in its uptrend with a bias higher while US Treasuries are biased lower as they consolidate. The Shanghai Composite looks better to the upside in its consolidation and Emerging Markets are biased to the downside in their broad consolidation.

Volatility looks to remain subdued keeping the bias higher for the equity index ETF's SPY, IWM and QQQ. Their charts show a mixed bag with consolidation in the uptrends ion the longer timescale, with the IWM the strongest, while on the shorter timeframe the IWM and QQQ may reverse higher with the SPY still looking vulnerable. Use this information as you prepare for the coming week and trad'em well.

More at Dragonfly Capital 

[charlessizemore]

Where to Look for Cheap Stocks in 2015: CAPE Around the World

2014 was a lousy year for global value investors. Cheap markets, as measured by the cyclically-adjusted price/earnings ratio (“CAPE”) got even cheaper, while expensive markets got even pricier. (Note: the CAPE takes a ten-year average of earnings as a way of smoothing out the economic cycle and allowing for better comparisons over time.)

I expect this to reverse in 2015. At some point--and I'm betting it could be as early as the first quarter--global market valuations should start to revert to their long term averages. That's fantastic news if you're invested in cheap foreign markets. It's not such fantastic news if your portfolio is exclusively invested in high-CAPE American stocks.

Let's take a look at just how skewed the numbers are. The S&P 500 managed to produce total returns of 13.7% in 2014. But as quant guru Meb Faber pointed out in a recent blog post, globally, the median stock market posted a loss of 1.33%. The cheapest 25% of countries saw declines of 12.88%, while the most expensive markets actually gained 1.36%.

I should throw out a couple caveats here. These were the returns of U.S.-traded single-country ETFs, which are priced in dollars, and not the national benchmarks. The strength of the U.S. dollar relative to virtually every other world currency last year was a major contributor to the underperformance of the rest of the world.

All the same, it's worth noting that we're in uncharted territory here. As Faber noted in a recent tweet, U.S. stock valuations relative to foreign stock valuations closed 2014 at the highest spread over the past 30 years. Four out of the five biggest relative valuation gaps resulted in outperformance by foreign stocks the following year. The only exception was 2014.

Let's dig into the numbers. The CAPE for the S&P 500 is now 27.2. That's a full 63.9% higher than the historical average of 16.6, more expensive than at the 2007 peak, and close to the 1929 peak. The only time in U.S. history where the S&P 500 was significantly more expensive based on CAPE was during the peak of the 1990s tech bubble.  

Sure, the "fair" CAPE is going to be a little higher today than in decades past due to record low bond yields (all else equal, lower yields mean higher "correct" valuations). But I should point out that yields are even lower in most of Europe and Japan, yet valuations are significantly cheaper. So while low bond yields might partially explain why U.S. stocks are expensive relative to their own history, it doesn't explain why the U.S. is expensive relative to the rest of the world.

No matter how you slice it, U.S. stocks aren't the bargain they were a few years ago. Research Affiliates calcuates that U.S. stocks are priced to deliver returns of about 0.7% over the next 10 years. Using a similar methodology, GuruFocus calculates an expected return of about 0.4%.

I've driven home how expensive U.S. stocks are. Now, let's take a look at other global markets. Here are the world's cheapet markets as measured by the CAPE and sister valuation metrics cyclically-adjusted price/dividend ("CAPD") cyclically-adjusted price/cash flow ("CAPCF") and cyclically-adjusted price/book ("CAPB").  All figures reported in Meb Faber's Idea Farm using original data from Ned Davis Research.

We see some familar names on the list. Greece remains the world's cheapest market by a wide margin. Of course, Greece is also in the middle of an election cycle that may well result in the country getting booted out of the Eurozone.

Interestingly, Russia is cheap following Western sanctions and the collapse in the price of oil, yet there are several far more stable countries that are cheaper, such as Austria, Portugal, Hungary and Italy.

Two countries that I've liked for years based on valuation--Brazil and Spain--round out the top ten. To put things in perspective, Spain trades at nearly a 60% discount to the U.S. market based on CAPE.

Yes, Spain has its problems. Its economy is stuck in a slow-growth rut, and unemployment remains over 20%. But Spain is also home to some of the world's finest multinationals, such as banks BBVA (BBVA) and Banco Santander (SAN), telecom giant Telefonica (TEF) and fashion retailer Inditex (IDEXY).

There are different ways to use this data. You could buy and hold country ETFs, such as the Global X FTSE Greece 20 ETF (GREK), the Market Vectors Russia ETF (RSX) or the iShares MSCI Spain ETF (EWP). Or you could go with a convenient one-stop shop like Faber's Cambria Global Value ETF (GVAL).

GVAL is nice collection of cheap stocks from around the world. As of last quarter, GVAL's largest country weightings were to Brazil, Spain and Israel.

Disclosures: Long GVAL, EWP, BBVA, SAN, TEF

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog.

Photo credit: Laszlo Ilyes

[charlessizemore]

Cheap and Unloved, Spanish Stocks are a Buy

In the last month of 2014, investors have two chief concerns: lackluster holiday sales and the sudden collapse in crude oil prices. On the surface, neither of these should be causes of major concern. Retail sales remain higher than last year when you look at year-to-date figures for 2014. And falling energy prices mean more money available for discretionary spending.

There’s one big problem, however. U.S. stocks are very expensive based on traditional value metrics such as the cyclically-adjusted price/earnings ratio (“CAPE”), and continued robust growth had already been baked into share prices. If the growth that investors had expected fails to materialize, the U.S. market could be looking at a nasty correction.

The best time to make major new equity purchases are when prices are cheap and expectations are low. Any marginal improvement comes as a surprise to Wall Street and provides the impetus for a rally.

These are precisely the conditions in place today in Spanish stocks. Spain was one of the hardest-hit countries in Europe’s back-to-back crises. The 2008 meltdown crippled the Spanish construction and banking industries, and the following Eurozone sovereign debt crisis utterly crushed confidence in the Spanish economy. More than one in four Spaniards—and well over half of Spain’s youth—were unemployed by mid-2012.

Spanish stocks, as represented by the iShares MSCI Spain ETF (EWP), collapsed in value. Seven years after peaking in late 2007, EWP is still down by nearly 50% today, before taking dividends into account. At the pits of the Eurozone crisis, EWP was down by fully 70%.

After a thorough thrashing like that, Spanish stocks are now priced to deliver solid returns. Spanish stocks sell for about 9 times cyclically-adjusted earnings (i.e. average earnings of the past 10 years). Meanwhile, U.S stocks trade at about 25 times cyclically-adjusted earnings. Assuming that stock returns in both markets regress to their long-term averages, this means that Spanish stocks are priced to deliver returns of more than 50% over the next five years. American stocks are priced to deliver returns of less than 7%. And again, those are cumulative returns over the next five years, not annualized.

In my view, these figures actually understate how cheap Spanish stocks are at current prices. Remember, the CAPE takes a rolling 10-year average of earnings. Well, Europe has been in an almost continuous state of crisis since 2008, meaning that earnings have been depressed for roughly seven of those ten years. Yes, earnings were abnormally high going into the bust due to Spain’s housing and finance boom of the early and mid 2000s. But after seven years of jarring economic turmoil, most of those bumper earnings are no longer included in the calculations.

Meanwhile, Spain is slowly creeping into growth again even while Germany and the Eurozone core stumble. Latest estimates have the Spanish economy growing at 1.2% in 2014 and 2.0% in 2015. That may seem modest, but it’s not wildly better than what the Conference Board expects for U.S. GDP growth. The Conference Board expects U.S. real GDP growth of 2.2% for full-year 2014 and 2.6% for 2015.

Now, what makes more sense: To own Spanish stocks trading at barely a third the valuation of U.S. stocks as measured by the CAPE or expensive U.S. stocks with lofty growth assumptions already built into prices? I think you know the answer.

I like the iShares MSCI Spain ETF as a broad play on Spanish stocks, but I also believe that investors can do well by picking and choosing individual Spanish stocks. I’m currently long Spanish banking giants Banco Santander (SAN) and BBVA (BBVA) and global telecom operator Telefonica (TEF).  I’m also long two more exotic plays on a Spanish recovery, REITs Lar España and Hispania.

As newly-formed REITs that only began trading this year, book value is a reasonable estimate for the REITs liquidation value. And at current prices, Lar España is trading at a 10% discount to book value while Hispania is trading at a modest 4.7% premium.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog.

Photo credit: M Kuhn