Good Afternoon ,
A range trading day in Dublin today up and down and closing just about flat. European markets had a more straightforward day almost straight down -1.8% and London closed down too -0.7%
Not much corporate news today , the Elan bid did not happen and Elan fell -8% after the strong false rally yesterday.
United Drug rallied +7% today after the share price has been under serious pressure for some time now. C&C fell -5% as the market starts to focus on possible tax hikes with the April 7th budget.
Kingspan fell -4.7% though CRH was positive and Grafton rose just under 1%.
The Profit Warning from Air France was enough to out the flag carriers under pressure , British Airways fell -3% , Lufthansa fell -2.7% but Aer Lingus held flat and Ryanair stayed in its range though closed +1%.
At 5pm , Wall Street is -1.8% , the rally finally succumbs to some profit taking but lets hope the street manages an orderly close and the pattern of building and range trading continues as this will provide a platform or support for the markets to stabilise and hopefully push on.
Merrion Research published a note today called Four to rely on highlighting four stocks to follow in Ireland for the medium term. In our view, the recovery in the Irish equity market (excluding the banks) will be more influenced by policy actions outside of Ireland and the direction of global equity markets than events domestically. However, with financial uncertainty remaining high and the Irish domestic economy likely to underperform, we identify four stocks which we believe will benefit from the ultimate cyclical recovery but which also provide relative defensive characteristics in the interim . Our criteria for choosing these stocks are:
- Solid balance sheets - reasonable leverage levels, no covenant or short term refinancing concerns.
- Strong free cash flow generation.
- Ability to sustain or grow ROACE over the next 3-5 years.
- Proven management track record.
- Low dependence on the Irish economy.
- Attractive valuation.
The four stocks we have chosen initially are CRH, Ryanair, Kerry Group and DCC. Their strong cashflow and balance sheet characteristics will allow these companies to invest in their businesses and/or take advantage of low valuations in their sectors to ultimately emerge from this recession in a strong structural position within their industries at a time when others are retrenching due to high leverage.
Food for thought
Have a good weekend
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
www.merrion-capital.com
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