Good Afternoon ,
Well another eventful week in the markets draws to a close , a short week , market a bit more volatile and after the strong recent run certainly a bit more two way but each pull back is being bought which is a very healthy sign. The market is definitely looking ok with increasing institutional interest in Ireland across the range of stocks , Seeing institutional interest in the Irish Financials for the first time in many months. However day trading these can be lethal with hue intra day volatility.
CRH is also very volatile but I think that at these levels the stock looks comfortable. In terms of Risk and reward the bias is definitely to the upside despite the further cuts to forecasts this week. In July 2007, CRH traded at just under 18x peak earning's forecasts where it is now trading at just over 12x our revised reduced earnings numbers. It strokes me that with the strength of the CRH balance sheet , and the bullish noises being made by their US peers , that any sign of a stabilisation could lead to a re-rating of the stock. Europe is the key area of concern for CRH at this point so the market will be looking very keenly at trends here.
Smurfit numbers were the news this morning in Ireland this morning and while the stock retreated a few percent first thing , the market took the lack of guidance and the lack of any debt paydown in its stride and the stock rallied after the conference call to close +9.4% at 2.91. A massive move . 300% rally from the low point with absolutely no evidence of anything but continued deterioration in the underlying market conditions. On the conference call Smurfit management were asked twice about whether they ar in Discussion with banks which they evaded saying they were not going to front run any conversations and said that they are always in talks with their banks. Any news about covenant re-negotiation would be taken very positively as would news of an equity offering to bolster the balance sheet.
Independent News and media rallied a further 15.5% today. If there is any read across from theis to the other highly leveraged companies whose businesses are imploding then these stocks under maximum pressure are the ones to own. This market wants beta and risk. It might not be a sensible strategy to play these in size but it is noteworthy that these are the stocks that are the ones leading the rally.
At 5pm Wall street is up 1.3% as the stress test results from the Banks were as was effectively leaked with ten banks needing to raise $74bn.
London closed +1.4% and European markets rallied +2.3%
Have a good weekend.
Liam
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