Liams Last Post: Another day ireland sinks materials and financials worst..

Good Afternoon

 

The late sell off in Wall street last night did nothing to calm nerves… As my dad once said to me about the price of tomatoes in the fruit market years ago… if it is not going up…it is going to go down.

 

And so the global equity rally fades , albeit there is still significant amounts of cash going into the market. Looking at the overall European Markets the best performing sectors over the apst mont have been the Materials sector with performance of 7% , followed by Energy +5.5% , Financials +4% with Consumer staples and consumer discretionary sectors generating about 3.5% returns .  What is clear now is that there is a degree of sector rotation going on now. On a one week view the Materials sector has lost -1% , Industrials -2% and Information technology stocks have declined by -4% , in the past 24 hours the positive sectors have been Telcos's Consumer staples , Energy ,Utilities , IT so the more defensive sectors ar very much taking over from the cyclicals.

 

Is the dash to trash over , is this just a pause before we get into the year end trading statements ?

 

There has been selling pressure on Irish Midcaps and the Financials over the past week and the market has struggled but held up well before a significant mark down today.

 

Grafton is a stock where we have been doing decent business in the 3,60's levels for the past few weeks as the stock has retraced from its recent high of 4.00 , but today without much volume the stock got knocked at the opening to a low of 3.33 , the stock has been struggling in the 3. 35 to 3.45 level for most of the day.

 

ICON which managed to persude investors at it s conference call yesterday was up sharply today again.

 

CRH which has been struggling for some time dipped below eur19.00 . I have to say I continue to like it , My view is and has been that the stock is in the sin bin post the rights issue and may remain so as indeed it has in the past until it announces a significant acquisition. The management indicated when they raised money that acquisitions may not flow until late 2009 or early 2010. We are getting close to this time horizon now. The currency moves are a drawback for this one with its exposure to the Dollar a definite drag on earnings.  There is significant operational leverage in this stock and unlike Lafarge where our Friends in Kepler cut their recommendation to reduce , CRH has not got a stretched Balance sheet , is trading on an EV to IC of just over 1x and a free cashflow yield of 9.8%.

 

Today the economic data was mixed with initial jobless claims taking a step for the worse with the number coming in at 531k vs forecasts of 515k , but the leading indicators came in a tad stronger at 1% vs 0.8% expected.

 

 Across Europe all markets ar down about 1% with Ireland down -2.2% dragged down by the building materials stock and the banks.

 

Have a good evening …

 

 

Does not feel great…

 

Liam

 

 

 

 

 

 

 

 

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

www.merrion-capital.com

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