Liams last Post : Market at support levels , CRH a sector thing , Banks react to Long bond blowout. tough day...

 

Good Afternoon ,

 

Well what an end to the week, it is back to the bad old days and that's for sure…. With a big sell off in Ireland. One client pointed out to me how hard it is for the largest stock in the market to underperform yet CRH is trying its best..

 

One thing though and I hope it is a bull case.. the ISEQ is now back at support levels which have held six times in the past 18 months… so hopefully it bounces from these levels again.

 

I am afraid I was too early in thinking that the market would already have discounted the CMC and MLM reports and the newsflow from the rest of the sector into the CRH performance. At this point I am not sure what the market is exactly looking for but I can say that the issues are guidance for 2011 , any significant change of outlook for 2010. The Sector continues to be a dog and I had thought that there might be an opportunity to get a trading bounce. Instead the sector performance continues to tank and CRH is now down -12% since the trading update but -17% since the start of August. Indeed looking at CRH peers Holcim , Lafarge and Martin Marietta have pretty much performed exactly in line with each other and the exception is Vulcan which has underperformed by a further -% since the July update of CRH.

The market is not differentiating between quality of balance sheets or strategies etc or valuations. It is a sector thing but we do believe that CRH will find a floor at close to these levels.

 

CRH is now yielding 4.5% so a whole range of yield driven investors may soon start to look at this one.  The 20 year average yield on this stock is 2% ….however the stock did get to these levels of yield in 2008 and has traded in a yield range of about 3.5%

 

The Yield spread n the Irish 10 year bond jumped back to 304bp over bunds which says a lot about the state of how the world now views Ireland. I am afraid that the Irish financials are not going to be a pretty place as the Anglo uncertainty continues and hangs over the perception of Ireland inc. Not a pretty picture . Needless to say Irish Life and Permanent is the most exposed to funding concerns so the stock got hammered today losing -6%

 

Smurfit is a stock I have been bearish on and the market price is starting to react to the double dip concerns that it had blithely managed to ignore until now.

 

Busy week for ireland next week , Kingspan strts us off , they were sanguine at their pre close about theiur prospects. It will be interesting to see if they row back from this…more important perhaps than the numbers…

 

Hope you have a good weekend..

 

Liam

 

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Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

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