Liams Last Post : markets taking double dip to heart ,CRH on the drift , Smurfit more to go and Financials beaten up.

Good Afternoon ,

 

And so it is that the double dip sentiment takes hold again and markets go into retreat having had a cosy July to reflect back on. The only problem with July was that the rally was on low volumes and with low  conviction. It is definitely the silly season certainly in Ireland we have a hiatus of corporate news flow for this week before we get into the news season again.

 

The forthcoming news season is likely to be dominated by weakening outlook statements and companies revising downwards their expectations of growth commensurate with the downgrading of official economic growth forecasts. Some stocks are well ahead of the curve in this regard and in particular the construction stocks across the board in Europe the UK and the USA have been reflecting the changing expectations with analysts forecasts already being cut ahead of reports.

 

Many people have commented that I seem to be wracked in terms of a strong opinion on CRH. It is true that the perceptions of the recovery have shifted negatively very quickly and with it CRH has drifted from one trading range into a new lower bound.  I think that we are close to a absolute bottom in the stock and as the sector is so heavily oversold there might be room for a trading bounce depending on your view on the market. Otherwise I do think that the stock should be watched carefully for evidence that the stock is fully discounting future downgrades. The trading bear call I made at eur16.30 has worked beautifully I egret to say so now the question is whether to close in the position. We are close , maybe not today and maybe we have to wait through CRH 's own reporting in the next few weeks but taking a medium term view I believe it has to be right to be ready to buy it back close to these levels.

 

Smurfit is the stock I find hardest to square off with them guiding the market towards an upgrade in EBITDA while the rest of the world sees a slowing environment. It is a macro call. I think that this stock has the greatest capacity to disappoint from managements guidance and even with the recent pull back , there is more downside from here.

 

Ireland's financials have been hit again with continuing fears about sovereign issues so the imminent NTMA bond issue will need to be a success. FT alphaville did not help today with the Funding cliff article.

 

Have a good evening

 

Liam

 

 

 

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Liam Boggan

　

Merrion Stockbrokers

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