Liams Last Post : week one over , Grafton makes the right noises, My picks for 2011.

Good afternoon,

 

Well we make it to the end of the first week of 2011 and the markets remain in good shape albeit Wall Street is reacting to the big miss in the Non Farm payroll numbers which completely contradicted the ADP payroll number released on Wednesday.

 

Grafton is the highlight of the week from an Ireland perspective. The trading update today underpins my bullish view of the stock. The wording of the statement continued to be cautious and less direct than the recent statements of its peers. I liked the trading update today as there is clear positive momentum in Ireland and the UK , Weather was exceptional so the slight miss relative to our forecasts are irrelevant. The acquisition of the 10 Travis Perkins branches signalled a return to an expansion programme in the UK which they only ever do when they see conditions being right. I also do see Grafton being aa takeover candidate in its own right at some stage so it is time to start building positions in this one now.

 

CRH remains in the mire as the Republican vote on the Highway Trust fund casts a lot of doubt about the Highway programme and with Vulcan and Martin Marietta falling sharply and their CDS spreads widening it is just another signal to look elsewhere for performance than CRH at this point intime.There is a price for everything and this one is not cheap given the risks and headwinds.

 

The Eurozone game of chicken is on again with markets once again worried about Spain and Portugal. Spanis 10 year yields are now 5.50 which is exactly the same as the rate at which the EU will lend money to Ireland as part of the bailout.  

 

 Central Bank Governor Patrick Honahan gave a speech in Dublin today saying that the EU and the IMF would be open to re-negotiation of the deal. He also said what is now common market wisdom that an EU insurance scheme for Bonds would have been the most effective solution to crisis from a Banks funding and a sovereign perspective. Honahan acknowledged that the market has a perception of significant tail risk for the banks which is still overhanging the perception of Ireland right now.

 

I will stop now and just re-iterate that I think that the key themes for the Irish stocks in 2011 are recovery in the global economy and cost control or loss containment in Ireland. Many Irish stocks still have pariah status internationally due to being Irish but this hides some interesting opportunities. I suspect that we are likely to see a wave of corporate activity with acquisitions , divestments and takeovers dominating the news. I suspect that there are sufficient number of corporate opportunities to make Ireland one of the surprise positively performing markets in 2011.

 

My list to BUY for 2011 are Grafton , Kerry , Paddy Power , DCC, Ryanair , Aer Lingus  and at the Higher risk end of the spectrum Smurfit Kappa and Irish Life and for those with an appetite for some more blueskies stuff , I belioeve that a portfolio of the Oil E&P stocks namesly Tullow , Cove, Petroneft and PetroCeltic will pay handsoem dividends by the year end.

 

Have a good weekend,

 

Liam

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Liam Boggan

　

Merrion Stockbrokers

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