Week Ahead: Reckitt Benckiser's Struggle | Tesla’s Job Cuts | US Oilers | Swiss Quality Spotlight

22nd Apr by Keelan Cooper

18 comments 1859 reads

Good morning and welcome to the Week Ahead, your weekly destination for discussion and analysis of the largest stocks in the UK and overseas.

Earlier this month the UK surprised markets with lower-than-expected inflation figures for March, hitting a two-year low at 3.2%. This outcome contrasts notably with the persistent inflationary pressures seen in the US, where CPI remains higher at 3.5%. The differing inflation dynamics between the two countries are now being reflected in the performances of their respective leading indices. Following these announcements, the FTSE 100 has maintained its positive trend returning just over 1% while the S&P 500 has recorded a decline of over 4.5%.

Looking ahead, this week presents a relatively subdued macroeconomic calendar, featuring releases such as the UK CBI Industrial Trends on Monday and US Jobless Claims on Thursday. However, the focus shifts decisively to corporate earnings, particularly in the US, where several members of the "Magnificent 7" and industry heavyweights like IBM, Visa, Boeing, and Exxon Mobil are set to report.

In the UK, attention will be on updates from key sectors, including housebuilders Taylor Wimpey and Persimmon, as well as consumer goods giants Reckitt Benckiser and Unilever. The banking sector's Q1 updates will commence with Lloyds on Wednesday, followed by Barclays on Thursday and Natwest on Friday.

In Europe, notable names reporting include Novartis, Nestlé, Airbus, Carrefour, Deutsche Bank, Sanofi, and Safran, contributing to a week brimming with market-moving corporate disclosures.

Companies reporting

Day	Big UK earnings	US company reporting	EU company reporting
Monday - 22nd April		Q1 2024 earnings - Verizon, Nucor	Q1 2024 earnings - Renault, Saipem, SAP
Tuesday - 23rd April	Q1 Trading update - Taylor Wimpey, Jupiter Fund Management HY 2024 results - Associated British Foods	Q1 2024 earnings - Tesla, PepsiCo, Lockheed Martin, Philip Morris International, Invesco, UPS, Texas Instruments, Kimberly-Clark, Freeport-McMoRan, Xerox, Danaher, Fiserv Q2 2024 earnings - Visa	Q1 2024 earnings - Deutsche Boerse Novartis, Kering, DNB ASA
Wednesday - 24th April	Q1 Trading update - Lloyds, Reckitt Benckiser, Bunzl	Q1 2024 earnings - Meta, IBM, AT&T, Boeing, Biogen, Humana, Thermo Fisher Scientific, General Dynamics, Ford, Western Union Q3 2024 earnings - Lam Research	Q1…

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shopping365

22nd Apr

Two further Swiss companies I hold that have been performing well are Abb (SWX:ABBN) and Holcim AG (SWX:HOLN) . The former is engaged in engineering and robotics, anyone who has visited Switzerland and ridden in a cable car or ski lift will recognise the name. Recent results available here https://library.e.abb.com/publ...

The latter is involved in the basic materials sector and produces a low carbon concrete, an example of this is described here https://www.holcim.com/who-we-...

Both pay a dividend. As always DYOR.

Mark Carter

RKT. Well that was a bit of a disaster, wasn't it? $18b price tag, 29X earnings.

BnB

Keelan, good to see some European coverage today. I would point out that I’ve been warned off both Nestle and Novartis by my bank (Swiss, so they should know). Not because these are poor quality businesses, quite the opposite, but because they expect the negative trend to continue for sometime. Two to watch, for sure. In terms of quality European businesses, I would be all over LVMH Moet Hennessy Louis Vuitton SE (EPA:MC) and COMPAGNIE FINANCIERE RICHEMONT SA (SWX:CFR) if I didn’t already have a large stake in each. Shares are very cheap relative to history and other luxury sector comparators. Now, during a consumer slowdown, seems to be the ideal time to buy, being the only time you get such a good price. Recent weakness in ASML Holding NV (AMS:ASML) also looks like a buying opportunity to me if you can stomach the valuation and volatility. Investors would have had to be asleep for the last 10 years not to be aware that they hold the monopoly in the market for the most advanced semiconductor manufacturing equipment . Staying with semiconductors, and moving massively down in scale and valuation multiple, have a look at AIXTRON SE (ETR:AIXA, the valuation of which has collapsed due to fears over EV adoption in the near term. Their products, particularly those fostering the use of innovative materials like silicon carbide and gallium nitride in semiconductor production, are expected to be in big demand when the market picks up.

ABB and Holcim mentioned below are both decent companies but both are also highly cyclical, so don’t really match up on quality metrics. Nevertheless, ABB has strong tailwinds from data centre, AI and electrification trends as well as an upturn in the capital cycle. But I prefer competitor Schneider Electric SE (EPA:SU) which has a vastly superior long-term track record and better insulation (geddit?) from cyclical forces. Another very reliable non-cyclical, because its industrial gas products are utterly essential to the industrial processes that it serves, is L'Air Liquide Societe Anonyme pour l'Etude et l'Exploitation des Procedes George (EPA:AI. Their moat is built upon the unique distribution networks that see their products pumped straight from the process plant into their client factory sites, creating a monopoly relationship. The valuation is up with events, but this, barring disasters, is one I believe you can tuck away for a decade with confidence. I could highlight many more, but, for the sake of brevity and to stay with the Swiss theme, let me offer a company of the highest quality and with a valuation to make pure value investors choke on their morning coffee, yet which I believe is poised to perform well: Belimo Holding AG (SWX:BEAN) is a Swiss precision engineer, which makes patented building control solutions that are in high demand to meet demanding building emissions regulations.

I hold all of these and hope these suggestions are of use to some.

Howard Adams

Hi Keelan (and other readers)

Many thanks for this weekly review of forthcoming events. I am finding it insightful. It has also stimulated ideas for investments I have not yet considered. I invest in UK, Europe and mainly in the US, thus the weekly review aligns nicely with my own portfolio.

I wish a few more readers joined in on this thread but I think it will take some time before it gains traction. I hope you and other readers will have the patience to let it build momentum.

Like shopping365's post earlier I think posting about investment ideas might just help to attract more readers.

FWIW, one of my European holdings is Exor NV (AMS:EXO) . IMO this is an option which is only attractive if you dig quite deeply into what this stock actually does. But most importantly who owns it, who the directors are and who is overseeing the investments that Exor NV (AMS:EXO) owns. (information is on their website https://www.exor.com/)

My investing thesis for this stock is somewhat flippant but is also extensively researched.

The flippant part is 'follow the money'. That is to say Exor NV (AMS:EXO) is the investment vehicle of the Italian dynasty the Agnelli family who founded Ferrari.

(This is separately listed in Italy & Nasdaq under ticker Ferrari NV (BIT:RACE) or Ferrari NV (NYQ:RACE) )

When I first encountered and researched Exor NV (AMS:EXO) I figured the Agnelli family are highly motivated to protect their own money and thus their investments (the family owns nearly 57% of EXO, and EXO owns nearly 24% of Ferrari).

I then dug into all the people involved and concluded that the 'wisdom of this particular crowd' (and the network of people they are connected to) is highly likely to be much more informed about the markets and the invested companies than I every will be and so I felt Exor NV (AMS:EXO) could be a steady, slow growth, long term holding.

Furthermore I am investing in a company and not an investment trust or a fund and thus do not get charged annual management charges.

I first bought in Jun 2023 and have added steadily every since.

The other reason I bought in and have added steadily is that I like the sorts of companies they invest in ...... this the current list from their website

In addition to holding Exor NV (AMS:EXO) I also hold Ferrari NV (NYQ:RACE) and Iveco NV (BIT:IVG) . I am tempted to also buy a starter position in Stellantis NV (NYQ:STLA) but need to do more research.

A by product of holding Exor NV (AMS:EXO) is that ticking the news feed box in Stocko alerts means I get quite an interesting set of news feeds about some of Exor NV (AMS:EXO) holdings which can alert me to ideas I would not have seen otherwise.

For example today the current CEO of Iveco NV (BIT:IVG) is moving to become CEO of CNH Industrial NV (NYQ:CNHI). This caused a dip in Iveco NV (BIT:IVG) share price, but might offer an opportunity in CNH Industrial NV (NYQ:CNHI) . CNH used to own IVG, the CEO moving to CNH oversaw the extraction of IVG from CNH and helped the share rise from a lows of 4.74 euros (23/09/23), to 11.68 euros (as I type), a rise of 146.41% in about 7 months during a period whereby the European economies have been quite challenged.

Apologies for long post, got carried away.

Regards

Howard

Hi BnB

Useful post many thanks for the comments and ideas.

I am with you on luxury goods.

I hold LVMH Moet Hennessy Louis Vuitton SE (EPA:MC) Hermes International SCA (EPA:RMS) and Kering SA (EPA:KER) at the moment.

I have also held COMPAGNIE FINANCIERE RICHEMONT SA (SWX:CFR) and will hold again.

I see them all as long term holds and tend to cost pound in/out as the luxury goods market fluctuates .... China, US, inflation, flights to bonds and gold. I find holding these and researching them often gives me a new insight into some of macro narratives flowing around markets.

Also, I just enjoy researching them as they are fascinating businesses.

Needless to say as I invest in Tech I also hold ASML Holding NV (AMS:ASML) .

Also, as a European play on chips I hold BE Semiconductor Industries NV (AMS:BESI) (a close partner of Applied Materials (NSQ:AMAT) which I hold) along with several other US semi conductor stocks.

Hi Howard

I also hold BE Semiconductor Industries NV (AMS:BESI) - it gives a wild ride!

Rusty2

The problem is the tax on dividends in Swiss companies.

abtan

Hi Rusty/shopping365

"The problem is the tax on dividends in Swiss companies."

Agreed

I've held Swiss companies in the past, but it was only when the dividend came through that I realised how high the tax rate was..

I tried to go through the process to reclaim this, but found it highly onerous.

That's not to say Swiss companies are bad investments - indeed I own one off the top of my head - but now I only think it's worth investing in one if capital appreciation is the main aim.

john2

The Agnelli family did not found Ferrari. Ferrari was founded by Enzo Ferrari in 1939. The Agnelli family founded Fiat at the end of the 19th century and incorporated Ferrari into their empire a considerable time later.

There are a many companies in Europe that I like and have done well for me.
Here are a few that I hold:

Lifco AB (publ) (STO:LIFCO B)
This first came on my radar via Chris Mayer (of 100 Baggers fame).
It's an amazing company with bizarre, unrelated niches, such as Dental Equipment and Demolition Tools.

I read the Annual Report last week and found the segmental information pages fascinating - from Page 68 for any interested:
https://network.s-z.se/app/upl...

It remains highly cash generative, with modest debt.
Organic and acquisitive growth has been the norm for quite some time now without erosion to margins.
I am a big fan.

A sample of one of their products:
https://www.youtube.com/watch?v=7hTYzMdQfRs
Lagercrantz AB (STO:LAGR B)
Another Swedish compounder that I like.
Margin expansion over the last few years has been remarkable.
As per 1. above, highly cash generative with modest debt.
Trigano SA (EPA:TRI)
A maker and seller of caravans, campervans and trailers.
Is the dominant player in the European market, with Knaus Tabbert AG (ETR:KTA) playing catch-up.
Highly cash generative, acquisitive, and appears to have pricing power.
Operating Margin has been expanding over the last decade, from 2.2% in 2014 to 12.2% in 2023.
2 of my favourites in the transport sector:
- Ivu Traffic Technologies AG (ETR:IVU)
- Init Innovation In Traffic Systems SE (ETR:IXX) .
I see them as the Tracsis (LON:TRCS) of Europe, but with a much bigger market to go for.

Both are highly cash generative and have won some ridiculously large contracts in the last 12 months, across both Europe and the US. Init alone won more orders in Q1 this year than the entirety of 2023, including one contract win from TFL.

There are competitors out, but with the market expanding as Europe and the US invest in their green transportation infrastructure, I would hope that the growth continues for some time to come.

Hi john2

Yes my mistake, thank you for the correction.

Hi abtan

Very interesting ideas, none I have looked at before. Thank you

Harry Hindsight

Posting as some comment needed good or bad.

3.2% inflation - it's still a reduction in your wealth over time - not reality (aka Clown Town).

Took 2 adults and child to 5-Guys burger bar in Canary Wharf - £69 - ok had a beer, coke etc but the government 'figures' are surely fictional when in the 'real world'.

Ok not everyone can splash out on their grand kid for a treat but the point is there, even my local chippy is now getting into silly land for 'cod and chips'. Everyone is caning it as much as can get away with it.

3.2% - Clown Town.

The Tesla was always a rich person option, not the normal people without a charging point next to their door. And don't go on a long holiday with it - kids - "are we there yet" - nope lets spend the next hour protecting the planet (from what is debatable) .

BenHazz

23rd Apr

JD Sports Fashion (LON:JD.) with a 1.1billion acquisition of US based Hibbett (NSQ:HIBB) , just over 20% premium. JD working hard withing the RNS to stress the immediate financial upside of the acquisition. Probably in an attempt to limit the usual sp hit folloeing an acquisition involving a good chunk of debt. Long term positive as its increasing exposure to the southern US market, short term we might see a dip. (I hold)

Hi Abtan,

You are correct, capital appreciation is virtually always my main aim when investing. I would also add with regard to Swiss investments it is also the strength of their currency. I tend to regard the Swiss currency as being a European reserve currency, a bit akin to the US dollar, which was one of the reasons I started investing in the USA many years ago and this approach has served me well.

Keelan Cooper

Hi BenHazz,

Thank you for posting this, I was just about to write a comment about it!

JD Sports Fashion (LON:JD.) has a long history of acquisitions and featured prominently as one of the 'serial acquirers' in our 'Makings of a Multibagger' research. I've attached a link to the report below for anyone interested.

https://www.stockopedia.com/ac...

The company's US-based acquisitions in recent years have turned out pretty well for them, notably Finish Line in 2018 and Shoe Palace in 2020.

On initial glance, the current terms for Hibbett (NSQ:HIBB) don't seem to be too onerous. Particularly like that it'll be earnings accretive from year one.

Best,
Keelan

JD Sports Fashion (LON:JD.)

Hi BenHazz

I've been following Hibbett (NSQ:HIBB) for several years now - it's an impressive company and the only thing that has stopped me from investing has been lack of funds.

Personally I feel that JD Sports Fashion (LON:JD.) have made an astute acquisition at an excellent price.

Hibbett (NSQ:HIBB)'s cash generation over the last 6-7 years (that's as far back as my analysis went before today) has been remarkable.

They've generated so much cash that they've bought back nearly 50% of their own stock in the last 10 years.

To be honest I'm a little confused by what I see as a low takeover price. Hopefully there are no skeletons are lurking in the closet. In any case I've got my rose-tinted glasses on and I remain a happy holder of JD Sports Fashion (LON:JD.)

24th Apr

Some light-hearted tomfoolery for today.

TSLA market update. PE 33. Misses earnings target, yet trades +13% after hours.

Here's what one scamp on Twitter posted in response:

Week Ahead: Reckitt Benckiser's Struggle | Tesla’s job cuts | US Oilers | Swiss Quality Spotlight

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Keelan Cooper

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