Currently, there are countless news headlines regarding as well as bloggers posting their thoughts about the corona virus, related economic fallout and financial market (over)reactions. Here are my trivial thoughts on the topic and ideas how to take advantage of lower share prices.
This is not investment advice. Please read the disclaimer.
The development of the corona virus with more global cases recently is freightening. And nobody really knows right now, how it will turn out! The probability of a global recession did most likely rise since corona, but how likely is it? Honstly, I (and most others) have (and probably had) no clue!
What is already detectable?
- Manufacturing and supply chains are party disrupted which can have manyfold effects on global interconnected and complex manufacturing companies (i.e. Apple)
- Tourism activity (think airlines, hotels, cruises) is down and events canceled are up
- Local retailing can be hughely affected (see Hong Kong, mainland China)
Quick Observations: Equity Market
- MSCI World Airlines: -20%
- S&P 500: -15%
- MSCI World Hotels Restaurants & Leisure: -15%
- MSCI World Energy: -15%
- MSCI World: -10%
- DAX 30: -10% (export heavy)
- MSCI Telecom: -6% (as expected more defensive)
- FYI and as a point of reference: Revenues of Macau Casinos down 90% (link). The article gives good explanations in general and puts things into perspective.
On the one hand, I currently believe, as many other bloggers and commentators, that the equity-market sell-off is probably exaggerated. On the other hand, I do not know if the the market was overvalued before the sell off. In effect, I do not know if the stock market is fairly valued now (after the sell off). But, more importantly, it’s always worth remembering that
It’s a market of stocks, not a stock market.Currently unknown. (I know this quote. Pls comment if you know who said this!)
The recent market sell off may be exaggerated in some companies but could be well warranted in some other companies. If there are discounts at the local grocery store, people are flocking there and are buying in bulk. I am inclined to act the same way with regard to certain stocks: buy them when they are cheap. In other words I want to take advantage of lower share prices.
This is a list with a few potential long ideas about some stocks I try to watch. I have not done any meaningful research on this companies at all or my current research is still ongoing. This is why I will not purchase any of them right now.
A company I did already research is to be found below.
- NTT (9432 JP): A japanese Telecom that I already own without any meaningful research done so far! NTT should be a rather defensive play, meaning that fundamental performance should be rather unaffected by a global econmic downturn. It is down c. -12% from a High in Feb, more than MSCI Telecom (see above), but Japan is obviously more exposed to Corona. All schools are closed from Monday.
- Current Dividend Yield: 3.7%, and dividend is growing
- High share buy backs (from presentation, p 22)
- SES (SESG LX): A Company in Luxemburg operating satellites. Services are TV, mobile data for i.e. cruises, services for goverments, etc. Same here: I already own SES without any meaningful research done so far! Should be an rather defensive investment.
- Flow Traders (FLOW NV): Here my research is ongoing. I discussed Flow as an idea for more research here. My research is already ongoing.
- One thing that was very observable during the recent sell-off: On some down-das Flow Traders was trading higher. This seems to be, because Flow earns more NTI when markets are more volatile.
- Gazprom (GAZ MR/GY): Here I did a lot of research and came to the conclusion that it was undervalued and bought in Sept 2018 (a second tranche, much bigger than the first back in Feb 2015). So I already own Gazprom.
- Now with my blog running, I will value Gazprom again, so ongoing. But I am indeed happy that Gazproms price declined.
- My Fair Value (FV) estimate per ADR (representing 2 shares) was 695 RUB (c. 8.68 EUR, c. 10.14 USD), indicating a strong undervaluation, since ADR traded for about 3.70 EUR (at Sept 10, 2018).
- Carnival: One of the biggest operators of cruise ships. Long-term trends are very much intact. Older people want to spend there money (they seem to have plenty) and enjoy their time. (I had the idea on my own, but several blog seem to havt the same idea: see here, here). For reference
- Carnival Corporation & Plc (CCL): -22% in Feb (so far)
- Royal Caribbean Cruises Ltd. (RCL): -30% in Feb (so far)
- Lufthansa: A german Airline company. Very depressed earnings multiple (P/E).
Check Point Security Software (CHKP US)
I do currently own shares of Check Point Security Software (CHKP US) and I will probably buy more in the future.
During the last fey days and the corona virus impact on the global financial markets, Check Point Security Software (CHKP US) shaved about 2 bn USD of its Market Capitalization. This represent about 2.5x annual GAAP Net Income of c. 800 mUSD. I believe that…
- demand for CHKPs products and services (read revenue) will rather not be affected in the long run, but if at all
- revenue might be somewhat weak in the short run (because corporations are delaying expenses), and
- CHKPs operations should be affected below average, since it’s less manufacturing based, maybe resulting in
- a little pressure on the margins in the short term.
This leads me to the perception that the decline in CHKPs Market Capitalization is unwarranted and most likely exaggerated. Opposed to the market where I do not know if it is/was over-/under- or fairly valued, I thought CHKP is undervalued before the sell-off (see latest valuation update), so I am inclined to buy more now.
Despite I already own Check Point shares, I actually like the decline in CHKPs price very much, because
- not only I am able to buy more shares at a lower price, but
- CHKP itself will buy back more shares for lower prices.
FYI: I have to wait for the permission of my compliance officer.
In the meantime…
Check Point’s SandBlast Agent got a AA-rating from NNS Labs in its recent Advanced Endpoint Protection (AEP) Test. (No higher rating [AAA] was awarded). SandBlast Agent detected 100% of HTTP and email threats, 100% of malware using sophisticated evasion techniques, and 100% resistance to evasion.
Additionally, Microsoft Azure customers selected Check Point as their top choice for cloud security. Check Point Software Technologies has been named a Microsoft Security 20/20 award winner for the Most Prolific Integration Partner category.
Deployed by over 4,000 organizations worldwide, the Check Point CloudGuard portfolio of cloud security solutions addresses all aspects of the Cloud threat landscape. These should support CHKPs long term growth
- cloud computing environment is the most complex it has ever been.
- number of cloud services offered to enterprises has grown exponentially.
- manner in which businesses store and scale data has changed dramatically.
- the number of technologies deployable in the cloud has multiplied significantly, while application architecture has moved to micro-services, which has redefined the perimeter for security to that of the workload.
I hope you enjoyed this blog post. Please feel very encouraged to get involved in a discuss below or to give general feedback. 🙂
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