Managing assets is about having a global top down view on markets and sectors but also watching the markets for individual investment opportunities, long or short.
The top down view and the bottom-up views may not be in tune, particularly when individual opportunities arise in markets that are globally treacherous and volatile.
This is exactly what we are seeing at the moment and we have numerous Buying opportunities that are flashing on our radar screens, despite our globally cautious approach.
Having navigated rather successfully the Evergrande stress episode, we are adding to positions in numerous sectors and markets and are adding three new positions today
We like Energy Stocks
In the past couple of weeks, we have added exposure to the US Energy sector through a global ETF ( XLE US ) and a Small Cap ETF (PSCE US )
Today we are adding a company in the Natural Gas infrastructure that we see as particularly interesting
BUY New Fortress Energy NFE US @ USD 27.25
New Fortress operates as an integrated Gas energy company through the funding, development and construction of natural gas infrastructure projects in Europe, Latin America, the Caribbean, and the US. Projects include gas facilities, power plants, and logistic solutions.
Despite energy prices having been on fire this year, New Fortress shares have fallen 50% so far year to date.
The company’s top line revenues have been rising steadily. New Fortress has posted 7 sequential revenue gains in the last 8 quarters. The company’s 2Q21 top line, at $223.8 million, was up an impressive 136% year-over-year.
New Fortress’ robust growth prospects — driven by emerging-market liquefied natural gas demand — are further enhanced by its recent acquisitions. New Fortress announced this month that it had finalized the terms for its supply of natural gas to the Alunorte Alumina Refinery in the state of Para in Brazil. Also this month, the company entered a contract with the Sri Lankan government for a Liquified Natural Gas terminal and investments in the country’s power plants.
Yet delivering on new import projects and its innovative floating LNG plans to secure cheaper supply implies significant execution risks. As revenues gain and business expands, the company has been slow to get earnings into positive territory. EPS in the second quarter came in at a 3-cent loss, an improvement from the 21-cent loss in Q1, but still the eighth consecutive quarterly earnings loss in a row.
The company also inherited sizable debt in the transactions, and higher gas and LNG prices could limit margin until floating LNG capacity is realized.
However, 2021, should be the turning point in getting the company into profitability, which is why we are interested in it.
The management has been focusing on the longer-term trajectory of the business, which is accelerating nicely, with much of the infrastructure now in place and most of the upfront cost to build behind it.
The long-term strategy of NFE’s businesses and operations will start paying handsomely in the coming three years, with the increasing scale, logistical network, and favorable LNG pricing creating notable competitive advantages
New Fortress is poised for triple-digit 2021 revenue growth as it expands into new countries, with considerable upside in 2022 and 2023, and our view is that the current share price discount much of the risks while very little of the upside.
According to the consensus of analysts, revenues should grow from 451 million in 2020 to 3.2 Billion in 2023, or a sevenfold rate of growth. The company will turn profitable this year and its net profits should reach 627 million in 2023, taking its Earnings per share to US$3
That leaves the company on a cheap valuation of less than 10x 2023 earnings.
Operating in the acquisition and funding of infrastructure equipment, the Company is highly leveraged by nature, but at the en of 2020, it had total liabilities of 1.3 Billion against total assets of 1.9 Billion.
The company is also expected to generate 630 Million of free cash flows as of 2023.
Analysts are turning significantly bullish on the company with an average target price at 53.9, the widest gap between current price and average target price ever and several recommendations with target prices at USD 69
Technically, we see the stock very close to bottoming after a bear market that more than. halved the value of the company. The moving Averages Convergence Divergence index is turning up with the differential real to move into positive and the materialisation of a buy signal on the horizon.
Connecting the sparks of the green revolution …
Our world is shifting phenomenally to a green environment with the rapid deployment of Electric Vehicles, Wind and Solar Power, online shopping and work from home habits…
Electronics are playing a major part in this revolution and amongst them companies that make the connectors that make all those thing happen …
BUY Luxshare Precision 002475 CH @ CNY 35.5
Luxshare Precision is a world leading designer and manufacturer of cable assembly and connector system solutions for consumer, automotive, cloud, medical and enterprise applications. Its is also a major supplier to Apple Inc. form which it derived 69 % of its revenues in 2020.
Its flexible design processes, agile manufacturing, and collaborative partnerships, has enabled it to command and leading position with technology leaders to create innovative solutions that transform our world every day.
A worldwide presence enables the company to service OEM customers locally while providing global scale and access to R&D and test facilities.
Sustained new product development and technological innovation, combined with rational, effective cost control and optimization of our manufacturing processes in areas such as automated modules, ensures that the company keeps its leadership and achieve sustained growth.
Luxshare Precision share have halved since their CNY 64 peak in October 2020, correcting most of the overvaluation reached then, despite continued and significant double digit growth in top line sales, net profits and earnings per shares.
Total Sales should increase by 50 % between 2020 and 2022 with net profits almost doubling and earnings per shares growing by 67 %.
As a result, the company’s P/E ratio has fallen to 28x 2021 Earnings and 21x 2022.
By 2025, Sales will have been multiplied by 2.8x when compared to 2020, net profits multiplied by 3 and Earnings per shares by 2.8x.
Luxshare Precision’s sales may have passed the exponential growth stage, but should continue to increase by 20-30% over the next five years outperforming most of its peers and fully capitalising on the green revolution and digitalisation.
Its growth will be certainly driven by expansion in the Apple iPhone and Apple Watch supply chain on top of its commanding lead in supplying AirPods, by also from the diversification of its customer base in automotive, clean energy, smartphones and wearables in China and abroad.
Luxshare is particularly well-positioned to gain from more rapid market penetration of 5G smartphones and wearable electronics in the next two years.
Analysts are bullish with an revised average target price of USD 49
Technically, the stock has now recorded a significant double bottom, rebounding from a strong support level at 32. It is about to break the downtrend with an objective for the trade at between 42 and 50.
We also like gaming, even outside China
The gaming industry has been badly hit by China’s clampdown on its own giants but this will not prevent the younger generations to continue playing and spending on their favorite games and consols.
BUY Take-Two Interactive TTWO US @ 148
Take-Two is a $16 billion dollar online gaming company whose subsidiaries, Rockstar Games and 2K, control several major game franchises, including the popular ‘Grand Theft Auto’ and ‘Civilization’ series. Other titles include ‘Borderlands’ and ‘NBA 2K.’ Take-Two is one of the heavy hitters in the gaming industry. It offers its products for both desktop and mobile users worldwide.
Earlier this year, Take-Two continued its expansion through the acquisition of Nordeus, the developer of the football simulation ‘Top Eleven.’ The move expanded TTWO’s mobile offerings, with a popular sports offering ahead of the fall football season.
Despite the strong franchises and new acquisitions, Take-Two’s shares are down by 30% this year as investors re-assess the use of online gaming now that pandemic related confinement measures are out of the way, but one thing that is not factored in is the fact that
Take-Tow could be a major beneficiary of the ruling that favoured Epic games against Apple Inc. by allowing it to divert its customers payments outside the Apple and google payment platforms and save the 30 % cut paid to the two app store giants.
The recent share losses come even while the company is beating expectations on the financial front.
It announced strong financial results for its fiscal Q1, which ended June 30, with its $1.30 EPS far exceeding the market consensus forecast of 89 cents.
Top line revenues, however, were down 2% from the year-ago quarter the $813 million in total revenue, a clear consequence of the end of the confinement measures.
Net bookings, a key metric for game expansion, rose above guidance to $711 million.
Looking at the long term, the consensus of analysts expects the company to deliver USD 4 Billion of revenues in 2023, a 33 % increase over 2020. Net profits will reach a new record at 803 million in 2023
Analysts remain positive on the stock with an average target price at 206 and the widest gap between the current stock price and average target price.
Technically, we believe that the 31 % correction since March is coming to an end soon, even if marginal additional downside is a possibility in the short term.
The stock is nearing its long term moving average and a solid accumulation zone between 100 and 140 that should provide solid support.
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