European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

This report contains a table that shows select European companies with non-voting shares and ordinary shares. Non-voting shares are usually referred to as preferred shares (although the denomination varies in the different countries), whilst voting shares are usually known as ordinary shares.
For each company there is a graph showing the discount (or the premium ) of one share class relative to the other, followed by a relative value trade recommendation, if I believe there are grounds for it.  
Please keep in mind that these are highly leveraged trades, and that spreads may temporarily blow up in a hypothetical, but highly possible, market shakeout.
Recommended trades:
<ul class="">
<li>
Carlsberg B shares are trading at a 10% discount vs. the A shares. A mean reversion trade could be set up, with a target of a 5% discount of the B shares vs. the A shares.</li>
<li>
BMW exhibits a trend towards a reduction of the discount of preferred shares, which has recently widened up to 24% as a result of a market selloff. Now the discount is 17% (vs. 18% in the previous report). I would recommend setting up a trade long BMW prefs, short ords with a target of a 12% discount.</li>
<li>
Fuchs's premium seems to vary within a range, and is probably liquidity related. It is 15.7% at the moment. The recommendation is setting up long ords/short prefs, with a 10% target.</li>
<li>
Henkel shows a long-term trend towards a reduction of the premium of the preferred shares. The premium is 12.6%. The trade would be short prefs., long ords. with a 10% target.</li>
<li>The erstwhile favourite share class trade, Volkswagen, shows no obvious trade opportunity at the moment, in my view. Remember that voting rights are valuable in a company like Volkswagen, so an 8% discount of the prefs. relative to the ords. seems about right.  But if you have a different (directional) view, believe that preferred shareholders are not going to get any rough treatment anytime soon, and look for size, you can set up the noughties' favourite trade, long VOW3/short VOW. It is difficult to think of any takeover attempt for Volkswagen.</li>
<li>
Danieli: a 37.5% discount of the savers seems too wide. I recommend long savers/short ordinaries. A 30% discount is not a demanding target.</li>
<li>
Telecom Italia savings, long position, for yield investors (7.5%), or long savings/short ords, as the ordinary shares are paying no dividend, an investor would obtain all the positive carry from the savings.</li>
<li>
Grifols B shares are trading at a 37.5% discount. The discount in Grifols B shares has averaged 26.7% over the last four years. I recommend setting up the trade long B shares traded on Nasdaq, short A shares traded in Madrid. The target is a 27% discount. Please note there is FX risk, which can be hedged.</li>
<li>The spread of Handelsbanken B shares has blown up to a 11.4% premium, in part related to the lower liquidity on the B shares (c. EUR 1.4 million daily average). I recommend setting up a trade short B/long A shares at this level, with a target of 2.5% discount, if you can get hold of any B shares.</li>
<li>
Schroders: I would keep an eye on the non-voting shares to set up the long non-voting/short voting shares trade during another market shakeout. It is now 18.6%, but it reached 42% on 19 March.</li>
</ul>

This report contains a table that shows select European companies with non-voting shares and ordinary shares. Non-voting shares are usually referred to as preferred shares (although the denomination varies in the different countries), whilst voting shares are usually known as ordinary shares.
For each company there is a graph showing the discount (or the premium ) of one share class relative to the other, followed by a relative value trade recommendation, if I believe there are grounds for it.  
Please keep in mind that these are highly leveraged trades, and that spreads may temporarily blow up in a hypothetical, but highly possible, market shakeout.
Recommended trades:


Carlsberg B shares are trading at a 10% discount vs. the A shares. A mean reversion trade could be set up, with a target of a 5% discount of the B shares vs. the A shares.

BMW exhibits a trend towards a reduction of the discount of preferred shares, which has recently widened up to 24% as a result of a market selloff. Now the discount is 17% (vs. 18% in the previous report). I would recommend setting up a trade long BMW prefs, short ords with a target of a 12% discount.

Fuchs's premium seems to vary within a range, and is probably liquidity related. It is 15.7% at the moment. The recommendation is setting up long ords/short prefs, with a 10% target.

Henkel shows a long-term trend towards a reduction of the premium of the preferred shares. The premium is 12.6%. The trade would be short prefs., long ords. with a 10% target.
The erstwhile favourite share class trade, Volkswagen, shows no obvious trade opportunity at the moment, in my view. Remember that voting rights are valuable in a company like Volkswagen, so an 8% discount of the prefs. relative to the ords. seems about right.  But if you have a different (directional) view, believe that preferred shareholders are not going to get any rough treatment anytime soon, and look for size, you can set up the noughties' favourite trade, long VOW3/short VOW. It is difficult to think of any takeover attempt for Volkswagen.

Danieli: a 37.5% discount of the savers seems too wide. I recommend long savers/short ordinaries. A 30% discount is not a demanding target.

Telecom Italia savings, long position, for yield investors (7.5%), or long savings/short ords, as the ordinary shares are paying no dividend, an investor would obtain all the positive carry from the savings.

Grifols B shares are trading at a 37.5% discount. The discount in Grifols B shares has averaged 26.7% over the last four years. I recommend setting up the trade long B shares traded on Nasdaq, short A shares traded in Madrid. The target is a 27% discount. Please note there is FX risk, which can be hedged.
The spread of Handelsbanken B shares has blown up to a 11.4% premium, in part related to the lower liquidity on the B shares (c. EUR 1.4 million daily average). I recommend setting up a trade short B/long A shares at this level, with a target of 2.5% discount, if you can get hold of any B shares.

Schroders: I would keep an eye on the non-voting shares to set up the long non-voting/short voting shares trade during another market shakeout. It is now 18.6%, but it reached 42% on 19 March.


Liquid European Ordinary and Preferred Shares: April's Recommended Trades

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Despite negative recent developments, we have remained steadfast in our belief that weakness in May has presented an attractive time to add exposure. In our June International Strategy, we highlight various themes which lead to this belief, along with areas of the market where we see actionable opportunities within our favorite Groups, spanning the Consumer Staples, Technology, Consumer Discretionary, Services, Health Care, and Financial Sectors.

Despite negative recent developments, we have remained steadfast in our belief that weakness in May has presented an attractive time to add exposure. In our June International Strategy, we highlight various themes which lead to this belief, along with areas of the market where we see actionable opportunities within our favorite Groups, spanning the Consumer Staples, Technology, Consumer Discretionary, Services, Health Care, and Financial Sectors.

Global Ex-U.S. Equity Strategy: Cautiously Optimistic Outlook Intact

EURO STOXX 50 Price EUR / Technical Analysis

This report highlights actionable set ups from predominately European, developed markets, and is supportive of our view that Europe is bottoming, a viewpoint that remains far from consensus. Within Europe, we put a spotlight on Germany’s DAX and France’s CAC 40. Today’s recommendations are primarily from cyclical Sectors, however European Consumer Staples also exhibits bottoming RS.

This report highlights actionable set ups from predominately European, developed markets, and is supportive of our view that Europe is bottoming, a viewpoint that remains far from consensus. Within Europe, we put a spotlight on Germany’s DAX and France’s CAC 40. Today’s recommendations are primarily from cyclical Sectors, however European Consumer Staples also exhibits bottoming RS. 

Developed Markets Chart Book: Europe in Focus

Equity analyst UK & Europe, UK Long Short

Peter Toeman

Equity analyst UK & Europe

Accelerating Tomorrow’s Independent Research

Boost Research

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Equity Bottom-Up

The political decision to exit the European Union has unpredictable negative consequences for both the UK economy and stockmarket.  A tough market background and Brexit concerns have reduced in-flows into Wealth and Investment Management companies. This growth hiatus could last for some time.  
<h2>Hargreaves Lansdown: What does it do ?</h2>
Hargreaves Lansdown is a wealth manager and private client stockbroker with a market value of  GBP8bn. It provides the UK's largest direct to investor platform administering £86bn of investments for more than 1.1m active clients
<h2>Why is it in the Short portfolio ?</h2>
Interim figures for the 6 months to December 2018, (published 29th Jan)  mark a deterioration in operating performance brought about by adverse market conditions. Assets under administration declined and net new business was 25% down on the prior year. Earnings per share increased 4%. The share price declined 6% on the day of the results but has subsequently been stable leaving the group on a forward multiple of over 30x. Unless the retail investment market recovers quickly this premium rating may prove vulnerable. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/080/444/original/port%202.PNG?1551297124" class="editor-image img-responsive" data-smartkarma-image-id="80444"></figure>
<div class="content-caption">S&amp;P Capital IQ</div>

The political decision to exit the European Union has unpredictable negative consequences for both the UK economy and stockmarket.  A tough market background and Brexit concerns have reduced in-flows into Wealth and Investment Management companies. This growth hiatus could last for some time.  
Hargreaves Lansdown: What does it do ?
Hargreaves Lansdown is a wealth manager and private client stockbroker with a market value of  GBP8bn. It provides the UK's largest direct to investor platform administering £86bn of investments for more than 1.1m active clients
Why is it in the Short portfolio ?
Interim figures for the 6 months to December 2018, (published 29th Jan)  mark a deterioration in operating performance brought about by adverse market conditions. Assets under administration declined and net new business was 25% down on the prior year. Earnings per share increased 4%. The share price declined 6% on the day of the results but has subsequently been stable leaving the group on a forward multiple of over 30x. Unless the retail investment market recovers quickly this premium rating may prove vulnerable. 

S&amp;P Capital IQ

Hargreaves Lansdown (HL/:LN) No Flow, No Go

Out of favor for the past three years, global asset managers are making a comeback, technically speaking, as seen by (1) the industry’s breakout from a multi-year base, and (2) its breakout from a relative strength bottom. Further, the industry is resuming its secular trend of relative leadership within the financial sector.  In today’s report we highlight actionable names, most which are breaking out from either base or bottom patterns.

Out of favor for the past three years, global asset managers are making a comeback, technically speaking, as seen by (1) the industry’s breakout from a multi-year base, and (2) its breakout from a relative strength bottom. Further, the industry is resuming its secular trend of relative leadership within the financial sector.  In today’s report we highlight actionable names, most which are breaking out from either base or bottom patterns.

Global Asset Managers Are Breaking Out -- Add Exposure

United Kingdom

Schroders PLC is an international asset management group.  The Group manages funds across all asset categories, including equities, bonds, cash, and alternative investments and Venture Capital.  Schroders clients comprise charities, insurance companies, public authorities, pension funds and unit trust holders.

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Schroders PLC (SDR LN)

Liquid European Ordinary and Preferred Shares: April's Recommended Trades

This report contains a table that shows select European companies with non-voting shares and ordinary shares. Non-voting shares are usually...

Jesus Rodriguez Aguilar

Global Ex-U.S. Equity Strategy: Cautiously Optimistic Outlook Intact

Despite negative recent developments, we have remained steadfast in our belief that weakness in May has presented an attractive time to add...

Vermilion Research

Developed Markets Chart Book: Europe in Focus

This report highlights actionable set ups from predominately European, developed markets, and is supportive of our view that Europe is bottoming, a...

Vermilion Research

Hargreaves Lansdown (HL/:LN) No Flow, No Go

The political decision to exit the European Union has unpredictable negative consequences for both the UK economy and stockmarket. A tough market...

Boost Research

Global Asset Managers Are Breaking Out -- Add Exposure

Out of favor for the past three years, global asset managers are making a comeback, technically speaking, as seen by (1) the industry’s breakout...

Vermilion Research

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