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Graduated from Moscow Technical University as MS in Electrical Engineering and from Canterbury Business School (Finance, 1996). Started my investment analyst career as a secondee at HSBC James Capel (London). Then returned to Russia where dedicated personal development to mastering report... More
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Hidden viewpoints about open facts
  • Team Up and Bring Home the Milk 0 comments
    Dec 3, 2010 7:51 AM | about stocks: WBD, PEP

    Black and white investment world would have made an analyst’s job a sort of fun were the key market interdependencies established correctly. Unfortunately, they weren’t. Euro currency recovery these days goes hand in hand with the global broad market rallies, supposedly hailing increase of the risk appetites. However, the main beneficiaries of a rally – equities and commodities – live in a different risk environment, and that obvious postulate have been somehow forgotten by the trendsetters. The fiercest enemy of the latter categories is being economic slowdown, while growth of inflationary expectations should normally bolster their performances. In this sense euro vs. dollar is a scarce dilemma. Both currencies look more or less equally "powerful” in their capacities of building a deferred inflationary environment. Indeed, judging by volumes of the latest US Fed’s fiscal interventions on the bond market (on single day of Dec 1st alone, the Fed had made Treasury bond and note purchases for $9.4 bn after spending $7.3 bn for the same purpose the day before) and ECB’s peripheral European countries’ bond purchases (rumors abound that the Portuguese sovereign notes placement this week – €500 mn, or $654 mn, worth of 12-month paper sold at 5.281% yield– was predictably rescued by the European Central Bank) put them both in the same boat. Ironically, their odds of running out of steam sooner rather than later look even. Thus, recalling that the Fed’s November spending came to $105 bn as promised while the total QE2 is capped at $600 bn, it’s easy to calculate that at this rate, the Fed will be running out of sovereign debt intervention cash in late March 2011 rather than in July as originally announced. Similarly, should ECB encounters all but unlikely Spain’s call for cash, it would be bound to extend the Europe’s emergency bailout fund beyond the announced €750 bn.

    One thing is next to obvious though: since global markets are bathing in cash (as IBM CEO Samuel J. Palmisano said, "Clearly, there’s tons of liquidity… There’s probably more than we could consume.”), the $2 trn green bolster acts as a foolproof against any dramatic drops of hard assets (and, maybe, equities) in the foreseeable future, similar to what we had seen in 2008. As such, the job of a long-term portfolio manager appears increasingly handsome and, permit me, laid-back unlike it was in the era of the Wall Street fat cats condemnation.

    Moving from planetary plane to the local happenings, it’s hard to avoid writing a few lines about the M&A’s event of the month, the PepsiCo’s bid for the Russian leading dairy and juice manufacturer Wim-Bill-Dann (WBD:US). Friday’s local business media hailed the deal by the striking headlines like "Milk at the Price of Oil”, etc. The WBD stock yesterday skyrocketed by over 60% as the US soft drink king offered lavish 30%+ premium to the market price.

    The ongoing deal (subject to the Russian antimonopoly watchdog’s pending approval) will be paid by cash, $33 per ADR or $132 for underlying stock. Consequently, the company’s EV comes up to $5.4 bn. The current WBD’s EV/EBITDA, around 17, puts it at par with Nestle of Switzerland. Coincidentally, in our previous weekly report we mentioned the Rosstat data that showed Russian consumer sector economic trends outperforming the energy sector’s ones. While Russian oil barons increasingly suffer from the State treating them as cash cows at an accelerating speed (the Russian government is now discussing boost of both oil and gas production tax and export duties on non-refined products), the consumer production and retail sector appears largely underinvested and underrepresented. Although, at a glance, the above-mentioned excessive valuation may appear hardly justified, we believe, it may be simply attributed to a reduced payback period and opportunity to gain a significant market niche in this kind of projects in Russia.

    Stocks: WBD, PEP
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  • Looks like commodities is a must-have stuff in your portfolio. Most other intsruments demostrate awry volatility.
    Aug 13, 2010
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