Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 7/11/11

with 2 comments

The past couple of days have been rather busy due to college and work commitments, which from this blog’s perspective is a pity in that I wasn’t able to provide the sort of timely analysis that I normally try to do. We’ve seen a lot of troubling economic developments around the world, but against that we’re also seeing some positive signs from corporates and from the Sage of Omaha. Let’s drill down into what’s been happening.

 

(Disclaimer: I am a shareholder in Ryanair plc) Ryanair reported a very good set of numbers earlier today. Encouragingly, the group raised its full-year net income forecast by 10% to €440m. The market gave all of this the thumbs up, with the shares finishing up 5.1% in Dublin this evening. You can see an interview with Ryanair CEO Michael O’Leary here. Overall, it is a testament to the resilience of Ryanair’s business model that it is able to churn out a performance like this in such an extraordinarily challenging market. Elsewhere in the airline sector, Aer Lingus released decent traffic stats this morning, with good capacity management seeing load factors rise 2.1ppt in October.

 

Greencore’s share price jumped nearly 10% just before the close on Friday, leading me to wonder aloud if the weekend papers were going to contain any major news on the stock. In the event, the Sunday Times said that the fund behind the recent approach for the company looks to be US private equity firm Clayton Dubilier & Rice, which counts former Tesco supremo Sir Terry Leahy among its team. One to keep an eye on.

 

(Disclaimer: I am a shareholder in Total Produce) Staying with the food space, John McElligott posted a great blog earlier today on the UK retailers and also Irish headquartered fruit and vegetable distributor Total Produce. I’m a big fan of TOT for some of the reasons John touches on – a very defensive business model, high cash generation, a strong balance sheet and enormous scope for the group to expand through acquisition in the extremely fragmented European produce distribution space (where TOT is the biggest player despite having only 5% market share!).

 

An interesting development - Warren Buffett invested $23.9 billion in the third quarter, the most in at least 15 years.

 

To return to a regular theme on this blog – if you want to know how grim things are getting in China, read this.

 

Europe’s woes continue to rumble on. Earlier today Morgan Stanley downgraded European equities to underweight, citing deteriorating growth, falling corporate margins, poor policy responses and leading indicators. The only Irish stocks in Morgan Stanley’s European model portfolio are Tullow Oil (rated overweight by MS) and Ryanair (underweight). Italy has come under extreme pressure today, with political instability not helping matters. Summing up the gravity of the situation, Nordea in a note released earlier today warned that:

 

The printing press at the ECB increasingly seems to be the only weapon left to save the Euro area from meeting its Waterloo in Rome.



And finally, on a lighter note, Twitter has provided some good chuckles in recent days, such as:

 

From @Makrotrader in Sweden: “I really really like Tzatziki. But I will boycott that as well. It is over. No more Greece. Good thing they don´t have good wines

 

and from @drmarkperry in Ireland: “I wouldn’t buy stock in Groupon with an 80% group discount coupon

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  1. [...] Ryanair’s better-than-expected passenger stats for the same month, which along with the recent upgrade to earnings guidance from Europe’s largest LCC has helped give the shares a lift in recent [...]

  2. [...] every penny, this is music to the ears of cut price airlines like Ryanair. Last month the carrier raised its full-year earnings guidance by 10% as passenger numbers and yields (helped by a better mix of airports) continue to rise. The [...]


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