Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 23/8/11

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Markets have thankfully been calmer after the chaos we saw last week. We’ve seen some interesting corporate newsflow, remarkable developments in Libya and interesting insights on a number of blogs since I last sat down to comment on the markets.

 

This is a busy week for company newsflow, with over 70 firms reporting either full-year or half-year results in the UK and Ireland. Yesterday, Kingspan released its H1 2011 numbers, which revealed a very solid performance in the start of the year, but its outlook statement reveals a tougher economic backdrop, with management saying growth eased in Q2 and will continue to moderate over the rest of the year. As stockbrokers Davy rightly note, “the lowering of…estimates at this juncture is a reflection of a more cautious stance for the building materials sector and is certainly not unique to Kingspan“. Cavan-headquartered Kingspan’s clear structural growth credentials, due to its world-leading insulation technology, which is well placed to benefit from the long-term upward trend in energy prices and ever-tightening energy efficiency regulations, means that it is perfectly positioned to outperform the broader construction sector into the future. However, the deteriorating economic situation in most of its key markets means that the short-term outlook is quite challenging. This is a point highlighted by results this morning from structural steel group Severfield-Rowen, which cautions that: “a full UK recovery remains some years distant” (the UK accounted for 43% of Kingspan’s revenues in 2010).

 

Events in Libya are finally moving towards the endgame. I was less than surprised to see Western oil companies acting with almost indecent haste to secure contracts from the new authorities there. Have a read of both this and this. Before the conflict began, Libyan oil (mainly particularly high quality “light sweet oil”) production accounted for 2% of global output.

 

Mike McDonough has an interesting chart on US loan foreclosures that shows the problem is nowhere near going away.

 

I’ve seen a number of excellent blog posts in the past 24 hours which I feel deserve to be highlighted. Expecting Value has a great feature on “Cheap stocks in a turbulent market“, that includes Trinity Mirror, which I’m a bullish shareholder of. The excellent John McElligott has a good contrarian piece on the UK banking sector which is well worth a read (especially given that the argument he makes is all but ignored by most commentators at this time). I do have a number of banking positions, mainly legacy positions/staff shares in AIB, Bank of Ireland and RBS, but I’m reluctant to add to any of them in the near term given the headwinds the sector faces. Finally, my old friend Ian Parsley has an interesting piece on the media sector: “The demise of television as we know it“, which brought to mind some similar points I’ve previously made about the radio sector.

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Written by Philip O'Sullivan

August 23, 2011 at 8:47 am

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