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Commodities Trading Ideas & Charts

A look at the most recent commodity expert opinions and forecasts: forecast for resources; coal and iron ore

China’s demand for commodities is expected to weaken in the second half of 2021, according to analysts, but this will be largely offset by stronger demand outside of China and the global shift to a low-carbon economy.

The development of the more virulent Delta strain of coronavirus has hampered mobility and growth forecasts, putting pressure on commodities in recent weeks. However, central banks have signalling more aggressive policy positions, with several announcing a reduction in bond purchases.

The vigourous drive in China to put inflationary pressure on industrial metals prices, such as steel, is a third issue. After the run-up that brought copper and iron ore prices to all-time highs, the situation in the second half will be more unpredictable.

Coal

Spot prices for coking (metallurgical) coal have risen since the start of May, but the CBA analysts believe a peak is building, as some steel product margins are now declining.

However, thermal coal prices have remained high due to supply concerns and seasonal demand from a warmer-than-usual summer in North Asia. Thermal coal prices have climbed thrice since the commencement of the pandemic, according to Longview Economics.

Over 2020, China’s coal power capacity increased by 3%, while additions outside of China totalled just 9GW and retirements were 25GW. While a result, China’s coal capacity continues to expand even as the rest of the world cuts back.

Iron Ore

China’s economic report for June is unlikely to allay fears of slowing growth. As a result, ANZ Bank analysts expect that downward pressure on iron ore prices will intensify.

Despite the fact that the market remains tight, a severe correction is unlikely. While demand outside of China may be able to compensate for some of the downturn, iron ore prices are projected to fall in the second half, albeit the decline will be limited.

Source: Factset

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ipo IPO Watch

Glenmark Life Sciences raises Rs 454 crore from cornerstone investors ahead of its first public offering.

According to a regulatory filing, the business has agreed to distribute 63,06,660 equity shares to 19 cornerstone investors at a price of Rs 720 per share, for a total of Rs 454 crore.

Amongst those cornerstone investors are HSBC Global Investment Funds, Government Pension Fund Global, Oaktree Emerging Markets Equity Fund LP, Copthall Mauritius Investment Ltd-ODI account, Societe Generale-ODI, Kuber India Fund, and Reliance General Insurance Company.

Glenmark Pharma would issue new equity shares worth up to Rs 1,060 crore and sell up to 63 lakh equity shares in the first public offering (IPO). The issue will begin on July 27 and end on July 29, with a price range of Rs 695-720 per share.

The proceeds from the new issuance will be utilised to cover the promoter’s outstanding purchase consideration for the API business spin-off as well as fund capital expenditure requirements. The IPO will raise Rs 1,513.6 crore at the top of the pricing band.

About Company

Glenmark Life Sciences, a subsidiary of Glenmark Pharmaceuticals NSE -3.62 percent, is a dominant developer and manufacturer of high-value, non-commoditized active pharmaceutical ingredients (APIs) in chronic therapeutic areas such as cardiovascular disease, CNS disease, pain management, and diabetes. APIs for gastrointestinal disorders, anti-infectives, and other therapeutic fields are also manufactured and sold by the firm.

Source : Factset

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Commodities Trading Ideas & Charts

Oil Prices Little Changed After Strong Overnight Gains

After a 2.3 percent increase the previous session, US West Texas Intermediate (WTI) futures were down 0.1 percent at $71.86.
After OPEC and allied nations signed a tentative deal to raise oil output, oil futures fell roughly 7% on Monday, owing to fears about the spread of the COVId-19 delta variant and concerns about oversupply.
The Energy Information Administration (EIA) reported earlier this week that gasoline stockpiles fell by 100,000 barrels last week, while distillate stockpiles fell by 1.3 million barrels.
The EIA report also showed a drop in crude stockpiles at the storage hub in Cushing, Oklahoma, to the lowest level in about seven months.

(Source: RTT News)
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Dividend Stocks Philosophy Technical Picks

Kimberly-bottom Clark’s line is being eroded by cost pressures, and its stock isn’t providing much value

The pronounced pullback in retailer and consumer inventories in its North American consumer tissue arm (where volumes collapsed 27% against extraordinary 22% growth last year) drove a significant portion of its underperformance in terms of sales and cost leverage. More specifically, excluding this business, sales were up 4% over the same period in fiscal 2020.

Kimberly’s management lowered its full-year forecast, now calling for organic sales to hold flat or decline by up to 2% (versus flat to 1% growth prior) and $6.65-$6.90 in adjusted EPS (versus $7.30-$7.55 prior). While we intend to trim our 2021 outlook (0.6% organic sales growth and $7.41 adjusted EPS pre-print), we’re holding the line on our long-term expectations of 2%-3% sales growth and high-teens operating margins.

Commodity Cost Inflation

While we never anticipated that the significant level of consumer stock-ups realized a year-ago would persist (particularly as consumers become more comfortable venturing outside the home), commodity cost inflation has outpaced our expectations (serving as a 750-basis-point drag to gross margins in the quarter). In this context, Kimberly now sees inflation costs amounting to $1.2 billion to $1.3 billion in fiscal 2021, up from an anticipated $900 million to $1.1 billion prior (primarily reflecting a 30% increase in the market price for pulp in North America and a more than 90% increase in resin). In an effort to offset the hit to profits over the next several quarters, Kimberly is employing a multi-pronged approach, anchored in pursuing around $100 million in additional cost savings this year (totaling up to $560 million) and raising prices at the shelf at a mid- to high-single-digit clip (similar to its peer set).

Kimberly is employing a multi-pronged approach, anchored in pursuing around $100 million in additional cost savings this year (totaling up to $560 million) and raising prices at the shelf at a mid- to high-single-digit clip (similar to its peer set). Kimberly’s price increases hit shelves a few weeks ago, making consumer acceptance difficult to ascertain thus far. However, we are encouraged by management rhetoric that suggests enhancing its value proposition and leveraging consumer insights across geographies and categories has been an area of focus for its product development.

Company Profile
Kimberly-Clark is a leading manufacturer of personal care (around half of sales) and tissue products (roughly one third of sales). Its brand mix includes Huggies, Pull-Ups, Kotex, Depend, Kleenex, and Cottonelle. The firm also operates K-C Professional, which partners with businesses to provide safety and sanitary products for the workplace. Kimberly-Clark generates just over of half its sales in North America and more than 10% in Europe, with the rest primarily concentrated in Asia and Latin America.

(Source: Morningstar)
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Technology Stocks

Coke implementing post-pandemic ambitions: leveraging process, innovation, and technology

The runway for growth is supported by ample room for share gains as well as geographic tailwinds. We estimate Coke derives more than 40% of sales from developing or emerging economies with burgeoning middle classes and low per-capita CSD consumption. We expect commercial drinks will become a larger portion of beverage consumption globally, and see the company executing against each of its market-specific strategies.

In developed markets, where Coke has firmly established the resonance of its brands, its strategies are geared toward profit growth driven by innovation. In developing markets, where its trademarks are visible but competition is rife, differentiation and eventual migration into higher-margin offerings is key. In emerging markets where the firm is less established, it is focused on driving volume growth even at the expense of modest margin dilution. We view these approaches as prudent and believe the decision to cull peripheral brands (going from 400 master brands to 200) will facilitate execution.

Financial Strength

We believe Coca-Cola is in stellar financial health. The firm deliberately skews its capital structure toward debt, on the premise that the lower-cost financing ultimately increases returns to shareholders. Coke regularly generates free cash flow above $8 billion (in the high teens to low 20s range as a percentage of sales), even amid the disruption caused by COVID-19. Even higher levels are driven by improving margins and working capital initiatives. Management has made commendable strides toward top-tier receivable and payable management, and the supply chain initiatives combined with a reworked bottler system should yield modest improvements in inventory management.

Moreover, Coca-Cola boasts strong coverage ratios above its peers. Coke’s financial strength is its ability to operate one of the larger domestic commercial paper programs. Issuing commercial paper is an integral part of the company’s cash management strategy, and the fact that investors and financial institutions are consistently willing to finance the company at such low rates lends credence to the reliability of its cash flows.

Bull Says

  • By volume, Coke is almost 3 times the size of its next largest competitor in the global nonalcoholic ready to- drink market, which begets scale benefits.
  • Despite a greater focus on marketing efficiency, its ad budget is still unparalleled and should help maintain consumer awareness and brand relevance.
  • The recently established platform services group should allow Coke to more effectively leverage data and improve technological capabilities across its mammoth production and go-to-market system.

Company Profile

Coca-Cola is the largest nonalcoholic beverage entity in the world, owning and marketing some of the leading carbonated beverage brands, such as Coke, Fanta, and Sprite, as well as nonsparkling brands, such as Minute Maid, Georgia Coffee, Costa, and Glaceau. Operationally, the firm focuses its manufacturing efforts early in the supply chain, making the concentrate (or beverage bases) for its drinks that are then processed and distributed by its network of more than 100 bottlers. Concentrate operations represent roughly 85% of the company’s unit case volume. The firm generates most of its revenue internationally, with countries like Mexico, Brazil, and Japan being key markets outside of the U.S.

(Source: Morningstar)

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Commodities Trading Ideas & Charts

Energy continues to be the leading sector in the Q2

Even with the rally year to date, we have energy as fairly valued, with the median stock trading at a price/fair value ratio of 1. Opportunities exist across all segments, particularly services and integrated, which trade at a 29% and 10% discount to intrinsic value, respectively. Exploration and production stocks have surged in the last three months, and on average the group is 8% overvalued (though a handful of 4-star stocks are still underappreciated, in our view).

The ongoing mass rollouts of COVID-19 vaccinations in developed markets will be the main catalyst for year-on-year demand growth of 5.1 million barrels per day in 2021. Our updated demand estimates for 2021 and 2022 are 96.2 mmb/d and 100.4 mmb/d, respectively. While optimistic about demand improvements, producers remain hesitant on the supply end.

During its June 1 meeting, OPEC+ confirmed it will go ahead with modest volume increases of 350 and 450 mb/d in June and July, respectively (which means the group will still be withholding at least 2 mmb/d). And U.S. shale drillers—which have historically acted as swing producers, like OPEC—have steadfastly refused to increase capital budgets to take advantage of higher oil prices, preferring to prioritize free cash flows and distributions to shareholders.

As a result, we now anticipate global demand will outpace supply this year by 1.0 mmb/d. These dynamics have pushed oil prices to what we consider frothy levels, with the West Texas Intermediate benchmark currently 33% higher than our $55/bbl midcycle forecast. Without an abrupt change in strategy from OPEC or the U.S. shale industry, the oil markets will remain tight this year, and short prices could climb even higher.

(Source: Morningstar)

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LICs LICs

MEC has released the results for the first half of the year

investment stockbroker risk analysis using multiple devices. Financial analysis using phone app and laptop. Market trading profit.

At a dividend rate of 5 cents per share, the corporation had dividend coverage of more than five years before the dividend was paid. Its earnings for 2020 were 4.6 cents which is almost double to previous year i.e. 2.8 cents. The relative P/E reported to 104.5% by 2020. And the market capital of MEC is not available.

Its portfolio performance since inception is 13.64% p.a. and market share price is currently market at $ 1.225 AUD while trading price is $1.100 as on 26th July 2021. Morphic Ethical Equities Funds NTA is marked at $16.07.21, the Pre-tax $1.4121 per share and the Post-tax $1.3134 per share for the year 2021.

Company Profile

Morphic Ethical Equities Fund (MEC) was established on 02 May 2017. Morphic Asset Management is a global equity investment firm managing the Morphic Global Opportunities Fund co-founded by Jack Lowenstein and Chad Slater. Morphic Ethical Equities Fund is an Australian Listed Investment Company (LIC) (ASX: MEC). Morphic Ethical Equities Fund is an Australian Listed Investment Company (LIC) (ASX: MEC). The Morphic Ethical Equities Fund aims to give investors with a chance to build wealth while remaining assured that they are doing it without harming the environment, people or society.

 (Source: fnarena)

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ipo IPO Watch

The share price of Open Negotiation has increased by 60% since its IPO

which is 60% greater than the company’s prospectus offer price of 20 cents. Openn Negotiation is a real estate technology firm. Its cloud-based Openn platform enables real estate bids to take place in real time and transparent private treaty offers to be submitted. So far, the platform has over $2 billion in property sales which is used by over 3,300 real estate agents across Australia and New Zealand.

On the ASX, the real estate technology stock is off to a strong start

The company had roughly 191.7 million shares outstanding at the time of its listing. At 20 cents per share, Openn’s market capitalisation is expected to be around $38 million. Openn Negotiation has a market capitalisation of around $57.5 million at its current share price.

The company anticipated that its IPO would raise $9 million before expenses.The funds will be used by Openn Negotiation to expand its business in Australia and New Zealand, as well as to assess the market in the United States. It intends to enter the American market in the future.

Because it did not believe it could prepare reliable forecasts, the company did not include financial guidance in its offer document. The company’s full-year earnings for the 2020 fiscal year were $851,402 with a loss of around $1.2 million before taxes. Openn also had $668,979 in assets and $448,975 in debt.

Currently, fees charged to upload properties onto the platform account for 90% of Openn Negotiation’s revenue. An agent must pay $500 to upload a property to the Openn platform. It also makes money by training real estate agents to use the platform, a service that costs $135.45 per agent.

Company Profile

The need for a better way of doing things prompted the creation of Openn Negotiation, as it did many other innovative developments.In 2016, our Founders, Peter Gibbons, a technology developer, and Peter Clements and Brad Glover, leading Western Australian real estate brokers, began collecting years of input from sellers, purchasers, and agents on the problems of the present sales process.

Source : fool.com

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Technology Stocks

Hardwire Positions in the Project Long-Term Benefits for Harley, but Near-Term Risks Remain Pervasive

While still a significant market player, Harley’s market share fell roughly 800 basis points, to 42.1% in 2020 from above 50% in 2019 (although it has recovered 2.5% of share through June). With the launch of “The Hardwire” strategy, CEO Jochen Zeitz is chasing the highest ROI opportunities for Harley. This is versus the firm’s goal calling for 7%-9% motorcycle operating margins in 2021 (in line with our 9% forecast, if it can mitigate EU tariffs).

Financial Strength

Harley-Davidson carries more debt on its balance sheet than as leverage is required to finance its HDFS arm and offer loans to customers. HDFS generates increased financial risk and weaker profitability when credit standards tighten or credit markets become less liquid. The firm had $1.7 billion in cash and equivalents at the end of June; it has historically strived to hold enough liquid assets to cover its liquidity needs for 12 months.

However, with the consolidation of securitization interests, that ratio jumped to 73% in 2009. The company worked this down to 64% at the end of 2013, but the ratio has risen again above 75% since 2015 with the issuance of incremental debt. The company still has financial flexibility thanks to a $707.5 million revolver (expiring in 2023), a $707.5 million revolver (expiring in 2025), as well as its $350 million facility, which helps address the seasonality of production and shipments. Additionally, Harley maintains flexibility in its capital structure through stock repurchases and dividends (currently at $0.15 per share per quarter).

Harley’s Brand Awareness

  • Harley-Davidson’s brand is more than 115 years old and resonates globally with a wide consumer base, particularly its core market (men over 35). Efforts to reconnect with its core consumer could lead to a unit demand uptick faster than we anticipate.
  • The firm has historically generated strong free cash flow, and we expect it to continue doing so after the pandemic, generating a mid-single-digit average FCF yield over the next decade.
  • Harley has high brand awareness and robust market share in custom and touring segments domestically, two of the most profitable motorcycle categories.

Company Profile

Harley-Davidson is a global leading manufacturer of heavyweight motorcycles, merchandise, parts, and accessories. It sells custom, cruiser, and touring motorcycles and offers a complete line of Harley-Davidson motorcycle parts, accessories, riding gear, and apparel, as well as merchandise. Harley-Davidson Financial Services provides wholesale financing to dealers and retail financing and insurance brokerage services to customers. Harley has historically captured about half of all heavyweight domestic retail motorcycle registrations, a metric it has ceded in 2020 as it has repositioned the business. The firm recently expanded into the middleweight market with the launch of the Pan America model.

(Source: The Motley Fool)

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Global stocks Shares

American Airlines: Significant Revenue Improvement to $19 FVE in the Second Quarter

Passenger revenue increased 105.8% from the previous quarter, the largest increase we’ve seen from U.S. network carrier this quarter, on a 44.4% increase in capacity, a 29.5% increase in load factors to 77.0% and a 10% increase in yield. These metrics remain 24.6%, 11.1%, and 11.4% below 2019 levels, respectively.

Management said business travel improved from roughly 20% of 2019 levels in March to 45% of 2019 levels in June and that much of the increase in demand was from travel within the West Coast. American has not traditionally had much of a presence in business travel on the West Coast, which suggests that the code sharing alliance that American initiated with Alaska Airlines is expanding American’s relevant market.

Company’s Future Outlook

There may be further upside to American’s share gains within business travel, as the firm initiated a code-sharing agreement with JetBlue, which has substantial share in the Northeast. Management said it expects 2022 CASM to be flat relative to 2019 levels, which is not as aggressive a target as peers have guided to. Since American is a domestically oriented airline and the domestic market has recovered faster than the international market, it is expected that the efficiency gains from restructuring should fall to the bottom line faster for American than for more internationally focused airlines as a larger proportion of the network would be in place in 2022.

Company profile

American Airlines is the world’s largest airline by scheduled revenue passenger miles. The firm’s major hubs are Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C. After completing a major fleet renewal, the company has the youngest fleet of U.S. legacy carriers.

(Source: Morningstar)

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.