Golden Girl Finance
 
Aston Hill Financial Inc.
Posts (31)
 
 

Stock Market

Volatility Reigns: An update on the markets

August 25th, 2015 by

Where do we go from here? Vice President & Portfolio Manager Vivian Lo provides her thoughts related to the most recent sell off...

 
 

We have been on a wild rollercoaster ride since mid-August and yesterday (Monday), investors hit panic mode with all major indices globally selling off significantly and essentially hitting correction levels. And while there was no “specific catalyst” for Monday’s plunge, the overall selloff stems from three main issues: 1) concerns about slowing growth in China; 2) significant declines in commodity prices; and 3) uncertainty over policy responses.

Want to read more?

Click here to learn more about what’s causing turbulence in today’s markets.

Stock Market

The state of the markets

July 6th, 2015 by

Portfolio Manager John Kim provides his thoughts on North American markets & the recent economic turmoil in Greece and China

 
 

Last week's market activity was all driven by macro events in Greece and, to a lesser extent, China.  The Greek government surprised everyone by stopping debt negotiations and calling a referendum on the creditors’ offer.  Prime Minister Tsipras said he wanted the people of Greece to decide.  He asked the people to reject the offer to give him a better position from which to bargain.  Not really sure why he thinks he will have more bargaining power if the people reject the offer. Tsipras said the vote was only about the creditor offer, but members of the EU said it was a vote on staying in the Euro.

Not to let Greece hog all the headlines, China’s Central Bank (the PBOC) cut the lending rate by 25bps to 4.85% and the RRR by 50bps for banks with loans to Agriculture and Small Business - all this to try and stem the bleeding in the stock markets.

With these surprises, world markets sold off last Monday due to all the uncertainty created by the call for a referendum.  Markets hate uncertainty, and with every headline out of Greece, markets reacted.  But the U.S. and Canadian markets recovered somewhat after U.S. economic data showed decent job growth – although not great – keeping alive the hope of some for only one rate hike in 2015 in the U.S.

Today, with the decisive NO victory in the Greek referendum, markets again sold off.  The U.S. and Canadian markets were able to recover from the lows as glimmers of hope appeared that a deal could actually be reached.  But we have heard that before.

As we look ahead, the big deadline will be July 20th when $3.5B owed by Greece to the ECB is due.  If that is not repaid, the ECB’s hand will be forced and will no longer be allowed to extend aid to Greece through the ELA.  Tomorrow the EU leaders meet, I don’t expect anything concrete will come out of it.  So the next couple of weeks will most likely be volatile as we get closer to the 20th; add to that US earnings season kicks off in earnest next week. Never a dull moment.

What I do believe is that if we look out one year from now, the world economy will have grown and Europe will be more stable than it is today.  Central Banks everywhere have shown the willingness, time and again, to do whatever it takes to keep the financial system afloat and the economy from sliding into another recession.  If the financial system begins to stress, even the Federal Reserve would have to take notice and most likely back off from raising rates.

Stock Market

Don't second-guess the rising market

April 23rd, 2015 by

Portfolio Manager Andrew Hamlin talks stocks on BNN

 
 

Watch Portfolio Manager Andrew Hamlin on BNN...

As he explains why he remains bullish on the stock market in the long term.

Click here to watch the clip.

Investing

How to get exposure to the global M&A cycle

April 15th, 2015 by

For investors looking to gain exposure to the M&A theme, portfolio manager Andrew Hamlin explains a different approach...

 
 

It is always nice to have unexpected wins in a portfolio, like owning a company for fundamental reasons and then - out of the blue! - it gets acquired for a huge multiple. Some recent examples include Kraft being acquired by Heinz and 3G, FedEx acquiring TNT Express, Mylan acquiring Perrigo, Lexmark acquiring Kofax Ltd., and, Verisk Analytics acquiring Wood Mackenzie Ltd.

Global M&A activity is picking up and is expected to be strong through to 2017. (This was a theme we discussed in our 2015 Market Outlook Report). This year alone, total deal announcements in Q1/15 were up 25% year over year to $854 billion. Completed deals were up 12% in Q1/15 alone, the strongest deal closings since 2008.

Think global

If investors want to play the M&A theme, one approach is to buy companies that have the potential to be acquired. This is a tough game and one that we don’t tend to recommend. Investors should be buying stocks for fundamental reasons - not because there might be a chance of a takeover. We think a better way to get exposure to global M&A activity is to own companies that collect fees and provide advisory services to buyers and sellers. Large global investment banks are one way to go, but these firms have other lines of business such as trading, fixed income, foreign exchange, etc. A more interesting approach is to own independent advisors – this is a ‘pure play’ approach as the majority (if not sole) source of their business is advisory services, for which hefty fees are collected.

As we look at the trends in global M&A, two key areas stand out that we want exposure to: Europe and Energy. In the Aston Hill Growth & Income Fund, we are getting exposure by owning Lazard Ltd., which looks to us to be the best positioned independent advisor. Over 50% of the firm’s revenues are generated from Europe, and almost 40% from Energy deals. Lazard is involved in the most number of deals larger than $10 billion. It has one of the most impressive backlog of announced but unclosed deals amongst the independents, is the exclusive advisor to 3G/Buffett in the Kraft Heinz merger, and is advising on the FedEx/TNT Express transaction. Furthermore, we like Lazard from an income perspective, as the company pays a +2% yield and has a history of paying special annual dividends.

Making the right move

Unless you are lucky enough to own stocks that get taken out, investors can still benefit from the boom in global M&A by owning companies that offer advisory services. We are in a multi-year trend of a pickup in M&A, and independent advisor stocks are not overly expensive - plus they provide great upside as the cycle matures and most pay very attractive dividends.

Investing

Pharma's on fire with M&A activity

April 10th, 2015 by

Portfolio Manager Jeff Burchell provides his thoughts on Mylan's recent bid for Perrigo in the pharmaceuticals sector

 
 

Pharma is on fire… But the risks are mounting as the deals get hotter and the space continues to melt upwards.

Mylan (MYL) has made an unsolicited bid for Perrigo (PRGO) – we owned both stocks in the funds and have subsequently sold both positions given the quick spike in the stocks and our view of what is next to come.  Keeping track of the M&A in pharma is a full-time job, and we have made money for investors doing just that.  We do see further opportunity on specific names in the space – but the egos are building as the prices being paid climb ever higher.

An expensive game of chess?

Part of our thesis on Mylan was M&A, either they acquire or they would get acquired.  We owned Perrigo for the underlying growth and our belief that the consumer business would return to higher growth rates after a few slower growth quarters.  There is a decent chance, in our view, that Mylan has put a larger-than $30 billion (that is “B” for billion) acquisition of Perrigo on the table to stir the pot in terms of their own shares (either to block a lower takeout bid for their shares or to encourage a much higher bid price for their shares). $30 billion is a big chunk of change to put on the table to play chess!

Risky heights

In our view, management teams in the space have shifted their focus from the shareholder discipline of buying back one’s own stock and paying dividends in favour of empire building – this will end badly at some point and reminds us of the late 1990s in the space.