HOLT Macro Overview: Markets priced for perfection · 2017. 2. 8. · HOLT Macro Overview: Markets...

HOLT Macro Overview: Markets priced for perfection

March 2017

+44 207 883 3649 [email protected]

Michel Lerner, CFA, Global Co-Head of HOLT

Market Commentary

HOLT

credit-suisse.com/holtmethodology

Felix Rusli, Head of HOLT, APAC +852 2101 6482 [email protected]

HOLT

Trumponomics and equity valuations

Opportunities at the style and sector level

Reflation implications for equities

AGENDA

1 THIS IS MARKET COMMENTARY AND NOT A RESEARCH DOCUMENT

HOLT

THIS IS MARKET COMMENTARY AND NOT A RESEARCH DOCUMENT

HOLT Offers Global Experience and Expertise

Global database covering 67 countries and 20,000 companies. This includes 37 Emerging Market Countries

and nearly 9,500 APAC stocks. Our database contains ca. 98% of Global Market Cap.

North America

(US and Canada) >6,000 firms

1,901 firms > $1B Mkt

Cap

Europe

19 countries

>3,800 firms

1,047 firms > $1B Mkt Cap

Japan >3,600 firms

549 firms >$1B Mkt Cap

Non-Japan Non-EM

Asia

4 countries

>3,000 firms

580 firms > $1B Mkt Cap

Global Emerging 40 countries

>3,400 firms

1,694 firms > $1B Mkt Cap

HOLT’s 40+ sector specialists review the data and make

adjustments on

a global basis

Quality, Consistency & Breadth

Complete global coverage

of > 20,000 companies

in over 67 countries

Data ingested from highest quality independent data

vendors in each region of the world

2

HOLT


HOLT can help you…

Compare and value stocks, sectors and regions on a global basis

Gain insights into what is priced into stocks, sectors and regions

Generate and filter ideas more efficiently

Identify key investment risks

Make money by identifying mispriced assets

3

HOLT


Trumponomics and equity valuations

4

HOLT


HOLT Global Economic Cycle is back into Recovery territory

Source: Credit Suisse Fixed Income Research

Date: February 8, 2017

5

HOLT


Fueling improvements in consensus-driven CFROI (world > €5 bn market cap)

Source: Credit Suisse HOLT

Date: March 6, 2017

6

HOLT


Revisions are particularly strong in cyclical sectors


Date: March 2017

7

HOLT

Scope for US CFROI to move up on tax cuts Tax Rates: U.S. vs Global Through Time

Source: HOLT Data. OECD Tax Database at OECD.org/tax. Universe for U.S. effective tax rate is largest companies (ex financials, REITs) by market cap (1,300 firms) ; based on

medians; excludes companies with negative pretax income. OECD average tax rates shown are combined corporate income tax rate - shows the basic combined central and sub-central

(statutory) corporate income tax rate given by the central government rate (less deductions for sub-national taxes) plus the sub-central or state tax rate.

8 THIS IS MARKET COMMENTARY AND NOT A RESEARCH DOCUMENT

HOLT


US companies with high tax rates could benefit

COMCAST CORP CMCSA Media $163,454 36% $8,252 25%

UNITEDHEALTH GROUP INC UNH Health Care Providers $144,657 36% $8,478 26%

ALTRIA GROUP INC MO Tobacco $126,509 35% $5,458 23%

WALGREENS BOOTS ALLIANCE INC WBA Food & Staples Retailing $92,433 37% $2,003 27%

UNION PACIFIC CORP UNP Road & Rail $83,983 38% $6,128 28%

CVS HEALTH CORP CVS Food & Staples Retailing $79,715 39% $6,868 32%

REYNOLDS AMERICAN INC RAI Tobacco $77,948 36% $3,327 25%

EOG RESOURCES INC EOG Oil, Gas & Consumable $51,523 42% $2,524 39%

EXPRESS SCRIPTS HOLDING CO ESRX Health Care Providers $47,326 36% $2,246 26%

AETNA INC AET Health Care Providers $44,008 35% $3,044 24%

CSX CORP CSX Road & Rail $32,798 37% $2,525 27%

HUMANA INC HUM Health Care Providers $31,013 37% $2,239 26%

EXELON CORP EXC Electric Utilities $30,828 35% $2,003 23%

NORFOLK SOUTHERN CORP NSC Road & Rail $30,526 36% $2,243 25%

SOUTHWEST AIRLINES LUV Airlines $29,473 38% $1,340 28%

Company Ticker Industry

Market

Cap

Total

Corporate

Tax Rate

5 yrs Median

Estimated

Impact on Net

Income

(5 yrs Total)

% Impact on

Net Income

(5 yrs

Median)

Source: HOLT Data and Factset

Universe: S&P 500 (ex Financials, REITS, Inversions and negative pretax income). Companies with five yr median tax rate > 35% and less than 10% foreign sales. Estimated impact on

net income is trailing five year impact of setting the yearly tax rate from as reported to 20%. Top 15 companies sorted by market cap in descending order shown.

9

HOLT


Policy risks out of sync with equity market complacency

10

Source: Credit Suisse Executive Panel: Politics


HOLT


Even if earnings recover, valuations look full (US large caps ex-Financials)

11


Date: March 6, 2017

HOLT


HOLT market-derived discount rate can be used for valuation signals

A market-derived discount rate is the rate which equates expected future cash flows to the current market value.

FCFF

1 + DR

Forecast

Observe

Solve

Market Enterprise

Value

HOLT Model

12

HOLT


Trump potential policies within a historical context

Source: Credit Suisse HOLT, Credit Suisse Global Strategy, Robert Shiller

Note: Pre-1976 the Discount Rates are estimated based on regression to the Trend PE’s (Most recent price/ Trend earnings which is the 10-year trailing average)

**NB: Quartile lines are drawn according to HOLT data back to 1950.

For further details see Wealth Creation Principles 2011, Vol 1 Issue 2 13

Smoot-Hawley tariffsGATT

Uruguay Trade

agreement

HOLT


Equities no longer cheap vs. bonds

Excludes Financials & Regulated Util ities

14

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Equi

ty R

isk

Prem

ium

(%)

Equity Risk Premium - USA

Equity Risk Premium 75%ile Median 25%ile

13*Derived Cost of Equity: WACC = (%D)(Kd) + (1-%D)(Ke), Equity Risk Prem ium = Ke - Rf

SolveKnow


Date: March 6, 2017

HOLT


The case for Asia remains stronger on a relative basis

15

Source: Credit Suisse HOLT Data

Date: March 14, 2017

HOLT


Korea- and Hong Kong-listed companies remain relatively attractive within Asia

16



HOLT


The region is also in the m idst of a strong upgrade cycle, benefiting cyclicals more than defensives APAC ex Japan aggregate CFROI revisions

CFROI Revisions - Cyclicals CFROI Revisions – Defensive sectors

17 Source: Credit Suisse HOLT Data


HOLT


The Credit Suisse HOLT Country Ranking Model provides investors with a monthly index ranking of the MSCI AC World countries using a rules-based systematic process. HOLT’s multi-

factor model uses Valuation, Market Sentiment and CFROI® Sentiment to rank each country.

Asia now dominates 4 out of the top 5 markets in the HOLT Country Ranking Model


Date: March 14, 2017 18

HOLT


Into a recovery, risk-on value/ low quality styles perform best

historically

Source: Credit Suisse HOLT, Data: Global developed, largest 1800, Dec 1992 to Dec 2012.

Note: Styles are ranked from 1 to 8, with 1 being the best-performing and 8 the worst. O:Operations; M: Momentum; and V: Valuations

Overheating Slowdown Contraction Recovery

Best in Class 1 1 4 2 +O +M +V

Contrarian 5 4 5 6 +O -M +V

Restructuring 6 7 11 1 -O +M +V

Quality at Any Price 2 5 3 4 +O +M -V

Yesterday's News 10 8 7 11 +O -M -V

Momentum Trap 8 10 9 8 -O +M -V

Value Trap 7 6 6 3 -O -M +V

Worst in Class 11 11 10 10 -O -M -V

Cyclicals 9 9 8 5

Defensives 3 3 2 9

eCAP 4 2 1 7

19

HOLT


HOLT Best in Class Stocks presenting at the AIC

20



HOLT


China State Construction International Holdings (3311)

Sales Growth (%) Warranted Price

(% Upside/ Downside)

6% HK$ 13.81 (-)

0% HK$ 11.75 (-14%)

15% HK$ 18.86 (37%)

Market Implied Scenario – What’s priced in?

Scenario Analysis

Transitioned from

Contrarian to Best

In Class as CFROI

revisions improved

IBES

Consensus Est.

21 Source: Credit Suisse HOLT LensTM


HOLT

THIS IS MARKET COMMENTARY AND NOT A RESEARCH DOCUMENT 22



HOLT Restructuring Stocks presenting at the AIC

HOLT


Bluescope Steel (BSL) Bluescope Steel is currently priced for margins to quickly revert back towards 6% by FY21, leading to a fall in CFROI back to

1%.

Market Implied Scenario – What’s priced in?



HOLT


The Case for Quality Growth Stocks

24

HOLT


Value has outperformed at the expense of Quality—will this continue?

Last 12 Month HOLT Factor Performance (Relative Returns) – Global Stocks

25



HOLT


Economics aside, valuations do not suggest the performance of Value should persist in the US

26


Date: February 2017

HOLT


US high quality high growth valuation premium has reverted vs. lower quality low growth

27


Date: March 3, 2017

HOLT


US high quality growth

Name Symbol

Market

Capitaliz

ation

(bil)

[EUR]

Growth

Percentile

Operational

Quality

Percentile

Valuation

Percentile

Price

Return -

Region

Relative

26

Weeks

SABRE CORP SABR 5.7 81 83 48 -30.6

ACUITY BRANDS INC AYI 9.1 86 92 58 -28.5

MONSTER BEVERAGE CORP MNST 24.3 79 81 13 -25.1

TRANSDIGM GROUP INC TDG 12.8 98 100 88 -20.2

REGENERON PHARMACEUTICALS REGN 37.4 79 94 81 -18.8

ZIMMER BIOMET HOLDINGS INC ZBH 22.2 92 89 71 -18.1

FORTUNE BRANDS HOME & SECUR FBHS 8.5 93 76 31 -17.8

NATIONAL RETAIL PROPERTIES NNN 6.4 85 75 75 -17.0

TYLER TECHNOLOGIES INC TYL 5.3 98 88 36 -14.0

CONSTELLATION BRANDS STZ 29.7 90 85 47 -12.4

O'REILLY AUTOMOTIVE INC ORLY 24.1 77 90 29 -11.8

POST HOLDINGS INC POST 5.0 98 79 74 -11.1

BLACK KNIGHT FINANCIAL SVCS BKFS 5.5 80 93 17 -10.8

SBA COMMUNICATIONS CORP SBAC 13.3 84 94 5 -10.7

HIGHWOODS PROPERTIES INC HIW 5.1 84 79 84 -8.7

STARBUCKS CORP SBUX 78.3 80 83 27 -8.0

FLEETCOR TECHNOLOGIES INC FLT 14.9 80 99 24 -7.1

ALEXION PHARMACEUTICALS INC ALXN 28.0 97 86 69 -6.9

PAYCHEX INC PAYX 20.9 82 87 27 -6.2

QUINTILES IMS HOLDINGS INC Q 9.0 76 85 27 -5.8

ALLEGION PLC ALLE 6.6 88 80 63 -5.0

GLOBAL PAYMENTS INC GPN 11.5 98 94 53 -4.6

EQUINIX INC EQIX 25.5 91 88 12 -4.3

CENTENE CORP CNC 11.5 92 78 62 -4.0

INTERCONTINENTAL EXCHANGE ICE 32.5 96 79 19 -3.4

LABORATORY CP OF AMER HLDGS LH 13.9 88 87 34 -3.3

KRAFT HEINZ CO KHC 104.5 91 98 8 -2.8

SMITH (A O) CORP AOS 8.4 90 85 40 -2.3

MSCI INC MSCI 8.6 96 81 26 -0.9

MIDDLEBY CORP MIDD 7.6 95 98 31 -0.4

IHS MARKIT LTD INFO 15.8 96 99 9 -0.2

28


Date: March 3, 2017

HOLT


Rolling 12-month relative returns of global high quality & growth stocks against

global low quality, low growth stocks

The underperformance of quality growth has been particularly pronounced in Asia

Universe: Largest 1,000 stocks by market cap in each major region. High (low) Quality & Growth = top (bottom) half of regional universe on HOLT Quality and Growth scores. Source:

Credit Suisse HOLT, Data as of 31/12/2016, extracted from the report, A Bad Year for Good Companies (HOLT Quantitative Strategy Team, 18 January 2017).

29

https://doc.research-and-analytics.csfb.com/mercurydoc?language=ENG&format=PDF&document_id=1069945901&serialid=Sender&auditid=1271781

HOLT


Asia’s High quality growth but underperform ing stocks

30



Name Symbol Country

Market

Cap (bil

USD)

Operational

Quality Percentile

Growth

Percentile

Price Return -

Market Relative

52 Weeks

CFROI

Forecast

HOLT

Upside (%) Sector

CK HUTCHISON HOLDINGS LTD 1 HKG 48.2 70 71 -17.5 7.1 -35 Industrials

HINDUSTAN UNILEVER LIMITED HLL IND 29.7 95 73 -14.7 38.1 -57 Consumer Staples

SUN PHARMACEUTICALS INDUSTRIES LTD SUN IND 25.6 67 61 -38.8 13.9 49 Health Care

GF SECURITIES CO LTD 1776 HKG 16.7 95 65 -4.8 11.1 -8 Financials

AMOREPACIFIC 090430 KOR 16.6 70 83 -29.1 11.7 -35 Consumer Staples

ASIAN PAINTS LIMITED ASPN IND 15.4 97 67 -2.8 18.0 -49 Materials

SK INNOVATION 096770 KOR 13.0 70 81 -6.9 7.7 20 Energy

LG HOUSEHOLD & HEALTH CARE 051900 KOR 12.3 81 78 -10.0 18.4 -25 Consumer Staples

JG SUMMIT HOLDINGS, INC. JGS PHL 10.9 68 81 -0.4 7.7 5 Industrials

GOODMAN GROUP GMG AUS 10.1 95 64 -0.5 7.2 -29 Real Estate

EICHER MOTORS LTD EICH IND 9.8 98 98 -0.7 27.1 -8 Industrials

S-OIL 010950 KOR 9.4 72 87 -2.6 7.6 -19 Energy

VIETNAM DAIRY PRODUCTS JSC VNM VNM 8.4 92 77 -9.1 27.3 -19 Consumer Staples

AMOREPACIFIC GROUP 002790 KOR 8.3 63 86 -20.9 12.9 -36 Consumer Staples

DALI FOODS GROUP CO LTD 3799 HKG 8.0 67 76 -1.0 19.8 -29 Consumer Staples

CHINA GAS HOLDINGS LTD 384 HKG 7.9 91 82 -1.2 13.1 -15 Utilities

DABUR INDIA LIMITED DABU IND 7.2 90 65 -8.1 20.4 -21 Consumer Staples

LENOVO GROUP LIMITED 992 HKG 6.8 73 61 -41.7 27.2 621 Information Technology

SIEMENS INDIA LIMITED SIEM IND 6.7 67 64 -1.3 8.1 -56 Industrials

ZHUZHOU CSR TIMES ELECTRIC CO LTD 3898 HKG 6.4 97 66 -14.8 15.3 71 Industrials

ENN ENERGY HOLDINGS LIMITED 2688 HKG 6.2 89 73 -6.2 11.2 19 Utilities

AUROBINDO PHARMA LTD ARBN IND 5.8 78 69 -28.4 15.2 66 Health Care

BRITANNIA INDUSTRIES LIMITED BRIT IND 5.7 98 81 -6.6 22.8 -33 Consumer Staples

SINGAPORE EXCHANGE LIMITED SGXL SGP 5.7 74 65 -10.5 35.3 -34 Financials

REA GROUP LIMITED REA AUS 5.7 92 71 -0.8 44.1 -31 Consumer Discretionary

MARICO LIMITED MRCO IND 5.5 94 63 -3.7 27.8 -56 Consumer Staples

PIDILITE INDUSTRIES LIMITED PIDI IND 5.4 99 85 -4.3 19.1 -27 Materials

HOLT


LG Household and Health Care (051900) LG H&H has historically traded at a premium, with market-implied CFROI above consensus forecast CFROI. However more recently, implied CFROI

has declined to near 10-year lows while forecast CFROI has remained relatively stable.

Market-implied scenario: Using HOLT’s MICAP analysis, LG H&H is currently priced to maintain its forecast CFROI of 18% along with 7% asset growth

for a further 15 years. This appears conservative relative to regional peers which have historically priced for a MICAP of 40 years.

Note: MICAP – Market implied Competitive Advantage Period. HOLT assesses the number of years the company would need to maintain its high CFROI in order to justify its current

share price.



HOLT


Reflation implications for equities

32

HOLT


Inflation: Good for cyclicals

33

Source: CS Strategy Research

Date: November 2016

HOLT


APxJ cyclical laggards classified as Best in Class and

Restructuring

34


Cyclical with less than 10% share price performance YTD. As of March 15, 2017.

Name Symbol CountryMarket Cap.

(bil USD)Sector

Price Perf.

YTD (%)

CFROI

Forecast (%)

HOLT

Upside (%)

Investment

Style

LINK ADMINISTRATION HOLDINGS LTD LNK AUS 2.1 Information Technology 0 22 -8 Best in Class

JB HI-FI LTD JBH AUS 2.3 Consumer Discretionary -5 17 9 Best in Class

WHITEHAVEN COAL LTD WHC AUS 2.2 Energy 10 11 216 Best in Class

SOUTH32 LIMITED S32 AUS 11.4 Materials -2 5 138 Restructuring

AURIZON HOLDINGS LTD AZJ AUS 8.2 Industrials 5 6 10 Restructuring

CHINA HONGQIAO GROUP LTD 1378 HKG 6.6 Materials 5 9 119 Best in Class

MAN WAH HOLDINGS LTD 1999 HKG 2.6 Consumer Discretionary -4 25 -20 Best in Class

CHINA SHENHUA ENERGY COMPANY LIMITED 1088 HKG 41.4 Energy 10 6 71 Best in Class

GUANGSHEN RAILWAY COMPANY LIMITED 525 HKG 4.4 Industrials 4 4 0 Restructuring

SHENZHEN INTERNATIONAL HOLDINGS LIMITED 152 HKG 2.8 Industrials -2 5 -5 Restructuring

BHARAT ELECTRONICS LIMITED BAJE IND 5.5 Industrials 9 10 16 Best in Class

OIL & NATURAL GAS CORPORATION LIMITED ONGC IND 37.2 Energy 2 4 91 Best in Class

LOTTE CHEMICAL 011170 KOR 10.8 Materials -1 12 75 Best in Class

CJ E&M 130960 KOR 2.5 Consumer Discretionary 9 12 28 Best in Class

SK HYNIX 000660 KOR 29.8 Information Technology 5 8 65 Restructuring

HANKOOK TIRE 161390 KOR 6.2 Consumer Discretionary -1 8 38 Restructuring

LG DISPLAY 034220 KOR 8.9 Information Technology -11 1 129 Restructuring

LG 003550 KOR 9.5 Industrials 5 8 45 Restructuring

SAMSUNG ELECTRONICS 005930 KOR 243.4 Information Technology 10 7 20 Restructuring

HUTCHISON PORT HOLDINGS TRUST HPHT SGP 3.4 Industrials -2 6 68 Restructuring

INDORAMA VENTURES PCL IVL THA 4.8 Materials 7 7 6 Best in Class

IRPC PUBLIC COMPANY LIMITED IRPC THA 2.9 Energy 9 6 73 Best in Class

AU OPTRONICS CORPORATION 2409 TWN 3.7 Information Technology 1 2 242 Restructuring

INNOLUX CORP 3481 TWN 4.0 Information Technology 6 2 213 Restructuring

WISTRON 3231 TWN 2.1 Information Technology 6 3 32 Restructuring

LITE-ON TECHNOLOGY CORPORATION 2301 TWN 3.8 Information Technology 4 7 14 Restructuring

HON HAI PRECISION INDUSTRY COMPANY LIMITED 2317 TWN 50.5 Information Technology 5 10 34 Restructuring

HOLT


Guangshen Railway Company Lim ited (525)

US-Americas Railroads AggregateGuangsheng Railway

Eroding margins for

Guangshen Railway

Guangshen Railway’s CFROI could potentially improve on better cost control and announce tariff hikes. The stock offers

potential upside in our model if CFROI can reach levels similar to developed market peers.

Comparing Guangshen Railway to US Railroad sector



HOLT


Rising inflation expectations without a drop in investor tax rates carries risks to equities (70% correlation between CPI and US discount rate)

36

Source: Credit Suisse HOLT data, Bloomberg

Date: Dec 8, 2016

HOLT


With rising inflation, margins tend to come under pressure

37


Date: March 2017

HOLT


Fewer companies have the track -record of offsetting margin pressures with higher asset efficiency

0.64

0.66

0.68

0.70

0.72

0.74

0.76

0.78

0.80

0.82

0.84

0.86

1987-1996 1997-2006 2007-2016

Me

dia

n A

sse

t Tu

rns

x

United States Europe Japan

38

Source: HOLT US Investment Strategy

Chartbook – Feb 2017

HOLT


Stocks with pricing power, high asset turns and attractive valuations with a higher discount rate

Name Symbol Country

Market

Cap (bil)

[EUR]

CFROI

2015/16

CFROI

2016/17e

CFROI

2017/18e

Asset

Turns

2015/2016

Regional

Industry

Median

Asset

Turns

Warranted

Upside -

Downside

to Low

Price (%)

SKYWORKS SOLUTIONS INC SWKS USA 16.545 24.38 24.65 23.10 0.66 0.44 131

GILEAD SCIENCES INC GILD USA 85.946 39.03 30.18 19.78 0.57 0.01 111

GREAT WALL MOTOR CO LTD 2333 HKG 10.044 17.04 17.43 14.67 1.14 0.99 85

JAPAN AIRLINES CO., LTD.(C) 9201 JPN 10.892 15.39 13.93 11.70 0.73 0.46 84

LAM RESEARCH CORP LRCX USA 17.958 11.45 15.33 12.42 0.45 0.44 82

TRANSDIGM GROUP INC TDG USA 12.202 36.63 42.19 39.02 0.88 0.71 82

ALEXION PHARMACEUTICALS INC ALXN USA 27.256 20.62 24.89 25.24 0.39 0.01 80

CONTINENTAL AG CONG DEU 38.711 12.56 11.64 11.71 0.91 0.84 78

GREAT WALL MOTOR CO LTD 601633 CHN 15.914 17.04 17.43 14.67 1.14 0.99 77

FOCUS MEDIA INFORMATION TECHNOLOGY CO LTD002027 CHN 14.326 50.43 48.27 33.93 1.20 0.81 76

BIOGEN INC BIIB USA 59.199 18.41 16.93 16.87 0.35 0.01 75

CHINA HUARONG ASSET MANAGEMENT CO LTD2799 HKG 14.553 14.07 12.46 11.00 0.52 0.45 60

MAGNA INTERNATIONAL INC MGA USA 15.472 9.10 9.04 9.14 1.36 1.00 59

CELGENE CORP CELG USA 89.532 19.62 19.74 20.43 0.32 0.01 57

CBRE GROUP INC CBG USA 11.488 25.30 25.25 23.43 2.98 0.16 56

REGENERON PHARMACEUTICALS REGN USA 37.197 22.99 20.97 19.50 0.45 0.01 54

PRUDENTIAL FINANCIAL INC PRU USA 45.011 10.68 12.68 11.80 1.88 1.19 47

FUJI HEAVY INDUSTRIES LTD.(C) 7270 JPN 27.725 17.31 11.79 13.78 1.11 0.96 46

ABBVIE INC ABBV USA 95.537 17.21 18.05 20.06 0.36 0.01 45

GREE ELECTRIC APPLIANCES, INC OF ZHUHAI000651 CHN 23.187 20.82 20.48 20.30 1.28 1.00 42

CIGNA CORP CI USA 36.717 20.80 15.59 16.79 2.05 1.01 42

LINCOLN NATIONAL CORP LNC USA 14.764 10.16 13.12 12.88 1.22 1.19 41

DEUTSCHE BOERSE AG DB1Gn DEU 14.604 23.13 22.05 21.29 0.58 0.55 40

LYONDELLBASELL INDUSTRIES NV LYB USA 34.721 14.50 15.46 14.46 0.85 0.57 37

APPLE INC AAPL USA 690.658 17.87 15.96 15.21 0.68 0.57 37

HYUNDAI MOBIS 012330 KOR 18.819 8.92 8.62 8.34 1.53 0.69 37

CHINA VANKE CO LTD 000002 CHN 30.542 14.24 15.30 13.61 0.98 0.20 35

MAGNA INTERNATIONAL INC MG. CAN 15.521 9.10 9.04 9.14 1.36 1.00 33

SAUDI TELECOM COMPANY SJSC 7010 SAU 33.029 9.75 8.34 8.18 0.33 0.22 33

PICC PROPERTY AND CASUALTY COMPANY LTD2328 HKG 21.625 20.46 18.64 16.75 2.68 1.75 33

HCL TECHNOLOGIES LIMITED HCLT IND 17.047 24.96 23.43 21.70 1.31 0.87 31

HEWLETT PACKARD ENTERPRISE HPE USA 35.810 10.35 9.12 9.15 1.09 0.57 29

APPLIED MATERIALS INC AMAT USA 37.603 16.47 20.51 20.50 0.68 0.44 29

MS & AD INSURANCE GROUP HOLDINGS, INC.(C)8725 JPN 18.961 14.02 11.99 11.55 3.13 1.39 29

THE PEOPLE'S INSURANCE CO (GROUP) OF CHINA LTD1339 HKG 16.266 14.01 12.83 13.11 2.61 1.75 29

DISCOVERY COMMUNICATIONS INC DISCA USA 10.926 31.28 29.37 28.46 1.00 0.50 29

NOVO NORDISK AS NOVOb DNK 79.163 24.68 22.92 23.03 0.51 0.29 28

DELPHI AUTOMOTIVE PLC DLPH USA 19.306 16.26 17.49 18.83 1.09 1.00 27

SIAM CEMENT PUBLIC COMPANY LIMITED (THE)SCC THA 16.946 9.50 10.11 9.52 0.54 0.37 27

JOHNSON & JOHNSON JNJ USA 317.560 12.33 13.04 12.79 0.37 0.10 25

D R HORTON INC DHI USA 11.552 8.26 8.97 8.99 1.12 0.92 24

REYNOLDS AMERICAN INC RAI USA 82.166 74.38 84.63 90.30 2.36 1.17 23

39


Date: March 2017

Name Symbol Country

Market

Cap (bil)

[EUR]

CFROI

2015/16

CFROI

2016/17e

CFROI

2017/18e

Asset

Turns

2015/2016

Regional

Industry

Median

Asset

Turns

Warranted

Upside -

Downside

to Low

Price (%)

SKYWORKS SOLUTIONS INC SWKS USA 16.545 24.38 24.65 23.10 0.66 0.44 131

GILEAD SCIENCES INC GILD USA 85.946 39.03 30.18 19.78 0.57 0.01 111

GREAT WALL MOTOR CO LTD 2333 HKG 10.044 17.04 17.43 14.67 1.14 0.99 85

JAPAN AIRLINES CO., LTD.(C) 9201 JPN 10.892 15.39 13.93 11.70 0.73 0.46 84

LAM RESEARCH CORP LRCX USA 17.958 11.45 15.33 12.42 0.45 0.44 82

TRANSDIGM GROUP INC TDG USA 12.202 36.63 42.19 39.02 0.88 0.71 82

ALEXION PHARMACEUTICALS INC ALXN USA 27.256 20.62 24.89 25.24 0.39 0.01 80

CONTINENTAL AG CONG DEU 38.711 12.56 11.64 11.71 0.91 0.84 78

GREAT WALL MOTOR CO LTD 601633 CHN 15.914 17.04 17.43 14.67 1.14 0.99 77

FOCUS MEDIA INFORMATION TECHNOLOGY CO LTD002027 CHN 14.326 50.43 48.27 33.93 1.20 0.81 76

BIOGEN INC BIIB USA 59.199 18.41 16.93 16.87 0.35 0.01 75

CHINA HUARONG ASSET MANAGEMENT CO LTD2799 HKG 14.553 14.07 12.46 11.00 0.52 0.45 60

MAGNA INTERNATIONAL INC MGA USA 15.472 9.10 9.04 9.14 1.36 1.00 59

CELGENE CORP CELG USA 89.532 19.62 19.74 20.43 0.32 0.01 57

CBRE GROUP INC CBG USA 11.488 25.30 25.25 23.43 2.98 0.16 56

REGENERON PHARMACEUTICALS REGN USA 37.197 22.99 20.97 19.50 0.45 0.01 54

PRUDENTIAL FINANCIAL INC PRU USA 45.011 10.68 12.68 11.80 1.88 1.19 47

FUJI HEAVY INDUSTRIES LTD.(C) 7270 JPN 27.725 17.31 11.79 13.78 1.11 0.96 46

ABBVIE INC ABBV USA 95.537 17.21 18.05 20.06 0.36 0.01 45

GREE ELECTRIC APPLIANCES, INC OF ZHUHAI000651 CHN 23.187 20.82 20.48 20.30 1.28 1.00 42

CIGNA CORP CI USA 36.717 20.80 15.59 16.79 2.05 1.01 42

LINCOLN NATIONAL CORP LNC USA 14.764 10.16 13.12 12.88 1.22 1.19 41

DEUTSCHE BOERSE AG DB1Gn DEU 14.604 23.13 22.05 21.29 0.58 0.55 40

LYONDELLBASELL INDUSTRIES NV LYB USA 34.721 14.50 15.46 14.46 0.85 0.57 37

APPLE INC AAPL USA 690.658 17.87 15.96 15.21 0.68 0.57 37

HYUNDAI MOBIS 012330 KOR 18.819 8.92 8.62 8.34 1.53 0.69 37

CHINA VANKE CO LTD 000002 CHN 30.542 14.24 15.30 13.61 0.98 0.20 35

MAGNA INTERNATIONAL INC MG. CAN 15.521 9.10 9.04 9.14 1.36 1.00 33

SAUDI TELECOM COMPANY SJSC 7010 SAU 33.029 9.75 8.34 8.18 0.33 0.22 33

PICC PROPERTY AND CASUALTY COMPANY LTD2328 HKG 21.625 20.46 18.64 16.75 2.68 1.75 33

HCL TECHNOLOGIES LIMITED HCLT IND 17.047 24.96 23.43 21.70 1.31 0.87 31

HEWLETT PACKARD ENTERPRISE HPE USA 35.810 10.35 9.12 9.15 1.09 0.57 29

APPLIED MATERIALS INC AMAT USA 37.603 16.47 20.51 20.50 0.68 0.44 29

MS & AD INSURANCE GROUP HOLDINGS, INC.(C)8725 JPN 18.961 14.02 11.99 11.55 3.13 1.39 29

THE PEOPLE'S INSURANCE CO (GROUP) OF CHINA LTD1339 HKG 16.266 14.01 12.83 13.11 2.61 1.75 29

DISCOVERY COMMUNICATIONS INC DISCA USA 10.926 31.28 29.37 28.46 1.00 0.50 29

NOVO NORDISK AS NOVOb DNK 79.163 24.68 22.92 23.03 0.51 0.29 28

DELPHI AUTOMOTIVE PLC DLPH USA 19.306 16.26 17.49 18.83 1.09 1.00 27

SIAM CEMENT PUBLIC COMPANY LIMITED (THE)SCC THA 16.946 9.50 10.11 9.52 0.54 0.37 27

JOHNSON & JOHNSON JNJ USA 317.560 12.33 13.04 12.79 0.37 0.10 25

D R HORTON INC DHI USA 11.552 8.26 8.97 8.99 1.12 0.92 24

REYNOLDS AMERICAN INC RAI USA 82.166 74.38 84.63 90.30 2.36 1.17 23

HOLT


SUMMARY Limited scope to be complacent given how extended valuations now are

Pick-up risk selectively, mostly outside the US

Increase the focus onto stocks with pricing power, strong capital discipline and attractive

valuations

40

CLARITY IS CONFIDENCE

HOLT


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HOLT Macro Overview: Markets priced for perfection · 2017. 2. 8. · HOLT Macro Overview: Markets...

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