PGM Capital – Blog
17May/150

Highlights in the week of May, 11, 2015

By Eric Panneflek

Dear PGM Capital Blog readers,

In this weekend's blog edition we want to discuss some of the most important events that happened in the global capital markets, the world economy and the world of money in the week of May 11, 2015:

  • USA April retail sales flat.
  • Adecoagro S.A., Q1-2015, financial results.

USA APRIL RETAIL SALES DISAPPOINTS:
The U.S.A. Commerce Department said on Wednesday, May 13th, that the country's retail sales were unchanged in the month of April as can be seen from below chart.

Americans cut back on their purchases at autos dealers, furniture outlets, building supply stores, gas stations, supermarkets and department stores last month. Offsetting those declines were increases in spending at restaurants, clothiers, health-related stores and online retailers.

ADECOAGRO Q1-2015, FINANCIAL RESULTS:

Company Profile:
Adecoagro S.A. (NYSE:AGRO) is an agricultural company in South America. The company makes money by producing and selling products such as cattle, dairy goods, sugar, ethanol, and farming crops. Adecoagro has operations in Argentina, Brazil, and Uruguay.

As of December 31, 2014, it owned a total of 257,036 hectares comprising:

  • 20 farms in Argentina,
  • 11 farms in Brazil,
  • 1 farm in Uruguay
  • 3 rice processing facilities in Argentina
  • 2 dairy facilities with approximately 6,551 milking cows in Argentina.
  • 10 grain and rice conditioning and storage plants in Argentina.

As of March 31, 2015, the company owned 3 sugar and ethanol mills in Brazil with a sugarcane crushing capacity of 10.2 million tons; and had a cogeneration capacity of 232 MW.

Adecoagro S.A. was founded in 2002 and is based in Luxembourg.

On Thursday, May 14, the company reported its Q1-2015 financial results with the following highlights:

  • Adecoagro recorded Adjusted EBITDA of $35.8 million in Q1-2015, representing a 3.1% increase compared to Q1-2014.
  • Adjusted EBITDA margin during Q1-2015 reached 32.8%, compared to 36.7% in Q1-2014.
  • Net Income in Q1-2015 was US$13.8 million, US$11.2 million higher than in Q1-2014.

Source:

PGM CAPITAL COMMENTS:

Disappointed USA April Retail Sales:
It shouldn’t be a surprise that the latest batch of US numbers are somewhere between disappointing and catastrophic.

  • First-quarter GDP was flat and is about to be revised negative.
  • Retail sales were flat in April, the first month of the second quarter, with business inventories and import prices pointing in the same grind-to-a-halt direction.

The US is now looking at zero growth for the entire first half of 2015. Six years into a recovery, with record low interest rates and a recent doubling of government debt, that’s a bit of a dilemma. Especially given the Fed’s threat to raise interest rates in the next few months.

As can be seen from below chart, the dollar is reacting to this prospect exactly as one would expect, by falling like a stone, after it has hit a 12 year high, by mid March this year.

US-Dollar Index 5-day chart

Gold, in the meanwhile, is acting like the reciprocal of the dollar, adding US$30 an ounce since Wednesday May 13th, to end the week at US$ 1223.65 an ounce, as can be seen from below chart.

Adecoagro Q1-2015 financial results:
As can be seen from below table, the legendary Investor, George Soros at the end of 2014, owned approx. 21.5 percent of the company's stock

AdecoAgro Top Institutional Holders:
Holder Shares % Out Value* Reported
Ospraie Management, LLC 10,650,214 8.84 85,308,214 Dec 31, 2014
Jennison Associates LLC 8,099,503 6.72 82,776,920 Mar 31, 2015
Brandes Investment Partners L.P. 6,751,054 5.60 68,995,771 Mar 31, 2015
Wellington Management Company, LLP 4,711,480 3.91 37,738,954 Dec 31, 2014
PGGM Investments 4,500,000 3.73 45,990,000 Mar 31, 2015
Soros Fund Management LLC 25,915,076 21.50 207,579,758 Dec 31, 2014
Tradewinds Global Investors, LLC 2,606,674 2.16 26,640,208 Mar 31, 2015
Global Thematic Partners, Llc 2,102,426 1.74 21,486,793 Mar 31, 2015
EMS Capital LP 1,835,491 1.52 14,702,282 Dec 31, 2014
Bienville Capital Management, LLC 1,640,475 1.36 16,765,654 Mar 31, 2015

Source:

As can be seen from below table -updated May 5, 2015- currently, AGRO is one of the top 10 holdings for George Soros investment portfolio.

Ticker Shares Value ($1000)
SPY 5,341,000 1,102,543
BABA 4,444,604 369,969
YPF 11,650,176 319,797
AGRO 25,915,076 264,852
DOW 4,629,386 222,118
ENDP 2,217,176 198,881
EBAY 3,327,467 191,928
ZTS 4,106,735 190,101
CY 13,216,666 186,487
LVLT 3,454,781 186,005

Source:

Below 2-year chart, shows that the shares of the company has appreciated in the last 2 years with approx. 40 percent, for which the biggest increased has happened Year-To-Date.

Based on the company's business model, and the fact that legendary investor and Guru, is the biggest share holder in the company, we have a BUY rating on the stock of the company.

Before following any investing advice, always take your investment horizon and risk tolerance into consideration and keep in mind that the price of Commodities, Precious metals as well as the stocks of their producers can be very volatile and that sharp corrections may happen in the short term.

Until next week.

Yours sincerely,

Suriname Times foto

Eric Panneflek

10May/150

Highlights in the week of May 4, 2015

By Eric Panneflek

Dear PGM Capital Blog readers,

In this weekend's blog edition we want to discuss some of the most important events that happened in the global capital markets, the world economy and the world of money in the week of May 4, 2015:

  • China overtook USA as world biggest Economy.
  • Q1-2015 earnings report of Archer Daniels Midland Company (ADM).

CHINA NOW WORLD NO1, WORLD ECONOMY (P.P.P):
According with data from the International Monetary Fund (IMF), as can be seen in below table, the Chinese economy in December 2014,  was US$17.6 trillion, slightly higher than the US$17.4 trillion of the USA.

So for the first time since 1872, when it overtook the UK, the US has been knocked off the top spot.

The IMF calculated these figures by using purchasing power parity (PPP) which enables you to compare how much you can buy for your money in different countries. As money goes further in China than in the US, the figure for China is adjusted upwards.

Q1-2015 RESULTS OF ARCHER DANIELS MIDLAND:

Company profile:
The Archer Daniels Midland Company (ADM) is an American global food-processing and commodities-trading corporation, headquartered in Chicago, Illinois.

History:
In 1902, George A. Archer and John W. Daniels began a linseed crushing business in Minneapolis, Minnesota. In 1923, Archer-Daniels Linseed Company acquired Midland Linseed Products Company, and the Archer Daniels Midland Company was formed.

Currently, the company operates more than 270 plants and 420 crop procurement facilities worldwide, where cereal grains and oilseeds are processed into products used in food, beverage, nutraceutical,industrial, and animal feed markets worldwide.

The company also provides agricultural storage and transportation services and is also a leading supplier of Biodiesel, ethanol, special fats and feed and fertiliser.

It was named the world's-most-admired food-production company by Fortune magazine for three consecutive years: 2009, 2010 and 2011.

Q1-2015 Earnings report:
On Tuesday May 5, the company reported adjusted earnings per share of US$0.77, up from US$0.55 in the same period last year. Adjusted segment operating profit was US$883 million, up 12 percent from US$789 million in the year-ago period. Net earnings for the quarter were US$493 million, or US$0.77 per share, and segment operating profit was US$855 million.

ADM Reports Q1-2015 earnings report

On Thursday, May 7, the Board of Directors declared a cash dividend of 28.0 cents per share on the company’s common stock payable June 11, 2015, to Stockholders of record May 21, 2015.

PGM CAPITAL COMMENTS:

China now world's biggest economy:
For the first time in more than 140 years, the US has lost the title of the world's largest economy.

Just 15 years ago, the U.S. A produced nearly three times as much as the Chinese

China now accounts for 16.5% of the global economy when measured in real PPP (Purchasing Power Parity) terms, compared with 16.3% for the U.S.A.

It is worth mentioning, that in their updated GDP (P.P.P.) ranking of world's  economies, the CIA  also shows that China in 2014, became world's biggest Economy as can be seen from below table.

We believe that the year 2015, might be THE YEAR for China.

With the upcoming rebalancing of the IMF SDR basket this year, for which we believe that the Chinese Yuan, will be included in this prestigious IMF reserve currency basket, we believe that this will have an upwards pressure on the value of the Yuan against the other mayor world currencies.

This will increase the purchasing power of the Chinese people, which will have positive effect on most Chinese companies, specially their 3 mayor Oil Companies.

Archer Daniels Midland:
Below chart shows the all-time chart of the stock of company.

It is also worth mentioning that the company has increased its quarterly dividend in the past 10 years from US$ 0.085 a share in Q1-2005 to US$ 0.28 in Q1-2015, which is an increase of over 220% in 10 years.

Archer-Daniels-Midland Company Dividend Date & History

Based on the above, the company business model, its, P/E ratio of 14, P/B of 1.64 and a strong balance sheet we have a BUY rating on the stock of the company.

Last but not least, take into considerations that markets can stay irrational longer than you can stay solvent and before following any investing advice, always take your investment horizon and risk tolerance into consideration and keep in mind that stocks of commodities producers as well as markets of emerging economies can be very volatile and that sharp corrections may happen in the short term.

Until next week.

Yours sincerely,

Suriname Times foto

Eric Panneflek

 

3May/150

Highlights of the Week of April 27, 2015

By Eric Panneflek

Dear PGM Capital Blog readers,

In this weekend's blog edition we want to discuss some of the most important events that happened in the global capital markets, the world economy and the world of money in the week of April 27, 2015:

  • Ping An Insurance Group's stock at an all-time High.
  • Disappointed US, Q1-2015, GDP figures.
  • Shares of LinkedIn and Twitter down with more than 25% in the week.

PING AN INSURANCE GROUP AT AN ALL-TIME HIGH:

About Ping An:
Ping An Insurance (Group) Company of China, Ltd. is a holding company, which was founded 1988 and has its headquarters in Shenzhen and Shanghai, with a focus on insurance, banking, and investment businesses in China.

The company began as only a casualty insurance company. Since the mid-1990s Ping An has been diversifying into financial services from its core business of insurance and began taking investments from overseas firms.

Since June 24, 2004 Ping An has been listed on the Hong Kong Stock Exchange under the symbol 2318.hk.

Ping An has operations across all of the People's Republic of China, and in Hong Kong and Macau through Ping An Insurance Overseas. Ping An has branches or a representative agent in 150 countries.

The Hang Seng Index Services Company announced on May 11, 2007 that Ping An will join as Hang Seng Index Constituent Stock (Blue Chip Stock) since 4 June 2007.

As can be seen from below chart on Thursday, April 29th, the company's stock closed at an all-time high of HKD 111.14 a share.

DISAPPOINTED US Q1-2015 GDP:
On Wednesday, April 29, the USA department of Commerce reported that, the country gross domestic product grew between January and March at an annualized rate of 0.2 percent. The pace fell well shy of the 1 percent mark anticipated by analysts and marked the weakest quarter in a year as can be seen from below chart.

Source: Bureau of Economic Statistics

The only good news: the massive inventory build, the largest since 2010, boosted GDP by nearly 3.0%. Without this epic stockpiling of non-farm inventory which will have to be liquidated at some point (and at a very low price) Q1 GDP would have been -2.5%.

Below chart shows a breakdown of the GDP figure by its components.

LINKEDIN & TWITTER CRASHED WIHT MORE THAN 20%:
As can be seen from below chart, shares of LinkedIn (NYSE: LNKD), operator of the most popular social network for professionals, fell 20 percent in early trading on Friday, May 1st, wiping out more than US$6 billion of market value, after the company slashed its full-year forecast.

As a consequence of the weak results of Twitter's (NYSE: TWTR) on Tuesday, April 28, Twitter's stock fell by as much as 24 percent, slicing about US$6 billion off its market value as can be seen from below chart.

PGM CAPITAL COMMENTS:

Ping An:
As can be seen from above all time chart of the company, its share price has increased with approx. 976 percent since it went public in June of 2004.

With a P/E ratio of 18 and a strong balance sheet we can consider the company fairly valued. As can be seen from below chart, the company has increased its dividend steadily during the last 5 years, for which its current dividend pay out ratio is only 15.12 percent, which makes its current dividend payout extremely safe and gives the company room to further increase its dividend in the future.

Ping An Dividend history and Payout ratio

Based on the above we have a BUY rating on the stocks of Ping An Group

USA Economy stalls in Q1-2015:
The slow down reflected lower consumer spending, declining exports, lower business investment and less state and local government spending. The declines were offset by lower-than-expected imports, inventory build-ups by private business and an increase in federal spending.

As can be seen from below chart, the biggest factor was a deterioration in net exports, with lower exports subtracting nearly 1 percentage point from the annual growth rate and rising imports subtracting another quarter point. The strengthening dollar, which ended the quarter 8% higher than it had started and 20% higher than it had been a year earlier surely contributed to this.

Hours after the fresh data was released the Federal Reserve said that winter slowdown was “in part” reflective of “transitory factors” and that “economic activity will expand at a moderate pace” going forward. Economists expect that the central bank will hold off until the second half of the year, gauging the direction of the economy, before raising interest rates for the first time in 6½ years.

We  believe that the Federal Reserve won't be in any hurry to increase interest rate in parts, because of the softer U.S. economy at the start of the year and the zero to negative yield in Europe.

Twitter & Linkedin:
Regarding the massive sell-off, of the shares of both Twitter and LinkedIn we can be very short, this is something we have been predicting for a longtime. Chances are that the sell-off of these stocks are signalling the first signs that the current bubble in the US stock-market is about to burst.

Until next week.

Yours sincerely,

Suriname Times foto

Eric Panneflek