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Hi Clued. Thanks for your comment. As you say the fundamentals for defence stocks are in place, but I beileve when they expand exponential over a period of time i.e investors jump on board regardless of price because general market euphoria and FOMO, the p/e ratios become stretched. Companies most in the news:
Company. Trailing P/e. Forward P/e. Stock Mkt P/e
Nvidia 73.04. 36.10. 24.79
Rheinmetall. 49.00. 29.76. 15.45
RR. 14.95. 30.67. 16.47
BAe 22.14. 19.68. 16.47
I had expected a correction to start on Friday after US employment data and closed short-term polsition earlier at 420p, not great after seeing it going as high as 431p. My aim for short-term trading was to stay out of the market till after US CPI, but got pulled it at 408p [small] after it had hit buy retracement points at 406-408p. If CPI good will increase short-term position and hope for good Q1 US company reports. If bad CPI increase below 400p and wait till AGM if need be.
No intension to alter long-term position, RR very good hold and expect the forward P/e to be justified with major news and profitability.... Keep an eye on cable.... earnings predominantly in US dollars.... weak Stg will mean better currency translation which should further help bottom line profitability.
Good afternoon All, okay not a good afternoon!
If I refer to my postings of 2nd & 4th I did express a view of a correction and more volatility. On technical terms, as I mentioned "my limited knowledge has pointed to correction with RSI above 80 and MACD which I follow, showing fast moving line crossing the signal line". This combined by higher bond yields and oil price "with more volatility in prices and RR no acception. Short-term we could test 406-408p level".
Tomorrow we have US CPI. If any higher than expected reading we could see lower levels, otherwise a buy, but to break above 431p resistance, I believe we will need a substantial announcement from RR or US markets to revert to believing the FED will start cutting rates in June or at least cut 3 times this year. This will also boost all the momentum stocks that are currently correcting / taking profit today.... defence, chip makers etc
If we have a technical trader, it would be great to hear their opinion.
NB . US companies start reporting Q1 results.... RR will not immume to any reaction to these announcements.
This is not a posting of "I told you so" but to garner debate as my position is formulated on my views and I would like to know if I am on the right path or not.
First opologies , US CPI is due out on Wednesday.
I am surprised by strong RR bounce and thought it might test lower levels. The bounce is most welcome., as it seems the US markets are rallying, but mainly because of Tech stocks .... "Buy the Dip" investors at play?
It will be interesting to read the weekend US press and their interpretation of the data and its inflationary implications.
Good afternoon All,
Amazing economy, such strong numbers... could do with some of it in the UK.
Bond yields higher, Swap prices now pricing in US rate cut in Sept as opposed to July. US shares futures bucking the trend.... CONFUSED, normal !
Some will try and spin a market positive from this. Becareful of knee jerk reaction. Recall my days in banking, whoever holds the microphone controls the narrative.
If I am short-term trader, I would sit it out at least one hour after US open [3:30pm]... Long-term, continue to hold and accept down days [add below 400p] as RR is a good recovery company/stock.
Once again, just my opinion. I any not the Pope and not inffallible.
Volatility to continue to the next data point.... Tuesday US CPI.
Good evening,
I did mention a few days ago to expect greater market volatility.
"This combined with events in the Middle East, has seen oil prices rise with brent nearing $90. This is inflationary and yesterday's US data shows the economy continuing to grow strongly. As a result, US bond yields have been rising and the anticipated US rate cut in June has been reduced below 50%. This will have a negative affect on the general market. "
Unfortunately the market got carried away with the idea that inflation is under control and that central banks would begin to cut rates sooner [March} rather than later. For a start sentiment is changing dramatically, especially in the US. They started the year predicting 5 to 6 rate cuts this year, then that fell to 3 and now zero to maybe even a hike.
Tomorrow, 1:30pm is important with the release of US employment data. If this is strong, it will only heighten the fear of inflation and markets will continue to retreat. If the data is weak, that will be market positive and should provide some support. How long it will last will depend on the next set of data.
With regards to RR, without major news out it will now be influenced by events in the wider market. It saviour would be major news, not just new plane orders or Moodys also giving it investment grade. Might have to wait till the AGM hopefully with Tufan providing news on external SMR orders or major payback of debt and dividends to be reinstated soon. Otherwise, wait till June for central bank action from BoE, ECB and maybe FED.
Bumpy ride for all but especially for short-term traders, however, long-term still a good hold with lots of positives to come. [IMHO]
Good Luck
Good afternoon. We should have expected some kind of correction to RR shares. I am not a technical trader but my limited knowledge has pointed to correction with RSI above 80 and MACD which I follow, showing fast moving line crossing the signal line. Someone with better technical knowledge might explain this much better.
This combined with events in the Middle East, has seen oil prices rise with brent nearing $90. This is inflationary and yesterday's US data shows the economy continuing to grow strongly. As a result, US bond yields have been rising and the anticipated US rate cut in June has been reduced below 50%. This will have a negative affect on the general market, with more volatility in prices and RR no acception. Short-term we could test 406-408p level. Watch the data between now and June for guidance.
Just my observation and open to alternative observations.
It might just be that not all 3 major credit rating agencies have RR at investment grade. While S&P and Fitch have bestowed RR with investment grade BBB- [lowest level], Moody's is yet to confer its equivalent Baa3. There was a positive reaction when S&P got the ball rolling. Not much reaction following Fitch upgrade , but once Moody's joins the club, hopefully a further positive reaction.
Or just long holiday weekend and today we had the important US PCE inflation data released. The Personal Consumption Expenditure is closely followed by the FED. Good news, the core measurement was lower @2.8% than the previous month's @2.9%. Bodes well for a good US open on Monday and hopefully for RYCEY too.
The Germans have lifted the embargo on sale of Typhoons to the Saudis. However, while the Germans were debating this, the French jumped in and offered the Rafaele [ Macron made a personal approach]. As DB pointed out it is still up in the air. Once again DB makes a valid point that the Saudis want a more active role/participation in the future projects. Depending on the how the current consortium of UK, German and Italy [Typhoon] and future consortium of UK, Japan and Italy [Tempest] react to this demand, I believe this will not only effect the sale of the 48 Typhoon but also future Tempest orders.
Totally agree about FOMO.
Good to see Bae closed above £13. RR struggling with £4, needs some new impetus before heading to £4.20+ and RM just around 4% away from Eur500, which might prove a barrier for now.
Wednesday UK CPI might provide a small boost if inflation falls, however, looks like all Central Banks [BoE, FED & ECB] unlikely to cut before June. Are we due a sideways or minor correction move?
Tks WHL for your insight. I hear what you are saying about RSI. I follow MACD, but unfortunately another indicator much overlooked even by myself, FOMO. With so much cash around especially in the US, FOMO momemtum trades play a big part. I noticed in the afternoon on US entry, Bae gets sold and RM gets another leg up. I ask myself are they switching to the other, as you say more visibility.
Tks DBarnet. Good to see Bae shares break through £13.00 . Hopefully it will hold today and make its way towards £14.50. It has been a bit of a laggard when compared to RR and Rheinmettal who seem to be on a momemtum play at the moment, moving up each day. Although fundamentally and looking at its diverse portfolio, especially since adding Ball Aerospace, to me it is more attractive.
Hi Rheinmetal_fan. Thank you for the information. I gather this refers to next fighter jet the Tempest, but I thought the Saudis were initially interested in buying the Eurofighter Typhoon which was being blocked by Germany. Has that embargo been lift and is that proceeding? They want 48 Eurofigthters.
I noticed Rheinmettal continues to roar ahead. Is this a now a momentum trade to Eur 500 or backed by fundamentals?
Hi, just seen on Bloomberg Tv that Qatar airways have requested Boeing and Airbus to put forward bids for an order between 100 to 150 widebody planes. Early stage but a potential positive for the future.
Unfortunately, the investment upgrade was not enough to continue the price momentum through £4. As someone rightly said, going to need a big positive announcement, either directly or market related, to push through.
Good start to the day, UBS price target upgrade, UK wage inflation data continuing downward trend, now we need good US CPI data for the market to push forward.
Keep an eye on Cable, want a lower Pound against Dollar as most income in Dollars and don't want to lose out on currency translation.
On Friday, for the first time in a while there was market talk that the US market had gone too far. I am looking to Tuesday's US CPI data for direction. If the numbers are not clear cut, we will start market correction and that will be across all markets.
RR needs some positive news to push ahead. I don't see Divis announcement soon. Tufan rightly pointed out, RR needs to get balance sheet in order. RR is still a negative equity company, liabilities outnumber assets. Hence, a need to repay debt is essential and will propel RR into investment grade, Moodys Ba1, S&P BB+ or Fitch BB+. Then we will see Divis.
SMR , nothing for a while GBN treads carefully.
Important dates to note, RR AGM 23rd May, US FED meeting 11-12th June and ECB 6th June, the latter two likely to reduce interest rates.
Hi Chaps, if anyone is citing current weakness in price on EU's decision, BAE's main markets are the UK and USA, Saudi Arabia along with Australia and India... the latter two growing quickly through the threat of China. THe following link provides the top 10 orders https://executivebiz.com/articles/what-are-the-top-10-bae-systems-government-contracts/
EU and Trump are no different. Trump got pilloried by the EU for saying America First. EU has been practicing these policies for a long time through ... agricultural and more recently content of EV cars and now defence. The only difference is they don't say it openly like Trump.
Unfortunately no clear commitment date, except to say next stage of competitive bids will be soon.
Hi, although I have following you chaps for a while since I have a vested interest in RR, however this is my first post. Anyway, I digress, on BBC Parliament live debate on Civil Nuclear Roadmap Debate. Vast majority agree on SMR and the need to move quickly.