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1、EQUITYSTRATEGYGLOBAL,(200),400,200,0,(400),3Q,STRATEGY NOTEUSA|Equity Strategy,GlobalGlobal Equity StrategyUS:Paper,Scissors and Stone,28 January 2013,Key TakeawayThe rally in US stocks over the last week,brought indices close to their all-time highs.The shallow nature of distribution days suggests
2、that the currentuptrend will remain unbroken.The expanding breadth on decent volume alsopoints to further gains.Correlations between stocks have broken down.TheVIX index is at its lowest level since April,2007 while corporate credit spreads,US cor por a t e equit ies net issues(US$bn),remain firm.Tr
3、ue,measures of complacency such as the AAII show bullish positioning at a,(600),90 92 94 96 98 00 02 04 06 08 10 12,two-year high,but cash inflows have only started to follow the market priceaction.US equity funds recorded a light withdrawal(US$994m)for the secondconsecutive week.Our 2013 S&P 500 in
4、dex target is unchanged at 1,565(December 17,2012).,Source:Federal Reserve System,JefferiesTop 3 J effer i es pa per&pa ck a gingr ecom menda t i ons,One of our themes for 2012 was a breakdown in stock correlation within theUS market while quality may underperform as economic expectations improve.In
5、deed,it seems that the 4Q earnings season will beat estimates both on thetop and bottom line.In this context we would highlight the US paper andpackaging sector as an early cyclical play.The FOMC will hold a two-day meeting on Tuesday and Wednesday.We expect that thestatement is going to change very
6、 little.Nearly 500 companies(under consensus coverage)reported their quarterly results month-to-date.65%of the companies posted better than expected earnings for an average of 5.8%in magnitude.This set of results has slightly improved from what we experienced in theprevious quarter ie,57%and 3.3%in
7、earnings surprise breadth and magnitude on average.By market cap,large-cap companies have so far announced better results compared withmid-and small-cap companies.73%and 6.4%are the averaged earnings surprise breadthand magnitude for large capitalized companies and are quite significantly higher tha
8、nthe overall market.Looking back over the past few quarters,small-cap companies haddone better than large-and mid-cap companies until last quarter when we started tosee marginal difference between the three groups.This time around,large caps haveimproved further.By sector,Consumer Discretionary,Indu
9、strials,Information Technologyand Materials stood out in terms of earnings surprise.These four sectors posted an averageof around 70%earnings surprise in breadth and 10%in magnitude terms.In the previousquarter,Information Technology and Health Care were the better sectors overall.Looking at other m
10、easures,sales surprise has slightly improved from the previous quarter.Around 60%of the companies posted an average of 1.4%above market expectations insales.During the third quarter,we saw a flat sales surprise in magnitude and breadthreadings.However,net profit margin surprise measures are largely
11、similar to the previousquarter i.e.,flat in breadth and magnitude.,Symbol Na meCCK US Crown Holdings Inc.OI US Owens-Illinois Inc.RKT US Rock-Tenn Co.Cl ASource:Jefferies,R a t i ngs UpsideBUY 17.8%BUY 22.0%BUY 16.5%,In Exhibit 18-19,we highlight companies under Jefferies coverage with divergence in
12、 EPSestimates by more than 10%,and set to announce results over the next 2 weeks.In exhibit20,we highlight those companies that have produced in the past significant share pricechanges following the release of their results.In exhibit 21,we summarize the results of 3Qresults.,Sean Darby*Chief Global
13、 Equity Strategist+852 3743 8073 Kenneth Chan*Quantitative Strategist+852 3743 8079,Angela Cheung,CFA*Equity Associate+852-3743-8078*Jefferies Hong Kong LimitedJefferies does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that Jefferies
14、may have aconflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investmentdecision.Please see analyst certifications,important disclosure information,and information regarding the status of non-US analysts
15、on pages 14 to 18of this report.,Equity StrategyGlobal28 January 2013,Each month we invite our analysts tosuggest their top conviction ideas.,Exhibit 1:JEF conviction Long Recommendation,For further information on thecompanies highlighted please visitthe Conviction List.,CountryAustriaChinaFranceFra
16、nceFranceJapanJapan,SectorMaterialsConsumer StaplesConsumer DiscretionaryEnergyTelecommunication ServicesFinancialsHealth Care,TickerVOE AV291 HKAC FPFP FPFTE FP8766 JP4507 JP,Company NameVoestalpine AGChina Resources EnterpriseAccorTotal SAFrance TelecomTokio Marine HoldingsShionogi,JEF TargetPrice
17、3331.7314811.52,5041,800,Up/Down toJEF TP(%)20%16%7%21%36%-7%9%,Switzerland,Consumer Staples,NESN VX Nestle,69,8%,United KingdomUnited KingdomUnited Kingdom,EnergyHealth CareMaterials,TLW LNSHP LNRIO LN,Tullow OilShireRio Tinto,1,8002,4004,300,52%14%22%,USAUSA,Consumer DiscretionaryConsumer Staples,
18、CMCSA US Comcast CorporationWMT US Wal-Mart Stores Inc.,4588,13%28%,USAUSAUSA,FinancialsFinancialsHealth Care,BX USWFC USA US,BlackstoneWells FargoAgilent Technologies,19.53951,7%11%13%,USA,Health Care,HMSY US HMS Holdings,34,20%,USA,Industrials,BA US,The Boeing Company,87,16%,USAUSA,Information Tec
19、hnologyInformation Technology,AVGO US AvagoGOOG US Google Inc,42875,23%16%,USAUSAUSA,Information TechnologyMaterialsMaterials,SAI USASH USCE US,SAICAshlandCelanese Corporation,14.510054,20%16%15%,Source:Jefferies,For further information on ourcountry asset allocation,please seeour US and Europe 2013
20、 Outlook.,Exhibit 2:Current Asset AllocationCountry Asset AllocationAustralia Bearish,CountryMexico,Asset AllocationBullish,BrazilCanadaChinaDenmarkFranceGermanyHong KongIndiaIndonesiaItalyJapanKorea,BearishBearishBearishBearishBearishBearishBullishBearishBearishBullishBullishBearish,New ZealandNorw
21、ayPhilippinesRussiaSpainSwedenSwitzerlandTaiwanThailandTurkeyUnited KingdomUnited States,BullishBullishBullishBullishBearishBearishBullishBearishBullishBearishBullishBullish,Source:Jefferies,page 2 of 18Please see important disclosure information on pages 14-18 of this report.,Sean Darby,Chief Globa
22、l Equity Strategist,+852 3743 8073,Equity StrategyGlobal28 January 2013“A bargain these days is something thats only a little overpriced”,AnonUS share prices continued to grind higher over a holiday shortened week.US treasurymarket rates rose sharply and the curve steepened modestly.Sentiment was he
23、lped bypositive news on a debt ceiling resolution over the holiday weekend while initial joblessclaims fell to a fresh 5-year low.The FOMC meets for the first time in 2013 with astatement due on Wednesday.We expect the statement is going to change very little fromthe 11th-12th FOMC meeting.Our econo
24、mics team points out two points to watch:-*We expect that the rate guidance will be left unchanged.The FOMC will keep the targetrange for the federal funds rate at 0 to%and will maintain their anticipation that thislow range for the federal funds rate will be appropriate at least as long as theunemp
25、loyment rate remains above 6%and projected inflation is within 50 bps of the2%long-term goal.*We expect that the Fed will continue purchasing$40 bln agency MBS and$45 bln long-term Treasuries per month and maintain existing reinvestment policies.We also expect theFed will reiterate that it will cont
26、inue these purchases until the labor market improvessubstantially.Interestingly,the December Index of Leading Economic Indicators rose 0.5%and wasslightly stronger than expected as the consensus was looking for a 0.4%rise.Thecoincident index rose 0.2%,and the lagging index was up 0.7%.One of our the
27、mes for2012 was that the US stock market correlation would break down.Indeed,withinventories running low relative to shipments and quality stocks(high ROE,high dividendpayout ratio)there is room for cyclical stocks to outperform.We believe a veryunfashionable sector,paper and packaging and in partic
28、ular the containerboard sectormight surprise investors as an early cyclical indicator of US economic resilience.On a global basis,there are five reasons to look at this US sector.Firstly,there has beensignificant consolidation in the industry over the past decade,with the top four playersnow having
29、a combined 76%market share vs.36%in 1997.Secondly,the global costcurve for containerboard is steep,with the US being the lowest cost producer,largely dueto its access to cheap virgin fiber.Thirdly,a weak dollar has deterred imports and madethe US position more competitive for exports.Low natural gas
30、 prices have also helpedcompared to global peers.Fourth,the containerboard sector is the largest grade of paperby volume in the US and continues to grow at a healthy clip helped by emerging markets.Roughly 85%of the container board produced in the US is used for nondurableconsumables(food,consumer p
31、ackaged goods and beverages).It is also a play on e-commerce shopping.Lastly,with global growth slowing last year,many companies havethrottled back on capex and focused on managing working cap,setting the stage for arecord FCF(8%yield)year in 2013.While M&A will likely pick up,the focus will be arou
32、ndbolt-on acquisitions,and we believe investors will be rewarded with cash being returnedto shareholders.,page 3 of 18Please see important disclosure information on pages 14-18 of this report.,Sean Darby,Chief Global Equity Strategist,+852 3743 8073,Equity StrategyGlobal28 January 2013,The US remain
33、s firmly in bullish,Exhibit 3:US market technical analysis,territory,Current Price/Moving Average(%),%stocks,IndicesS&P 500Consumer Discretionary(CD)Consumer Staples(CS)Energy(EN)Financials(FN)Health Care(HC)Industrials(ID)Information Technology(IT)Materials(MT)Telecom Services(TS)Utilities(UT)CD:Au
34、tomobiles&ComponentsCD:Consumer Durables&ApparelCD:Consumer ServicesCD:MediaCD:RetailingCS:Food/Staples RetailingCS:Food,Beverage&TobaccoCS:Household&Personal ProductsEN:EnergyFN:BanksFN:Diversified FinancialsFN:InsuranceFN:Real EstateHC:Health Care Equipment&ServicesHC:Pharmaceuticals,Biotechnology
35、&Life SciencesID:Capital GoodsID:Commercial/Professional ServicesID:TransportationIT:Semiconductors&Semiconductor EquipmentIT:Software&ServicesIT:Technology Hardware&EquipmentMT:MaterialsTS:Telecommunications ServicesUT:UtilitiesDJINASDAQ,Current Price1,5034033805732364973514702511471841042245723117
36、1225444444857316534421615946347338115837633166847425114718413,8963,150,20 day2.5%4.0%2.4%4.1%2.8%3.5%3.4%-0.2%2.5%-0.3%2.3%1.2%2.3%2.6%3.6%6.0%1.8%1.9%4.3%4.1%1.5%2.8%3.6%2.6%3.9%3.2%3.2%2.3%5.1%0.9%3.5%-5.3%2.5%-0.3%2.3%3.1%1.6%,50 day5.0%6.9%3.3%6.5%7.1%5.7%6.8%1.4%6.8%0.0%3.5%10.0%5.3%4.7%7.4%7.2
37、%3.6%2.6%4.9%6.5%4.8%8.8%7.0%5.7%6.4%5.3%6.3%5.7%9.5%4.9%6.1%-5.7%6.8%0.0%3.5%5.3%4.1%,100 day4.9%8.1%3.2%5.7%8.9%6.3%8.2%-0.8%7.6%-2.2%1.8%16.6%7.0%5.0%8.5%8.1%3.2%2.5%5.1%5.7%3.3%12.7%8.4%6.2%6.7%6.1%7.7%8.1%10.6%3.8%5.8%-10.1%7.6%-2.2%1.8%4.8%3.3%,200 day7.6%12.0%4.9%9.0%13.9%10.3%10.9%-0.1%10.4%
38、0.1%0.9%19.5%10.5%4.6%15.5%11.5%6.9%2.8%8.2%9.0%5.5%20.7%13.2%8.0%9.0%10.9%11.0%10.6%10.4%-1.0%8.8%-10.4%10.4%0.1%0.9%6.5%5.2%,RSI(14D)74.479.669.973.474.776.675.350.471.549.365.867.364.369.274.180.267.263.273.773.462.871.677.377.776.774.872.473.983.356.874.434.771.549.365.875.764.5,200Dma87%80%83%8
39、8%99%89%97%81%87%88%71%83%87%69%100%70%88%79%100%88%100%100%100%94%90%86%100%83%100%71%90%77%87%88%71%80%63%,Source:Bloomberg,Jefferies,Earnings continue to be revised uppage 4 of 18,Exhibit 4:S&P 500 forward earnings integer(US$)Source:FactSet,JefferiesSean Darby,Chief Global Equity Strategist,+852
40、 3743 8073,Please see important disclosure information on pages 14-18 of this report.,Equity StrategyGlobal28 January 2013,S&P cash flow is at record highUS share buybacks continuesNet issuance was negativepage 5 of 18,Exhibit 5:S&P 500 forward cash flow per share(US$)Source:FactSet,JefferiesExhibit
41、 6:S&P 500 share buybacks(US$bn)Source:Federal Reserve System,JefferiesExhibit 7:US corporate equities net issuance(US$bn)Source:Federal Reserve System,JefferiesSean Darby,Chief Global Equity Strategist,+852 3743 8073,Please see important disclosure information on pages 14-18 of this report.,Equity
42、StrategyGlobal28 January 2013,The OECD lead indicator has recently,Exhibit 8:OECD composite leading indicators,turned up.We would expect globalcyclicals to performSource:OECD,Jefferies,We expect company correlation to,Exhibit 9:CBOE S&P 500 implied correlation,break downSource:Bloomberg,Jefferies,US
43、 paper imports have flat-lined as a,Exhibit 10:US import of paper and paper products(US$mn),weak US dollar has helped domesticproducersSource:FactSet,Jefferies,page 6 of 18Please see important disclosure information on pages 14-18 of this report.,Sean Darby,Chief Global Equity Strategist,+852 3743 8
44、073,Equity StrategyGlobal28 January 2013,Despite reporting a record quarterlyprofit,Apples forecasts showed,Exhibit 11:Apple(AAPL)vs.AAC Technologies(2018 HK)vs.Hon Hai(2317TT)forward ROE(%),signs of slowing consumer demandfor its products,particularly itsiPhones.Source:FactSet,Jefferies,The differe
45、nce between Apple and itssuppliers is in marginsRecently,there have been modest,Exhibit 12:Apple(AAPL)vs.AAC Technologies(2018 HK)vs.Hon Hai(2317TT)forward net margin(%)Source:FactSet,JefferiesExhibit 13:Equity market flows into US,outflows from the equity marketafter a stellar first week of inflows
46、 in2013Source:FactSet,Jefferies,page 7 of 18Please see important disclosure information on pages 14-18 of this report.,Sean Darby,Chief Global Equity Strategist,+852 3743 8073,Equity StrategyGlobal28 January 2013,US equities have steadily de-rated,Exhibit 14:S&P 500 price to earnings,over time but t
47、he forward PE iscurrently coming close to its 2standard deviationSource:FactSet,Jefferies,The forward PB is close to its 1,Exhibit 15:S&P 500 price to book,standard deviationSource:FactSet,Jefferies,Interestingly,the ROE has slipped,Exhibit 16:S&P 500 return on equity(%),marginallySource:FactSet,Jef
48、feries,page 8 of 18Please see important disclosure information on pages 14-18 of this report.,Sean Darby,Chief Global Equity Strategist,+852 3743 8073,Equity StrategyGlobal28 January 2013Exhibit 17:US,Japan and Hong Kong listed paper&packaging companies,GICS_INDUSTRY_NAME,Current Year,Revision(%,4W)
49、,YTD,Return,Sustainable,Dividend,Bloomberg,MC,Return Since 2010,%Consensus,Growth Rate,Cover(3 Altman Z Piotroski F-,CountryUSUSUS,CodeBLL USBMS USBKI US,Company NameBall Corp.Bemis Co.Inc.Buckeye Technologies Inc.,IndustryContainers&PackagingContainers&PackagingContainers&Packaging,(US$mn)7,1573,70
50、01,189,(%)4.07.17.0,(%)80.020.8214.9,PB(x)5.52.31.9,DY(%)0.92.81.0,ROE(%)31.29.417.2,EPS1.01.4(0.8),PT1.24.90.0,BUY25.025.066.7,(3 yr avg,%)29.144.6617.51,yr avg,x)9.391.808.30,Score2.863.045.86,Score668,US,CCK US,Crown Holdings Inc.,Containers&Packaging,5,504,3.7,49.3,0.0,0.3,0.0,58.3,2.28,6,USUSUS
