Today I've been looking at some 9m (YTD) results of companies reporting. It's interesting: certain ones like Food & Construction are actually seing revenue/sales higher yoy. Bottom line also looking good after tax and interest for them. These two I looked at tend to grow organically with little debt appetite. Companies with debt are going to be frightening ride when/if inflation kicks in H210?!
Then on the other side you have companies that are dependent on business spending like Travel Agents. This one in particular I was looking at had 800m gross profit last year and 600m this ytd. Net profit last year was 125m (EBIT was 125m also) and this year -5m (EBIT +3m). So this companies overhead/payroll is really hurting it, aka dividends will suffer big time.
I spoke to a friend in a services company earlier in the week - she's been told they need to lay off 30-50% in her team, and that she'll have to choose who. It's not a booming economy by any standards in the western world that anecdote tells me (along with the 2nd paragraph).
However china and india are growing like crazy and if you own shares in a company in that market or in a niche with low competition, this year is going to be fine (better than last year).
*yoy=year-on-year
** ytd=year-to-date (well Jan1-Sep30 in context)
I'm guessing with the weakness of service companies (a large portion of the US GDP and employeers) stimulus is going to have to remain strong...meaning, weak dollar? But I look at the yen and it looks like Japan will have to keep it even weaker. As for the Euro, I'm not sure.
ReplyDeleteHope you shorted the company your friend works at! =) (j/k, that might be insider trading? maybe not...I'm not really sure how those rules work).
:) It would be insider trading, because it's non-public information. But often an announced job cut will be good for stock price as it lowers overhead/payroll and increases profitability.
ReplyDeleteThat's why even thought more and more people are unemployed, some companies aren't feeling the pinch.
My theory anyway :)
Weak dollar.... Been wondering in last minutes if I should play dollar strengthening for a week or two. If GDP news tomorrow doesn't get EURUSD up past 1.50 - then I think USD strength will ensue.... couple of days, weeks?!
[edit 2nd paragraph] :P
ReplyDelete* That's why even though more and more people are unemployed, some companies aren't feeling the pinch on bottom line / profitability (it seems)