Value-Momentum Watchlist

Key News

Market developments

  • ACX seems to have bounced just a bit higher than our target level
  • API came out with revised down earnings guidance.

Stocks

ACX.AX: a leading provider of cloud based collaboration software for the construction industry. Profit margins are below expectations while the company is trying to expand outside of ANZ region. Current revenue of 250m in a potential future market size of 7b. Buying for value @ 3.40, buying momentum below 3.70.

API.AX: largest Pharmaceutical wholesaler in Aus/NZ with prominent retail brands such as Priceline. Revenues, earnings and return metrics have been improving while the company focuses on growing its higher-margin retail businesses to compete against Sephora, which make up 30% of total revenue. Buying for value @ 1.49, not buying momentum until volatility subsides.

BIDU: leading internet search engine in China. Revenue growth guided by company to resume from a 1-year halt following increased online advertising regulation. Own a subsidiary (iQiyi) which has sole distribution rights of Netflix in China (3% of current revenue). Partnered with Microsoft to work on autonomous driving project which a potential free option for the stock. Buying @ 130 for value, buying momentum below 220.

DBK.DE: German investment bank. Returned to profitability however CEO Cryan has recently guided future revenues lower. Buying for value at potential arbitrage boundary of €15 per share based on 25% of tangible book value (€6.75) + intrinsic value of cash flows (€5.20) + litigation premium (€3).

TRIP: American travel website providing hotel bookings and user reviews of travel content. Revenue has flattened out despite a rapidly growing database of content. Current strategy is to launch a Trivago-like lowest price hotel search engine. Based on Trivago’s metrics this could increase TripAdvisor’s revenue by 9%. Buy for value @ $29.50 plus whatever TRIP’s user base is worth. Can’t see a momentum angle at this point in time.

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