Right time to review portfolio

  • Markets
  • Sunday, 26 Jan 2020

FILE PHOTO: Passengers arriving from the Chinese city of Wuhan arrive at Narita Airport in Chiba, Japan in this photo taken by Kyodo January 23, 2020. Coronavirus can possibly affect air travel, meaning that around 260,000 barrels of oil per day are being removed from the market because fewer people travel or taking flights. Mandatory credit Kyodo/via REUTERS

COMPANIES are in the midst of reporting their fourth-quarter results, accompanied by their 2020 predictions.

In this context, it can be just the right moment to review your portfolio and make the changes, if needed.

Last week, major US banks reported record quarterly profits, beating earnings expectations. However, low-interest rates may negatively affect their profits from lending operations.

Netflix was another top gainer of the week, once again, thanks to a better than expected fourth quarter. Guggenheim raised Netflix’s price target to US$420.

Some people believe that due to the coronavirus outbreak more people will stay home, watching their favourite shows.

In addition, Netflix has released a new docuseries entitled “Pandemic: How to Prevent an Outbreak” which focuses on a global effort to stop influenza (for now, the effect of this on the stock price is done).

Despite that Netflix is not available in China, the rest of the countries in the Asia Pacific Region may show a rise in the number of subscriptions.

Still, we find it important to mention that its global market share in terms of the top streaming video subscriptions has fallen from 91% in 2007 to 19% in 2019, due to an increasing number of new competitors.

In total, it’s expected that US companies’ fourth-quarter profits will decrease by 2% year-on-year.

Keep in mind that this number has been dragged out by the energy sector. Profit there is expected to fall by 40%.

The global oil prices continue to lose positions due to the Middle East stability and the global economic slowdown, whilst companies’ costs continue to rise.

Coronavirus can possibly affect air travel, meaning that around 260,000 barrels of oil per day are being removed from the market because fewer people travel or taking flights.

It is also worth mention that companies prefer to under promise and over deliver rather than disappoint their investors.

Thus, even if the company shows quite weak results, its stock price may go up. That is why it is crucial to pay closer attention to the company’s forward-looking outlook and its ability to generate cash in the future.

Investors tend to anticipate positive news, meaning that better than expected results has been foreseen.

For this week, we recommend keeping an eye on the following giants: Amazon, Facebook, Apple, and Microsoft will provide their updates.

In terms of the macroeconomic data, the UK should be highlighted. According to the latest data, its economic activity picking up, while the Eurozone fell below expectations, thanks to reduced uncertainty after the election.

In particular, the flash IHS Markit/Cips composite purchasing managers’ index rose to 52.4 in January, from 49.3 in December.

The question now if this will be enough to convince the BoE’s Monetary Policy Committee on Thursday next week that the economy is back on track.

Meanwhile, business activity in the Eurozone remained weak in January: the IHS Markit Eurozone purchasing managers’ index remained unchanged at 50.9 in January.

While German activity grew above expectations, this was offset by weaker data from France, due to endless strikes.

Finally, the European Central Bank left interest rates unchanged.

At the same time, inflation remains low and the bloc’s economic growth continues to slow down due to the US-China trade war.

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