Spanish Banks Need US$76.3 billion and France Proposes Extreme Measures
As a welcome reprieve from the doom and gloom of the macro economy, KeyStone analyst Aaron Dunn spoke on BNN (Business News Network) early today. The short but sweet interview included a brief overview of his investment strategy,current view on the markets and three current picks. For those that did not get a chance to tune in, the video archive can be seen at http://watch.bnn.ca/#clip772334.
The Toronto Stock Exchange’s S&P/TSX composite index ended the week down just 0.5%.
Capping off the week was the return of Spain to the spotlight with an independent audit indicating that the nation`s troubled banks would need US$76.3 billion to recapitalize in the face of potential financial shocks. Although the figure is staggering, it is still well below the US$128.8 billion of potential bailout money that the Spanish government negotiated with the other euro zone members in June. The issue with Spanish banks, which is a potential issue with all banks, is the quality of assets that they hold. Since 2008, these banks of been hanging onto mortgages that are dangling on the cliff of default. The recapitalization money is intended to shore up the bank`s financial position in the event that many of these assets do indeed fall into the abyss.
In another piece of odd news, France`s Socialist President, Francois Hollande’s, issued his 2013 budget with a proposal to increase taxes on income over $1.0 million Euros to whopping 75%. Hollande`s called it a `fighting budget` but one must wonder if such extreme measures will only serve to further weaken the nation`s economy by starving it of investment. The reactions were understandably strong and we are certain that France`s wealthy are preparing their foreign residency plans as we speak with the tax heaven of Monaco (which borders France) top on the list.
9 Steps to Uncovering Explosive Small-Cap Stocks
Below are the 9 simple steps we follow in order to find, research, and analyze small-cap stocks that could put big gains in your portfolio;
Step 1: Growth Trends: Identify growth trends and market sectors positioned for rapid growth in the years to come. Be they sector specific such as energy (oil & gas), gold & precious metals, technology, healthcare, etc. or geographic such as China, India, Brazil, North America, Europe, etc.
Step 2: Old Fashioned Real Research: Actually read over the financial statements and MD&A’s of more than 7,000 publicly traded companies to find relatively unknown, high growth small to mid-cap stocks that display GARP and are positioned to grow.
Step 3: Financial Performance – The Fundamentals are Key: Review and evaluate key metrics in the company’s financial statements to understand historical financial performance. Strong fundamentals within an individual company can often lead us to growth trends within an industry.
Step 4: The Business Matters: Understand the business and industry of the potential investment, including products, services, and management’s ability to run the business.
Step 5: Quality Management: After reviewing the company’s financial statements and reading their MD&A, if the company meets our fundamental GARP based criteria, we find it important to interview key management to understand their strategy and clarify their outlook going forward.
Step 6: Earnings Quality: Look for red flags that indicate anything from cyclicality, financial manipulation or even fraud to avoid investing in these types of situations.
Step 7: Growth Outlook: Develop an understanding of expectations for growth to make valid valuation comparisons.
Step 8: Peer Comparisons: If they are available, we find it instructive to compare relative valuations of companies within the same specific business or industry to provide more “apples to apples” type information on how the market values similar companies or at least those within its industry segment.
Step 9: The Investment Decision: Factoring in all of the relevant information above, and paying particularly close attention to current market valuations, we determine whether or not the investment is a good BUY. If it is, we issue a full report to our clients with the corresponding BUY action and within what price range we find it attractive.
KeyStone’s Latest Reports Section
About KeyStone
Our Small Cap Strategy
Our Dividend Growth Strategy
KeyStone’s Philosophy
We base our analysis on extensive theoretical background of fundamental equity research. It’s been around for over 75 years and has delivered results for our clients for well over a decade and helped Warren Buffett become the richest investor on the planet..
