REVIEW OF IRISH SHARES: UPDATE & FOLLOW UP OF PREVIOUS RECOMMENDATIONS
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2nd September 2023
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The last review our Irish share recommendations was on 16th December 2022. The stocks that remained on the recommended list following that review were:- Aryzta, AIB, Bank of Ireland, Glanbia, Greencoat and PermanentTSB.
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The chart for Greencoat Renewables has since turned very bearish, so I recommend the sale of this stock.
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All of the other stocks recommneded continue to have bullish charts, particularly the bank stocks.
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The resilience of the bank stocks is impressive, when one considers the shake out in the sector in April & May of this year, on the failure of Silicon Valley Bank in the US. That was follwed by the failure of two other medium sized US banks, First Republic Bank and Signature Bank. However, the US government and the Federal Reserve moved quickly to reassure depositors, and the sector has since stabilized.
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The Irish bank stocks would almost certainly be trading at higher levels, but for the failure of the above US banks. Could the same thing happen here? Never say never - but in my experience, if there was any fundamental weakness in the Irish banking sector, this would normally come to light when some upset in the sector causes investors, and depositors, to be fearful.
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The fundamental item that is underpinning the sector is the rise in the interest rate from an abnormally low level. That is having a favourable impact on the net interest margins (ie the difference between the interest rates charged to borrowers, and that paid out to depositors).
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In addition, the departure of Ulster Bank and others from the Irish market, has significantly reduced competition in the sector. Are new on-line competitors such as Revolut making an impact? Not according to the charts, at any rate. Again, my experience is that technical weakness in the share price usually becomes apparent, whenever there is likely to be trouble ahead for the incumbents, and none is present at this time.
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Why do I rely so much on the charts, to make that call? The reason is that short sellers target a stock, when any vulnerability appears, and there is no evidence by means of weakness in the stock price, to suggest that is happening.
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Elsewhere on the Irish market, CRH has benefitted from the proposed move of its primary listing to the US. That has forced some US tracker funds to buy the stock, giving it a once off boost.
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Of the other major Irish companies, Ryanair and Smurfit Kappa merit only a 'moderately bullish' rating per their charts.
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And of the rest, FBD Holdings is notably strong. However, the anticipated good news may already be priced in to the stock. It announced earlier this year that it would pay out a special dividend from surplus capital. Also, it has confirmed that it expects to resolve the few remaining Covid claim cases through the High Court.
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To conclude therefore, our recommended list for the Irish market consists of the three bank stocks, together with Aryzta and Glanbia.
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I note that the latter will soon have a new chief executive, who will be keen to make his mark. How best to do that? By making an earnings enhancing acquisition. Which is probably why Kerry Group shares continue to be sluggish since it was outbid by International Flavors and Fragrancies for the nutritional arm of Du Pont in 2019.