The Financial Grimes: 5 July 2019

This top City analyst reviews the financial sector stocks making headlines today.

Friday

Markets It's a strange world.  The Dow reached an all-time high this week. Italy's stock market is up 11.2% since the start of June. At the same time bond markets are reaching new highs.  I can buy a 100-year government backed Austrian bond at 1.06% while in Germany the 10 year yield is -0.4%. At the same time the gold price has been accelerating its appreciation.  It can only be liquidity fuelling all assets rising. 

Implication Which means to outperform in a liquidity driven market it is important to ignore fundamentals.  Analysts should be dusting up their CV's is this liquidity squeeze continues. 

Turning Point But there may just have been a change in the market this week.  I see that Beyond Meat (NASDAQ:BYND) is down 7%, as is Lyft (NASDAQ:LYFT) and Uber (NYSE:UBER) is off 4%, while Funding Circle (LSE:FCH) is off 38%. At the same time Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB), all profitable companies, are up.  It may just be that the doors are closing for the loss-making business model. 

What to do Back in 2000 no one rang a bell at the top of the tech bubble. The right call then was to move into mining stocks.  For me, insurance looks like a good place to be. Back to my old friends Randall & Quilter and perhaps a few pawn brokers. 

10 Year German Bond Yields here:

Aquis Exchange – Acquisition

Share Price 486p
Mkt Cap £131 million
Conflict Disclosure: No holding

Aquis Exchange (LSE:AQX) operates as an equities exchange 

• News The company, which is listed on AIM, has agreed to buy Nex Exchange from the CME for £1. Last year Nex Exhange's revenue was £1.5 million and loss was £2 million. It aims to build the largest technology driven exchange services group across Europe. Nex Exchange has 89 companies listed on it. 
• Estimates For December 2019 the company is expected to do £6.5 million revenue and lose £1 million before moving into profit in 2020 after an increase to £10.4 million revenue. 
• Valuation The company trades at 13X expected 2020 revenues which is a forward looking valuation. This acquisition will reduce that valuation but may push profitability to the right. 
• Conclusion This looks interesting at a time when AIM is becoming increasingly expensive, driven by price inflation for Qualified Executives and increasing burden, while the broking community is suffering the effects of Mifid 2.  It may have a chance this time to take significant market share from AIM. This looks like a binary call, but, with £11 million on the balance sheet, it looks well placed to reach profitability. 

For information about Jeremy's 'deep dive' company analysis, you can email him at jeremy@charltonillingworth.co.uk

Jeremy Grime is an independent equity markets analyst and freelance contributor, not a direct employee of interactive investor.