- Equities portfolio predominantly net-long
- E.ON looks strong after Barclay's target cut
- Weak NFP would lead to GDX strength
Danish energy firm E.ON had its price target slashed by Barclay's,
but now looks to be oversold. Photo: iStock
By Peter Garnry
Equity markets continue to have positive sentiment on the margin despite recent range trading. As a result, our portfolio is predominately net long.
So what are some of the latest changes?
Today we have added a short position in STOXX 50 (EU50.I) with stop at 3,055 and a take-profit limit at 2,980 betting on a weaker than estimated nonfarm payrolls number.
In addition, we have added a long position in E.ON (EOAN:xetr) as the share price went back to the support level at €8 in yesterday’s trading driven by a price target cut by Barclays. We are betting on a mean reversion play in E.ON as investors will increase exposure at these levels due to an attractive 6.1% dividend yield, and also because these levels have provided support multiple times over the past nine months.
E.ON daily price chart since August 2015:
Create your own charts with SaxoTraderGO click here to learn more
Source: Saxo Bank
We have closed our long position in Eurofins Scientific (EUFI:xpar) with a 13.5% gain over five months as we do not see enough upside relative to other opportunities.
We have also closed our short position in the NASDAQ 100 ETF (QQQ:xnas), which was a hedge against long US technology positions (Amazon and Facebook).
Recent trades that we have put on are long First Solar (FSLR:xnas) and long Toll Brothers (TOL:xnys) betting on a successful turnaround in the former and a continuation of the US housing boom in the latter.
What will a weak NFP mean for the portfolio?
It will weaken the USD in the short term, taking gold higher and creating losses on our short gold miners position, so we would immediately sell this position on the open.
Our long Deutsche Bank, UniCredit and Barclays would also likely take a hit but here we would stick to our theme of improving fundamentals and mean reversion from rock-bottom valuations.
— Edited by Michael McKenna
Peter Garnry is head of equity strategy at Saxo Bank