Ticonderoga on Brokers & Asset Managers: Retail Outlook Getting Cloudier - SF, SCHW & RJF
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Rating Summary:
13 Buy, 8 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Ticonderoga on Brokers & Asset Managers: Retail Outlook Getting Cloudier - SF, SCHW & RJF by Douglas Sipkin
Ticonderoga analyst says, "Retail Broker Trends Weakening - Recent trends are a discouraging sign for the strong rally in retail brokers to start the year. Domestic equity mutual funds have had two consecutive weeks of outflow (likely a third when flows are reported for the current week), equity and debt markets have begun to see pulled deals pick up, and fed fund rate expectations continue to be pushed out. We view all three trends as negative for retail brokers such as Stifel (NYSE: SF), Raymond James (NYSE: RJF) and Schwab (Nasdq: SCHW) (all Neutral-rated). SF, in particular, has been reliant on strong banking trends and is the most vulnerable in the event of a continued pull-back, in our view."
"Domestic Equity Flows Negative for 2nd Consecutive Week. Domestic equity flows were negative $1.1 billion, or negative $4.2 billion over the last two weeks. Clearly, events abroad have played a role and will likely continue to play a role given heightened volatility. This looks like a trend reversal."
"Banking Deals Getting Postponed. The sell-off and volatility has delayed and/or reduced a number of equity offerings around the world. The most notable in the U.S. was Apollo’s decision to delay its offering on March 15. Lagardere SCA (MMB.PA, €29.93, NR) is also delaying its offering of Canal Plus in France. If volatility continues, we would expect to see additional offerings pulled. We also note that there have been a few high yield and leverage loan deals postponed in recent days, as well. Toys"R"Us postponed its $1.1bn refinancing, while Swift Transportation (Nasdaq: SWFT)(NR) postponed its $1.1bn refinancing. MedAssets (Nasdaq: MDAS)(NR) also delayed its refinancing of $635mm in borrowings, and CDW Escrow canceled a sale of 1.1bn in high yield notes."
"Fed Funds Expectations Moving Out. There has been a slight change in rate expectations, as well, as indicated by the fed futures curve. According to Bloomberg, the March 2012 effective fed funds rate is expected to average 35bps vs. 45bps at the beginning of March '11. The curve now expects a 50bps fed funds rate by June 2012 vs. April 2012 on March 1, 2011."
Ticonderoga analyst says, "Retail Broker Trends Weakening - Recent trends are a discouraging sign for the strong rally in retail brokers to start the year. Domestic equity mutual funds have had two consecutive weeks of outflow (likely a third when flows are reported for the current week), equity and debt markets have begun to see pulled deals pick up, and fed fund rate expectations continue to be pushed out. We view all three trends as negative for retail brokers such as Stifel (NYSE: SF), Raymond James (NYSE: RJF) and Schwab (Nasdq: SCHW) (all Neutral-rated). SF, in particular, has been reliant on strong banking trends and is the most vulnerable in the event of a continued pull-back, in our view."
"Domestic Equity Flows Negative for 2nd Consecutive Week. Domestic equity flows were negative $1.1 billion, or negative $4.2 billion over the last two weeks. Clearly, events abroad have played a role and will likely continue to play a role given heightened volatility. This looks like a trend reversal."
"Banking Deals Getting Postponed. The sell-off and volatility has delayed and/or reduced a number of equity offerings around the world. The most notable in the U.S. was Apollo’s decision to delay its offering on March 15. Lagardere SCA (MMB.PA, €29.93, NR) is also delaying its offering of Canal Plus in France. If volatility continues, we would expect to see additional offerings pulled. We also note that there have been a few high yield and leverage loan deals postponed in recent days, as well. Toys"R"Us postponed its $1.1bn refinancing, while Swift Transportation (Nasdaq: SWFT)(NR) postponed its $1.1bn refinancing. MedAssets (Nasdaq: MDAS)(NR) also delayed its refinancing of $635mm in borrowings, and CDW Escrow canceled a sale of 1.1bn in high yield notes."
"Fed Funds Expectations Moving Out. There has been a slight change in rate expectations, as well, as indicated by the fed futures curve. According to Bloomberg, the March 2012 effective fed funds rate is expected to average 35bps vs. 45bps at the beginning of March '11. The curve now expects a 50bps fed funds rate by June 2012 vs. April 2012 on March 1, 2011."
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