Q1 Results Release
15 April 2021
The fund has been rising since the beginning of April, driven by Petrofac, which recovered +35% over the month to return to its February level. This rise is partly due to the company's announcement on 7 April that it would refinance its $700m revolving credit facility for one year. However, we are mainly waiting for the publication of the annual accounts (scheduled for "mid-April") with - we strongly hope - a breakthrough on the litigation with the Serious Fraud Office. We believe indeed that, as the Volkswagen example shows where everyone has now forgotten Dieselgate in 2015, there will be a post-SFO for Petrofac. On the VW example, the stock is now worth three times what it was at the time.
In the markets, the euphoria continues in the US - perhaps fueled by the stimulus checks - and this is pulling the rest of the markets (except China). Our view remains the same: these increasingly high multiples on uncertain future results (which will certainly be shaved by the tax hikes the Biden administration wants to implement) make the game increasingly dangerous.
Q1 releases have just begun (LVMH last night with significant growth but noting that China now accounts for half of sales). We will see in the coming weeks how this plays out and especially what companies are planning for the rest of the year (if they take the risk: several have already announced that with the pandemic, the situation is too uncertain to give any projections).
Have a great week,
Charles
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