Tuesday, 5 July 2011

The Week That Was ;BP Plc, Deutsche Tel, Banco Popolare, Copper

It has been a slow 7 days as the 2nd quarter came to an end without too many headlines apart from the Dow Jones Industrial Index (DJIA) shooting above its 1200 points resistance. The ugly Greece debt crisis also came within manageability this week.
The Blue Chips 2011 Portfolio
Bp Plc is finally in the green after the stock rose 1% above the opening price of 455.60p.This stock has been boosted by the easing of the Eurozone debt crisis. Also ,the compensation fund for the Mexican Gulf oil spill is being boosted by the chipping in of associates such as Mitsui. Oil price volatility has also eased due to the IAEA intervention to boost oil supply of which BP is part of the oil bigs bidding for this extra supply.
Deutsche Tel has improved its position riding on the back of the Euro stocks’ resurgence after Greece approved austerity measures to deal with its debt crisis. This means that some of our long positions are now in the green. It also stands to gain even if the US FCC (Federal Commission of Communication) and the Department of Justice stop its sale of T-Mobile since the acquirer, AT & T has agreed to pay Deutsche Tel $6 billion if the deal falls through.
However, if the deal is passed, Deutsche Tel is in line for a $39 billion payoff which means the share price should ride an upward trend till the deal is sealed next spring. The stock is currently trading at €10.6.
Banco Popolare Societa Cooperativa
We closed the Banco Popolare trade on Tuesday 29th June at €1.52 yielding a return of 22%.We are now contemplating going long into it as its fortunes look to be better. Its management have just given a very positive earnings forecast arising from its restructuring. They anticipate job cuts in the near future but a return to profit growth in the next 12 months. The stock is currently trading at €1.62.
Blue Chips has also gone long into its first metal this year-copper at an opening price of$4.2568. This shows that the portfolio is healthy enough to withstand the volatility that comes with commodity markets. Copper is actually less volatile than gold in the market which has come from highs of $1571 in May to a low of $1482/oz attributable to the resolution of the Greek crisis. This may change however as the overall Eurozone debt issue is far from settled as Portugal, Spain & now Italy remain in the spotlight.
The issue is also bound to affect the Blue Chips portfolio if we decide to go long into Banco Popolare due to Moody’s threat of downgrading Italy’s debt.2 Italian stocks-Intesa & UniCredit- recently suffered a ‘flash crash’ recently in relation to this threat.
Whether or not Blue Chips extends its stay in Europe, a very exciting trading week lies ahead of us.
James Mwangi

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