Is Apple Worth More Than the Largest Banks in Europe

What if you were told that Apple (AAPL) is worth more than 32 of the largest banks in Europe? A new Reuters article states "Technology company Apple is now worth as much as the 32 biggest euro zone banks. That's the stark result from a steep fall in the share price of banks including Spain's Santander (STD), France's BNP Paribas, Germany's Deutsche Bank (DB) and Italy's Unicredit, compared to a steady rise in Apple's valuation, according to Thomson Reuters data. Earlier on Friday the DJ STOXX euro zone banks index fell 4 percent, valuing its 32 members at $340 billion. That's based on the market capitalization of their free-float shares, which for some French banks in particular is less than 100 percent." Read the entire article here.
It is absolutely amazing to see this contrast in valuation, and it says that either the financial system in Europe is possibly at risk of collapse or that it is just way too undervalued. It could also say that Apple is overvalued, but based on the growth and price to earnings ratio, it is hard to say Apple is expensive. Some of these European banks look downright cheap and most of them, possibly all of them, will survive the current challenges. Here is a closer look at a few leading European banks, as well as Apple:
Apple, Inc. (AAPL) shares are trading over $356.03. Apple is a leading maker of computers and mobile devices. The 50 day moving average is $359.94 and the 200 day moving average is $342.37. Earnings estimates for AAPL are about $27.41 per share in 2011 and $32.12 for 2012. The 52 week range is $235.56 to $404.50. Apple is a great company and will probably continue to be a solid investment for the foreseeable future. The market cap is about $331 billion. I would buy AAPL on dips.
Banco Santander (STD) is trading at $8.72. STD is a major bank and is based in Spain. These shares have a 52 week range of $8 to $13.52. The 50 day moving average is $10.25 and the 200 day moving average is $10.89, so the shares are trading well below support levels. Estimates for STD are at $1.25 per share in 2011. The headlines about Spain, Portugal and other countries have been very negative lately over concerns of sovereign debt defaults and the Euro as a currency. The market cap is about $53 billion.
Barclays PLC (BCS) shares are trading at $9.89. Barclays is a leading banking and financial services company based in the United Kingdom. The 50 day moving average is $14.51 and the 200 day moving average is $17.34. The 52 week range for these shares is $9.85 to $21.69. Earnings estimates for BCS are about $1.88 per share for 2011. BCS pays a dividend of 26 cents per share, which is equivalent to a 2.3% yield. The book value is stated at $28.15. The market cap is about $29 billion.
Banco Bilbao Vizcaya (BBVA) is trading at $8.66. BBVA is a major bank and is based in Spain. These shares have a 52 week range of $8.02 and $14.05. The 50 day moving average is $10.30 and the 200 day moving average is $11.04, so the shares are trading way below support levels. Estimates for BBVA are at $1.18 per share in 2011 and $1.39 for 2012. Book value is stated at $11.34. The headlines about Spain, Portugal and other countries have been very negative lately, over concerns of sovereign debt defaults and the Euro as a currency. The market cap is about $39 billion.
ING Group NV (ING) shares are trading at $7.81. ING is a leading banking and financial services company, based in the Netherlands. The 50 day moving average is $10.67 and the 200 day moving average is $11.34. The 52 week range for these shares is $7.76 to $13.41. Earnings estimates for ING are about $2.15 per share for 2011. The book value is stated at $15.53. The market cap is about $30 billion.
Deutsche Bank AG (DB) shares are trading at $38.44. Deutsche Bank is a leading banking and financial services company based in Germany. The 50 day moving average is $52.75 and the 200 day moving average is $56.81. The 52 week range for these shares is $38.32 to $67.64. Earnings estimates for DB are about $7.54 per share for 2011. DB pays a dividend of 79 cents per share, which is equivalent to a 1.8% yield. The book value is stated at $79.27. The market cap is about $35 billion.
The data is sourced from Yahoo Finance and Stockcharts.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes.

 

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Eventually, French Spreads Fail (E.F.S.F.)

Everyone seems to be waking up to the record spread between French bonds and Bunds at the moment. Having risen in July, it’s reached another record eurozone high on Wednesday of 81bps. French yields are low but clearly the debt is under-performing.

Is 100bps too far off?

No — actually the more Italy and Spain worsen and therefore the guarantees they provide to the EFSF look dodgier (especially if it gets used to prop them up and they step out), the more France is sucked in. Divyang Shah of IFR Markets puts it really well:

Italy and Spain have seen their contribution to the EFSF go up from 18% and 12% to 19% and 13%, respectively, without Greece, Ireland and Portugal. For Germany and France the increases have been from 27% and 20.5% to 29% and 22% respectively. But the market pressure on Italy and Spain has seen both enter the spotlight and if they decide they cannot contribute, then the funding required from Germany and France would go up to 43% and 32% respectively. Given the total of 75%, it would be hard to argue that we don’t already have a transfer union for the Eurozone.
The 10-year spread on France/Germany has widened out beyond its July peak to its widest level since mid-1990. The 10-year spread on Belgium/Germany has broken through 200bps and currently at 203bps is close to breaking its record wide level just under 215bps from early 1999. Both are significant, but especially so the moves seen in France. It suggests that investors no longer regard it as part of the core and have been for the last few weeks trimming exposure.
When a country steps out of its guarantee, the shortfall is shared between all the other guarantors – not just France and Germany. The point is though that their shares are huge already. We hate to resurrect the cliché… but this is another single point of failure like Italy itself. Any system that has multiple SPOFs is in trouble.

And it basically goes back to this thing when you consider that France’s AAA rating might also be a point of failure…

For instance, the IMF’s recent Article IV staff report on France forecast that debt to GDP would reach 85-95 per cent by 2013, depending on fiscal reforms, interest rates and growth, but not counting contingent liabilities from the EFSF. If France’s EFSF guarantee did rise to 32 per cent of total guarantees (to around €250bn) it seems to work out around 10 per cent of GDP. Not entirely reassuring. Some IMF AAA charts to close:

 

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5,700 Britons were arrested overseas last year,

5,700 Britons were arrested overseas last year, although the Foreign and Commonwealth Office said this was 10% fewer than 2009/10

Drug arrests also fell by almost 20%, according to its new British Behaviour Abroad report.

The highest number of arrests were in Spain and the United States. However, proportionally, tourists are most likely to be arrested in Thailand, according to the report.

Drug arrests continue to be a significant problem for some countries, it said, particularly parts of South America and the Caribbean where a high proportion of total arrests were drug related.

The FCO has launched a new ad campaign uring Britons to steer clear of drugs overseas.

The British Behaviour Abroad report also shows that the number of Brits hospitalised abroad increased to 3,752 cases, despite fewer people from the UK travelling abroad last year.

Cases of rape in Greece have almost halved since 2009/10, down from 27 to 15, though the number of sexual assaults rose 'significantly', according to the FCO.. Proportionally the highest number of sexual assaults occurred in Egypt, followed by Turkey.

The report showed that the Philippines was the country where Britons were most likely to need assistance of the FCO, followed by Thailand then Pakistan.

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