market folly

We're posting up notes from the 2017 London Value Investor Conference.  Next up is Kevin Murphy of Schroders who pitched a long of Standard Chartered (LONG: STAN).


Kevin Murphy's Presentation at London Value Investor Conference

Long Standard Chartered (LON: STAN) 

Standard Chartered are exposed to emerging markets and the shares are down two-thirds from their peak. As usual as the price has gone down more analysts have given sell ratings. As a deep value investor, he is not interested in consensus profit or what profit a company generated last year. He tries to think about profit through the cycle. Murphy likes to use deposits as a measure of value for banks as they are highly cyclical. With interest rates so low you could consider deposits as float and not a liability. Standard Chartered has extreme liquidity.

Compared to other banks that focus on emerging markets Standard Chartered looks cheap if measured in terms of deposits but not so cheap measure by profit. Why has it failed to produce better profits? The main reason is low interest rates.

Standard Chartered came through the Asia Crisis and the credit crunch well. Murphy thinks its balance sheet could withstand another crisis if one arose. If interest rates go up Standard Chartered will do well.


Be sure to check out the rest of the presentations from the London Value Investor Conference.