Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
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Tesla is losing ground in Europe, US banks and rising yield curve
Peter Garnry
Chief Investment Strategist
Summary: Tesla Model 3 was the fourth best-selling pure EV in Europe in November behind Renault, Volkswagen, and Hyundai, which should have shareholders alarmed. Tesla will be successful and become one of the biggest carmakers in the future, but the competition is heating up and that puts the $805bn market value into question. We also take a look at US banks which could rise another 33% this year if we are right about the reflation theme as the industry will be driven higher by a potential 25% valuation multiple expansion and 8% growth in tangible book value.
A month ago, we commented on our Saxo Market Call podcast that Tesla was slipping in European EV sales ranking for October. We pointed out that this was an ill sign since the European EV market is the biggest in the world and that the EV penetration rate of new car registrations in Europe is two times larger than China and five times larger than the US. Some clients wrote to us saying we were missing the timing effects on Tesla sales and that they were typically larger in the last month of quarter. Time will soon tell how big this effect is, but in the meantime, we have got November figures and they still show that Tesla is losing ground.
In November, plugin (hybrid and pure EV) registrations rose 198% y/y compared to the overall car registrations in Europe being down 14% y/y. This took the plugin market share to around the 10% mark with pure EV accounting for 5.4%. What is most striking is that Tesla, despite its $805bn market value dwarfing all other carmaker in the world, is losing ground against local players. Renault Zoe was once again the best-selling pure EV car with the VW ID.3 close after (see table). Number three in November was the Hyundai Kona EV and then on the fourth spot came the Tesla Model 3. While this should worry Tesla shareholders it is even more striking that the Model S and X are not in the top 20 ranking despite direct competing models such as Audi e-tron being on the list.
US banks could have 33% upside on reflation in 2021
We have talked a lot about reflation in the first two weeks of 2021 with our team introducing our Saxo Commodity Sector basket on 4 January to highlight 40 stocks with exposure to the commodity sector which could do well during reflation. But higher inflation is more than the commodity sector. It is also about banks as growth and inflation expectations drive a rise in valuation multiples for banks. From early 2016 to early 2018 when the last reflationary period occurred S&P 500 banks saw their price-to-tangible-book ratio rise from 1.11 to 2. During the current reflation period that started in June 2020 the S&P 500 banks price-to-tangible-book ratio has increased from 1.12 to 1.60.
If we can expect the same expansion in valuation multiples, that is price-to-tangible-book ratio around 2, and we factor in 8% growth in book value in 2021, then US banks could have an upside of 33% this year. Investors are so far buying this expectation as financials, materials and energy sectors are so far leading the gains this year.
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