This week Valeo reported sales figures for the first quarter of 2016. Sales rose 10 per cent over the same quarter last year beating market expectations. The share price on the French stock exchange has risen 3.9 per cent at the time of writing.

Valeo manufactures automobile components. The company manufactures clutches, engine cooling, parts, lighting, electrical systems, windshield wipers, motors and actuators, security systems, electronics, and connective systems for automobile manufacturers and the aftermarket.

Valeo's products are sold in Europe, Asia, North America, and South America.

The company keeps on profiting from a leading position in automobile emissions technology. Recent emissions and fuel efficiency scandals continue to place the company in an ideal position.

The company has also doubled sales in China every four years, which makes China the leading market for Valeo.

Looking forward an accelerating order intake and improving profitability reinforce the investment case.

Apple Inc

Apple reported results that are below our expectations despite a general market conservative view. Guidance for the next quarter was also subdued and below our estimates.

Apple results follow the negative trend being experienced in the tech sector. Earlier in the month Intel, IBM, Qualcomm, Microsoft and Google all reported disappointing results.

This was the first year-on-year revenue drop since 2003. Tim Cook, Apple’s CEO attributed the decline to macroeconomic headwinds and reluctance from consumers to upgrade iPhones before the next version come out in September.

Apple main strength in the past years is now proving to be its main weakness. The iPhone which accounted for 65 per cent of Apple’s revenue is so successful that it captures more than 90 per cent of all global smartphone profits. Unit sales account for less than 20 per cent in comparison.

While “services” (apps and music) and “other” (Apple Watch) have shown impressive growth, together they make up only around 16 per cent of the company’s revenue. Weakness in the mobile phone segment is expected going forward as the market is reaching maturity.

Apple will thus need to reprise is attacking role through innovation if it wants to defend its leadership positon. Managing the company’s past success cannot carry Apple for the long term.

Meanwhile, as a sweetener Apple has declared a dividend of 57cUS per share and is updating its share buyback program by $250 million.

Disclaimer: This article was issued by Antoine Briffa, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

 

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