📈 The Irbis Index April 2024

Welcome to the April 2024 edition of The Irbis Index!

We’re curious about new ways to leverage asymmetry of information to enhance investor returns.

The Irbis Index is a tool we are developing to reveal hidden correlations between global macroeconomic trends and events and the industries in which we’re investing. 

The Index tracks the market by highlighting key trends of large players across related industries.

On the 5th of each month, we issue the updated Index covering the preceding month, along with all associated trends.

Source: finance.yahoo.com.

To find The Irbis Index for March 2024, click here.

Key Trends for April ‘24:

Relative stock performance (Mar ‘23 - Apr ‘24) 

Road Freight companies show the largest average change in price, increasing rapidly since July 2023 but have experienced a large decline in April. At the end of March, average prices had surged to 182% of their level from the previous year. However, by the end of April, prices were only 138% of their level from a year earlier.

Many other industries have also observed a similar decline in April, in line with the S&P500.

In comparison to other indexes, the S&P500 dropped 4.2% at the end of April compared to March, the Dow Jones Industrial Average lost 5.0% during the month, and the small-cap Russel 2000 fared worse, with a 7.1% decline.

This was expected, as market analysts predicted a pullback following a month of gains.

Average EV/EBITA multiples

In April, the EV/EBITDA across all industries tracked fell slightly compared to the month prior, apart from Industrial Manufacturers which remained constant at 9.91x.

Cold Storage and Logistics continued to achieve the highest EV/EBITDA multiple for the third month in a row compared to other tracked industries, falling slightly below last month’s multiple of 20.95x.

Within the Cold Storage and Logistics Industry, only STEF received a downward revision from analysts, while both Americold and DFDS received one upward revision each in April.

On the other hand, Food Retailers continued to command the lowest EV/EBITDA multiple for at least the fourth month in a row.

However, most of the companies tracked in this industry did receive more upward revisions than downward revisions in April, apart from Sainsbury’s which received 2 downgrades and 1 upgrade.

Average Debt/Equity ratio (Industrial REITs)

The debt-to-equity ratio of Industrial REITs increased in April and has been increasing from 43.7% in January to 44.5% in March and now up again to 44.8%.

Top positive correlations

The largest positive correlation is between the S&P500 and Road Freight for the fourth month in a row.

When the S&P500 is used to predict prices of the top Road Freight companies over a year, the mean absolute error is only 3.0%. (up from 2.6% the month before, indicating the start of a possible divergence between the two industries).

The S&P500 and Meat, Fish, & Dairy correlation is also significant at 0.89 for the past four months.

However, new to the list is the increasing correlation between S&P500 and Food Production Equipment Manufacturers.

Top negative correlations

The largest negative correlation was observed between Road Freight and Food Retailers for the second month in a row with an absolute decrease from its correlation of -0.77 last month.

Target price variations

The month of April observed high target and actual price variations within the hard asset industries (REITS and Cold Storage).

This suggests that analysts remain optimistic about the industry despite the fall in prices experienced. Within the S&P500, the real estate sector logged the worst performance of the month, falling by 8.6%.

On our list, Americold replaces Warehouse REIT at the top of the list in April. New to the list is DFDS with a 62.9% price variation between actual price and target price, with one upgrade in April.

This month, both Rational AG and Sainsbury’s continue to top the list of negative target price variations.

UK Commercial Property, an industrial REIT that previously made this list for at least 3 months in a row, no longer has a negative price variation and instead has a +11.6% target price variation.

Energy

In April electricity prices fell across all countries tracked on The Irbis Index.

In Spain, spot power averaged €13.67/MWh in April, making it the cheapest month since 1998. This is the result of high renewable production which came as hydropower generation nearly tripled in April compared with the same month last year when Spain had drought conditions.  

The top sources of power in April remained the same in all countries in comparison to March.

However, in Germany, although wind remains the top source of power, power generated from solar and coal has also increased significantly in April.

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