The Irbis Index December 2023

Welcome to the December 2023 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 November 2023, click here.

Key Trends for December ‘23:

Relative stock performance (Jan ‘23 - Dec ‘23) 

Cold Storage & Logistics companies continue to show the largest average change in price,  increasing rapidly since June 2023 with average prices now at 155% of what they were a year ago (an increase from 142% a month ago). 

All other tracked industries have also observed increases in share prices, although not as significant. 

Industrial REITs and Food Production Equipment companies have made a significant recovery over the past month as well. 

Average EV/EBITA multiples

In December, Cold Storage and Logistics continued to achieve the highest EV/EBITDA multiple compared to other tracked industries, despite the multiple falling slightly over the months, from 17.6x in October, to 17.4x in November, to 17.0x in December. 

Likewise, Food Retailers continued to command the lowest EV/EBITDA multiple. In December, this multiple rose slightly to 5.37x, marking the first increase in the past four months.

Average Debt/Equity ratio (Industrial REITs)

The debt-to-equity ratio of Industrial REITs increased from 42.4% in November to 43.7% in December.

This has been the first increase in the average debt-to-equity ratio of Industrial REITs since October 2023 when the observed ratio was 44.8%. 

Top positive correlations

The largest positive correlation remains between the S&P500 and Cold Storage & Logistics. This trend has been consistent for at least four consecutive months, highlighting the strong interconnection between these two industries. 

This relationship stands out as significantly stronger compared to other observed correlations.

When the S&P500 is used to predict prices of the top Cold Storage and Logistics companies over a year, the mean absolute error is only 4.4%. 

Top negative correlations

The largest negative correlation was observed between Meat, Fish, & Dairy and Commodities (Metal).

Overall, the price of industrial metals is negatively correlated with many of the industries the Irbis Index tracks. 

Target price variations

Smurfit Kappa, Warehouse REIT, and Nestle continue to top the list of positive price variations.

Tesco ranked lower this month, with Cabka making the list in December instead.

Smurfit Kappa and Warehouse REIT have had one of the top 4 positive target price variations for at least the past four months. 

Although Sainsbury’s held the top spot for the negative target price variation for at least four consecutive months, the food retailer received 3 up revisions from analysts over the past month and no down revisions, indicating a positive outlook from analysts. 

This month, two industrial REITs - UK Commercial Property and SERGO joined the list of top negative price variations. 

Energy

Electricity prices decreased across all countries on the index except for Spain.

This is in contrast to the general increase in prices the month before.

All countries continued to rely on the same main source of power in December compared to November, except for Belgium which switched from Nuclear (36%) in November to Gas (30%) in December, and Spain which switched from Wind (29%) in November to Gas (34%) in December.  

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