The Irbis Index January 2024

Welcome to the January 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 December 2023, click here.

🚀 Index Update! In 2024, we have extended the scope of The Irbis Index by incorporating two additional categories: Road Freight and Container Leasing (more details in the Index Key above).

Key Trends for January ‘24:

Relative stock performance (Feb ‘23 - Jan ‘24) 

Road Freight companies show the largest average change in price,  increasing rapidly since July 2023 with average prices now at 125% of what they were a year ago.

Container Leasing and Industrial REITs have made a significant recovery over the past 2 months as well, in line with the S&P500.

Average EV/EBITA multiples

In January, the Road Freight industry, a new addition to our tracking, outperformed other industries by achieving the highest EV/EBITDA multiple. This result placed it slightly above our traditionally leading sector, Cold Storage and Logistics, in terms of valuation multiples.

It is important to note that within the Road Freight industry, it is larger companies such as ODFL that command a high EV/EBITDA of 26.7x. All Road Freight companies we track have had a decline in earnings per share estimate over the past month.

On the other hand, Food Retailers continued to command the lowest EV/EBITDA multiple. In January, this multiple fell slightly to 5.27x, from the previous month’s multiple of 5.37x.

Average Debt/Equity ratio (Industrial REITs)

The debt-to-equity ratio of Industrial REITs remained constant at 43.7% from December to January.

Top positive correlations

The largest positive correlation was observed between the S&P500 and Road Freight.

When the S&P500 is used to predict prices of the top Road Freight companies companies over a year, the mean absolute error is only 2.2%.

Cold Storage & Logistics and Food Equipment Producers also make the list with a correlation of 0.77.

When tested whether Cold Storage & Logistics affect Food Equipment Producers or vice versa, it is observed that it is more accurate to use Food Equipment Producers to track Cold Storage & Logistics, as this results in a lower mean absolute error.

Top negative correlations

The largest negative correlation was observed between Meat, Fish, & Dairy, and Commodities (Metal) for the second month in a row.

Overall, the price of industrial metals continues to be 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 re-entered the rankings this month, marking a notable comeback after its absence from the list in December.

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

Rational AG, despite leading in negative target price variation for January and appearing on the list for two consecutive months, saw a positive shift in perception with four upward revisions from analysts and no downward ones, suggesting a brighter outlook.

In contrast, two industrial REITs, Sainsbury’s and UK Commercial Properties, maintained their positions on the list for top negative price variations.

However, SEGRO dropped off this list, benefiting from four analyst upgrades and achieving a market price now higher than its previous target.

Energy

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

Many countries have moved to Wind as a source of energy in January, with Germany moving from Coal (38%) to Wind (62%), Luxembourg moving from Biomass (6%) to Wind (32%), the Netherlands moving from Gas (36%) to Wind (66%), and Great Britain moving from Gas (54%) to Wind (57%).

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