In the Spring of 2022 European Banks started to generate Accelerator long signals, slowly but surely, one by one until the sector itself lit up in a green tinge from April – June as you can see below.
The Apollo momentum signal is a measure of the momentum associated with inter-temporal changes in stock level expected returns and the consequent re-estimation of future expected returns by the market. We refer to this as the (momentum) accelerator signal.
In other words this signal was projecting an acceleration in the shorter term expected return (1 year) over the longer term and it’s probably not too much of stretch to imagine this was a precursor to improvements in Net Interest Margins and revenues thereafter. This reality is reflected in the Apollo Fair Value Drivers as they evolve through time as you can see in the case of BNP where revenues / sales are now the most significant driver of Value.
The Apollo signals are not trading signals – they are moments in time that demonstrate when the information set around a stock, sector or market is changing and the market is responding to that change.
A natural consequence of this particular evolution would be for the stock/ sector / market to transition to the next stage of the Investment Cycle and this is what we have seen (see chart 1) so that now we have moved into the Re-rating Cycle and if things pan out as we might expect we will see a move to the Growth Cycle – a period of optimism where the Implied Cost of Capital being priced in decreases to an historic low. Happy Days for the portfolio manager that has been able to watch this metamorphosis unfold before their eyes and respond accordingly.