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Focus on the earnings, not the noise

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By Michael O’Connor    

Major Indexes reversed gains early in the week to finish nearly 2% lower as tensions on the Russian Ukrainian border prolong the current market uncertainty.

In addition to the feds ability to fight inflation, the prospect of war has been added to the mix.

This uncertainty has led to some dramatic price fluctuations as stocks violently whipsaw.

We have seen mega-cap names trade like penny stocks, as the apparent lack of euphoric outlook continues to bring the valuations of many of these names firmly into focus.

It appears that valuations actually do matter, and growth at any price isn’t a flawless investing strategy. Who would have thought?

IT’S NOT ALL BAD NEWS!

It’s important to highlight that earnings growth has continued over the quarter, the companies that make up these stock market indexes are now more profitable than ever.

The fundamental of these businesses are strong, but the endless growth narrative that pushed many of these names to record valuations is being re-examined.

For example, Netflix’s reported actual earnings per share (EPS) of $1.33 for Q4, which was well above the mean EPS estimate of $0.83.

Not too shabby, right?

Wrong.

The market doesn’t care about what has happened nearly as much as it cares about what will happen.

From January 18 to January 24, the stock price for Netflix fell 24.2% based on disappointing forward guidance.

Despite having five times higher net income, double the revenue and over 100 million extra subscribers, Netflix is now trading below its June 2018 price as its growth outlook is adjusted downwards.

Over this period, Netflix has been a classic case of good company, bad stock. In 2018, too much of the growth story had already been baked into the price, leaving little room for an upside surprise. So, despite the success of the company over this period, the stock has grossly underperformed the broader market.

In short, the huge expectation placed on these high growth names following the onset of the pandemic was simply unsustainable. The market is now re-rating these stocks to account for the more realistic growth outlook.

RETURNING TO NORMAL

Looking at the positives; stock prices have fallen but earnings estimates have increased over recent months.

Many of the growth names that have seen considerable declines have now been re-rated towards more respectable metrics without significant disruption to the broader market.

Facebook, Netflix, Shopify, PayPal, Zoom and Square have lost more than $1.1 trillion in market cap from their peaks seen in 2021.

Yes, it has been particularly painful if you’re holding these individual names (I hold two…unfortunately), but the S&P has managed to eliminate much of the excess without entering correction territory.

This concentrated valuation correction across many of these high profile names now leaves the market in a much healthier position from a valuation standpoint.

For example, the forward 12-month P/E ratio for the S&P 500 is currently 19.2. This is below the 19.5 times forward earnings recorded prior to the pandemic.

While geopolitical events may weigh on markets over the immediate term, recent pull backs have helped to strip the pandemic exuberance out of the market.

These lower valuation metrics as earnings continue to rise offering a more attractive entry point for buyers waiting on the sidelines.

Focus on the earnings, not the noise. Earnings ultimately drive market returns.

To read my full market analysis, go to www.theislandinvestor.com.

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New summer film festival launches at Anam Centre

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New summer film festival launches at Anam Centre


A new summer film festival has been launched at the Anam Cultural Centre in Killarney, featuring a series of works by local filmmaker Charlie O’Brien. The week-long event, titled Anam Echoes, runs from Sunday July 12 to Friday July 17.


The programme brings together documentaries, traditional music, and guest conversations, with a recurring thread of Irish connections to Latin America running through the week.
The festival opens on July 12 and July 13 with a screening of The Green Fields of Cuba, followed by a live concert with Argentine uilleann piper Pamela Schweblin. On July 14, the venue will screen The Trackless Wild, Song of a Wandering Tip, a documentary exploring the legacy of a 19th-century Irish ballad writer in Argentina, followed by a director’s Q&A.
On July 15, doors open at 8:30pm for a short portrait of the late fiddle player Eamon Flynn titled A Trip to Mountcollins, which will be followed by a traditional music session with Tim Browne and Charlie O’Brien. Musicians gain free entry to this session.
On July 16, in collaboration with the Kerry International Film Festival, there will be a screening of The Killarney Echo alongside a panel discussion on film production, costume, and sound with costume supervisor Ciara O’Connor, sound engineer Tony O’Flaherty, and Charlie O’Brien.
The series concludes on July 17 with A Captain Unafraid, a film charting the life of 19th-century sailor and rebel Johnny O’Brien, followed by a final director’s Q&A.

Doors open at 7:30pm each night, and tickets can be booked at charlieobrien.net/anam-echoes-film-series.

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Felicity’s Summer in Killarney — Chapter 3

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Felicity’s Summer in Killarney — Chapter 3




A new weekly series from Killarney Advertiser’s Jess Jukes


Jess Jukes, a member of the advertising department at the Killarney Advertiser, is also a budding writer. Each week, we will bring you her serialized novella following the adventures of Felicity’s summer in Killarney.



Felicity messaged Jack the following morning.

Hi, I hope you’re feeling better. I heard there was a woman with a new ice cream truck up in Tiernaboul. Do you want to go get your Dad’s ice cream truck back?
She made her toast and sat. Jack messaged back before she had finished her tea.

I’ll meet you at Daly’s, we can walk up together.
Felicity set out for the shop not long after. A dreary sky hung above her, a complete contrast to the day before. It wasn’t long before Jack came around the corner. He was no longer in his ice cream uniform, but in casual jeans and a flannel. He parked his bicycle and leant against the wall next to her.
“What’s this about my Da’s truck being up Tiernaboul?”

Felicity pushed off the wall. “I’ll tell you on our way up.” She told him everything. Jack mentioned how his Da had been quiet and sad when he and Auntie Sheila called to tell him about truck being stolen. He had been subdued still when he had picked Jack up and they went to the garda station to report the theft.

The two trailed through each and every estate, looking for the distinctive bright colours of the ice cream truck. They had been walking for a good half hour when they finally found it.

Jack came to a stop. “Well, you were right about the truck … but why did the woman steal it in the first place?”

That was the question. “Come on, let’s go round the corner and call the gardaí before anyone realises they’ve left the keys outside.”

Felicity and Jack backtracked quickly, and Felicity called in an anonymous tip to the garda station. She put on a nasally voice, saying, “I saw an ice cream truck parked in the driveway of my neighbour, and now I know her I do, and she doesn’t own an ice cream truck. She doesn’t have any permit for that, and I don’t want her trawling up and down the street at all hours trying to sell merchandise without a licence.”
She continued her ramble until the poor sergeant on the other end of the phone sighed in resignation. He promised to send somebody up to investigate and Felicity hung up, triumphant.

Jack was almost crying with laugher. “Jeez Felicity, you should audition for the Four Esquires.”

It wasn’t long before she joined in his laughter. When they heard the garda car approaching, Felicity and Jack watched until the garda knocked on the door of the house. Only then they started back towards home, assured that the truck would be recognised.

Celebration
Sure enough, Jack’s Da Trevor had been delighted to get his ice cream truck back. He had been thankful to Auntie Sheila and Felicity for helping Jack when the truck was first stolen, and insisted on going out for a meal to celebrate its swift return.

The group found themselves in The Laurels, food in front of them, laughter and drinks flowing. Auntie Sheila was discussing the upcoming festival over the weekend with Jack’s mother, and Trevor was telling Jack the story of how he first brought his ice cream truck for what must be the millionth time.

Felicity found herself watching on with a content feeling. Not much better than a full stomach and good company.

As she was looking around the bar lazily, the girl paused. On the wall there was a framed Killarney Advertiser clipping. She got up and wandered over to for a better look.

There was an old man sitting at the bar underneath the clipping, a pint in hand. “You see the group that went up Carrauntoohil for charity last month? The lady in the middle, the one in yellow, she’s the daughter of the fella behind the bar.”

Depicted next to the article was in fact a group photograph full of people. ‘Walking Society Supports Charity atop Our Tallest Peak’ was splayed across the paper in bold lettering.

“Hm .. I’ve never seen it, Carrauntoohil.”

The man barked a laugh. “Course you have! You’re looking at the ‘Reeks all the time, aren’t ya lass? Nearly everything over the lake are the Reeks.”

Felicity turned towards him fully. “People go up it often then?”

The old man laughed again. “Nearly every day I’d wager. People go up in the sun and the rain, even when they shouldn’t. You know …” he leaned in closer as if to share a secret, “people die, up on that there mountain, every year. You gotta respect the mountains. They were here before we were, and they’ll be here long after we’re gone.” He coughed, and took a sip of his pint.

They spoke idly about the good food and the live musicians that were setting up. As the first notes of music began to waft on the air, Felicity bid the old man farewell and returned to her party.

Auntie Sheila moved over to free up Felicity’s seat again as she returned. “You met Seamus then?” she giggled, tipsy. “ He’s a dote, no one sweeter, I swear. You know, he’s been a regular in this bar ever since your mother and I were your age. Hasn’t changed a bit.” She hiccupped, and both Sheila and Jack’s mother started giggling.

Felicity ignored the women, now leaning on each other and saying things in funny voices whilst Trevor looked on with a smile on his face.

“Jack?” she asked conspiratorially. He turned to her, humming to show she had his attention. “Do you like mountains?”

Tune in next week to see what happens next

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