This week, interest rates were raised by 75 basis points, or 0.75 percent. This was the single biggest rate hike since 1989. Interest rates now stand at 3%, with many economists seeing a slowing economy, some analysts predict that rates will not rise more than 3.5% with signs of a slowdown clear, but what do they know? In my role as a trader, I scan the market, try not to get too engrossed in macros, and position myself to take advantage of short-term price moves within the small area of the market that has some momentum. I want to find companies that are dealing with current macro headwinds well. As previously discussed, I identify these by screening good quality stocks moving above their 50, 100, and 200 daily and weekly moving average, breaking out of a bottom or consolidation area on the chart and displaying rising trading volumes. The list grows daily. Not everything is down, there are still many little bull markets out there.

“The recession is coming! “It seems this sentence has been mentioned every day since 2018 when the yield curve first inverted. I do not deny that a storm is brewing but the media seem to use these words as a scare tactic consistently, saying that, as I have mentioned before, it might be part of the plan. The media can be used as a tool by the government to slow the economy by predicting doom and gloom and maybe we need all the help we can get, but I’m getting bored. I want to move to the next stage.

Some claim we are in a recession, with data pointing to that fact, albeit with some analysts changing the rules slightly. Is it a technical or a paper recession? Is this period of weak or negative growth in real GDP a recession if the unemployment rate is not rising and everyone is still spending, whilst savings are high?

I went to view a house this week, and over one hundred other investors viewed the same property, a little 3-bed terrace. The agent informed me the property sold for “significantly over the asking price”. Everyone I know is booking holidays and buying new stuff. Spending did seem to slow down a little at the start of this media doom and gloom, high energy prices, you’re all going to lose your house and job period. But now many seem to think ‘stuff it’ with companies like DFS this week claiming business is picking up. No one I know is out of work (although this normally comes after the start of a recession) and all companies I expect to show signs of a recession such as Howdens and Hollywood Bowl keep throwing out great trading updates. These are some of the signs my simple brain measures the economy and I suspect we are not in a technical Rick Omera Recession yet. Everyone I’ve talked to seems upbeat, despite the agenda of the media, and believes all the issues affecting inflation, such as war and supply chains, will eventually be resolved. This shows we have the vision to see inflation come down with the Bank of England predicting a peak of 11% at the end of 2022 and slowly moving down to 2% or even zero inflation by 2025. This is different to the inflation of the 1970s when most could not see a way out.

Recessions can be seen by many as a great opportunity, with most great businesses starting in these depressed times. I started my investing journey in 2009 coming out of a recession and I wish I had known then what I know now, next time hopefully I’ll take more advantage of the deals on offer. But I am also conscious of the people hurt and will aim to help anyone the best I can.

No one can predict what’s going to happen with any certainty, many try constantly, if they are right, they can sell a course, write a book, and have a movie made about them. If they’re wrong, people soon forget, and they can try again next week. Here at Omera, we will just keep scanning the Financial and property markets looking for deals whatever the circumstances.

Time will tell, but I’m not worried. Recession or not I’m still in a great position to take advantage of all the opportunities the market can present to me, and I hope you are too. If not, now might be the time to get educated, analyse your own personal balance sheet, and create a plan for every eventuality.

We all know Greggs; I am particularly partial to a cheese and onion pasty and a sausage roll. Greggs plc is a United Kingdom-based food-on-the-go retailer company with over 2000 stores nationally. The Company operates through two segments: Retail company-managed shops and Business to business. Its Retail company-managed shop segment sells a range of fresh bakery goods, sandwiches, and drinks in its shops or via delivery. Its Business-to-business segment sells products to the franchise and wholesale partners for sale in their outlets, such as Iceland. The Company offers various products under various categories, such as breakfast, savouries and bakes, drinks and snacks, sandwiches and salads, and hot food.

I would consider acquiring Greggs for a much cheaper price if I were a long-term investor, but as a trader, I believe this stock has some upside in the short term based on the chart below. The risk of recession lingers over the areas Greggs serves such as the office workers, the commuters and the builders grabbing quick sarnie, but as previously discussed these workers have not yet disappeared. If I were to take the trade, I would closely monitor this area. The big risk is a collapse in Greggs’ share price on the news of layoffs could beat you to the sell button.

Greggs stays current with diversification and moves with the times. It has plans to open over 150 new stores with some drive-throughs. The menu is constantly changing providing more choices for the demographic of its customers such as the growing vegan population, it manages products well with slow sellers such as bread binned, and pizzas expanded.

After being severely affected by COVID, Greggs has gone from strength to strength and I believe the experience they have gained would help them weather a recession.

The company currently has a share price of £20.48 with 102,064,421 shares outstanding making the company worth £2.09 billion. On January 1st, 2023, Earnings Per Share are estimated to come in at £1.18, giving the company a Price to Earnings Ratio of 17. The company usually trades for, on average, 20ish. I would have thought it would struggle to achieve the confidence of a PE of 20 in these current times, but with average volume since the beginning of October higher than the 52-week average, there does seem to be some confidence showing from investors.

I always like to look if directors are buying and noticed the CFO Richard Hutton bought a considerable amount at £24.21 in March and then sold in May at a loss. So, the director with the most knowledge over the finances of the company had confidence in the company in March but was scared out soon after, maybe due to the economic outlook, this does look more like the actions of a Stock Trader than a CFO. With any improvement in the economy, let’s see if he jumps back in.

I may review this company again if I see a breakout of 2200p with a higher volume. Q3 results are out on 9th November so we’ll report back then to read what Greggs is saying about the current state of play.

Halfords Group plc is an operator of vehicle servicing, maintenance, and repairs. Claiming to be the UK’s number one motoring service provider to consumers. The company provides motoring and cycling products and services in the United Kingdom and the Republic of Ireland. Its retail segment is involved in the sale of automotive, leisure, cycling products, scooters, and parts, as well as clothing and accessories through its stores. The operations of the Car Servicing segment comprise car servicing and repair performed from autocentres and mobile vans. The company has approximately 404 Halfords retail and three performance cycling stores offering a range of motoring and cycling products and on-demand services. It has approximately 374 garages offering Ministry of Transport (MOT), service, maintenance, and repair services.

Many investors are looking at Halfords. By using their favourite tool, the Discounted Cash Flow (DCF) model, they are determining that this share is cheap with an average DCF coming in at around £2 depending on the metrics used. As a trader, I want to follow the investors.

As you can see from the chart below the share price is breaking out of the bottom. The company’s share price has suffered hugely in the past few months leaving behind the success the business had during covid where most households wanted a bike and some new speakers for the car.

This spending was discretionary and showed that a slowdown in the economy will hurt Halfords, but with the recent acquisition of Lodge Tyre, the company is giving more emphasis on car servicing, a needs-based service which moves Halfords to a more defensive company. As interest rates rise more drivers will be reluctant to take out more expensive debt for a new car which is now priced on average at £38,500. One would think drivers may start taking more care of the older cars they own and Halfords (which holds 2% of the car servicing market) will hopefully be able to meet their needs.

Halford is also currently taking a higher share of the cycle sales market as smaller retailers exit the market, will this persist going forward?

Revenue is increasing but margins are low, making some potential investors nervous. Low margins are something you don’t want to see going into a recession. The company has plenty of cash and manageable debt, with a good lease structure on the properties they sell from. A recession would be a real challenge for the business but something I think they could manage. The company could be placed on my trading and maybe a long-term investment (on the way out of a recession after gaining market share) watchlist.

The company is estimated to have a reduction in profits by 29% in March 2023, coming in with an EPS of 24p. This gives a forward PE ratio of 7.6x at a current price of £1.81. The shares would normally trade at a PE of 11 on average over the past 10 years, so as confidence grows and Halfords diversify, I think it could achieve a higher PE than where it currently sits. The volume is increasing, and the chart is starting to show some signs of some new momentum, I think taking a breakout once proven may be a good trade. Anything could happen in this crazy market so a tight stop loss under support will be needed.

NWF Group plc is a specialist distributor of fuel, food, and feed across the United Kingdom. The company’s principal activities and its subsidiaries are the sale and distribution of fuel oils, the warehousing and distribution of ambient groceries, and the manufacture and sale of animal feed. The Fuels segment is engaged in selling and distributing domestic heating, industrial and road fuels. The Food segment is engaged in the warehousing and distribution of clients’ ambient grocery and other products to supermarkets and other retail distribution centres. The Feeds segment is engaged in manufacturing and selling animal feeds and other agricultural products.

Looking at the chart it appears I’m late to the show, with a few breakouts creating some good momentum on the upside, but as a momentum trader maybe I could jump into the stock on a pullback.

As in the company description, the company has three main revenue streams: Fuels operating from 22 depots contributing to 70% of revenue, Food warehousing in the north-west at 7% and Animal feeds to mainly the dairy industry at 22%. As inflation soars this has benefited the company which now some see as protection from inflation. The recent supply chain issues and rising costs of fuels have enabled NWF to present record profits, but a profit I think is unsustainable and once things start to level off, which they will, profits and low margins will eventually fall back to normal levels.

Many call for, especially the opposition government, a windfall tax on energy and oil companies. Do these discussions relate to the big blue-chip companies such as Shell and Bp or does this trickle down to the likes of NWF worth £137 million, a company making a few extra quid in these volatile times? I watch with interest.

Whilst NWF benefits from these unsustainable conditions, it is not something I would like to get involved with. I would not be comfortable determining whether a pullback was indeed a pullback or a return to normal levels. I also ponder that as investors have not been diluted in recent history, I would have thought using these volatile market conditions now would be a good time for management to raise some cash, so maybe they could be at risk of dilution.

As an investment, the company is well-run, with rising revenue in a well-diversified market, it pays a good dividend that rises over time, and has no debt. Earnings are however predicted to slow in the coming years with 2023 EPS predicted at £0.19 down from £0.35 giving the company a PE of 14.6, which for a company that traditionally trades for a PE of 11 there could be signs that NWF could be overvalued at present on a PE and DCF model.

NWF stock would look more tempting if the price drifted back to the lower end of the range it has traded in since 2014, as you can see below.

Anyway, not for me right now.