1. 1 of 4
Market Pulse
Investment Weekly Week 23 | 2 June 2015
Look to housing for US momentum
Vodafone: do you like bananas?
Beware of picking winners in tech
Goodbody Wealth Management
Bernard Swords
Chief Investment Officer
T +353 1 667 0400 E bernard.k.swords@goodbody.ie
Jude O’Reilly
Senior Research Analyst
T +353 1 667 0400 E jude.c.o’reilly@goodbody.ie
Brian Flavin
Senior Research Analyst
T +353 1 667 0400 E brian.s.flavin@goodbody.ie

2. 2 of 4
DateInvestment Weekly
Market Pulse
Housing to the rescue?
The disappointing performance of the consumer in the US has
been a major focus for investors lately. A soft housing market
has been part of the problem, but that could be changing.
Residential activity jumped 20% during 2013 while house price
inflation reached almost 15%. There was a notable cooling in
2014, though. Growth in housing activity slumped to 5% and
house price inflation fell to 4%.
View
Due to weather impacts we do not have a clear picture of new
building activity. However if we look at sales activity there does
seem to be a definite improvement in trends. New home sales,
which averaged an annualised rate of 425,000 in the first quarter
of 2014, have jumped to an average of 515,000 year-to-date.
Existing home sales have increased from an annualised rate of
4.7 million to more than 5 million. At the same time house price
inflation is starting to creep up again - the last reading was 5%.
Housing affordability dropped close to a five year low at the
end of 2013, but is now back to the five year average. These
improving trends look set to continue.
Irish assets look good
The Irish housing market has been recovering for two years.
In 2014, completions grew for the first time in eight years.
Even so, supply remains more than 60% below Goodbody’s
medium term forecast. These supply shortages are most acute
in the Greater Dublin Area. Demand has remained strong due
to the country’s young and growing population. That demand
is increasing as labour market conditions, confidence and the
banking system have recovered in the context of the fastest
economic expansion in the euro area.
View
We believe this is a sustainable recovery. A normalisation of
transactions, mortgage credit and supply over the coming years
will improve the quality of this recovery. It may take until the
end of the decade for supply to match expected household
demand, given development and planning lags, construction
sector capacity constraints and limited financing. Although in
the near term new Central Bank mortgage restrictions may
moderate new mortgage lending, we think that further out strong
- albeit moderating - house price growth should continue.
Action
The US economy has lost some momentum, but we do not
believe that it will be long lasting. Consumption has been
somewhat disappointing, but if the improvement in the housing
market continues this will bolster consumer confidence and
consumption. Consequently we expect an acceleration in the
US economy and equities remain the best bet from here.
Action
Ireland is in recovery mode after a prolonged recession and
there is a need for significant investment in areas like housing
to meet the demand requirements of a growing population.
This is likely to remain the case for a number of years, we
recommend exposure to Irish assets such as residential and
commercial property opportunities.
Market performance
Current Prior MTD YTD
FT World (local) 273.44 -0.8% 0.1% 6.7%
FT World (euros) 302.84 -0.4% 0.6% 15.8%
Iseq 6230.18 -1.0% -0.7% 19.2%
FT 100 6882.66 -2.1% -1.5% 4.8%
Euro Stoxx 366.86 -2.8% -0.9% 14.8%
S&P500 2111.73 -0.7% 0.2% 2.6%
Oil
Brent 65.64 0.8% 0.3% 14.1%
Week 23 | 2 June 2015
Market performance
Current Prior Year end
Bond markets (10 year yields)
Euro area 0.61 0.61 0.54
UK 1.90 1.93 1.76
US 2.21 2.21 2.17
Currencies
Dollar/euro 1.097 1.098 1.21
Sterling/euro 0.720 0.709 0.78
Source: Bloomberg
++

3. 3 of 4
DateInvestment Weekly
Market Pulse
Evolving Theme
Vodafone buzz picks up
The global communications sector is performing strongly year to
date, underpinned by growth recovery, mobile data monetisation
and mergers and acquisitions activity. This should continue,
leading to an earnings inflection story in 2015.
Vodafone has been one of the laggards in the sector. But this
could be changing. According to the company’s recent full year
results, services revenue turned positive in Q4 - the first time
this has happened in 10 quarters. Vodafone’s German business
is expected to improve as pricing pressures there ease and
overall spending should moderate as its three year Project Spring
investment project comes to an end in 2016. The economic
recovery in Europe should also help.
Many have argued for some time that Vodafone is undervalued.
It would appear that some industry participants might think
so also. In a recent interview John Malone, chairman of Liberty
Global, compared Vodafone’s European assets to “a banana in
a jar” - the problem is how to get your hand out with the banana.
These comments, and related musings that Vodafone’s Western
European business was a great fit for Liberty, were enough to
send the stock northward. Synergies could be worth up to 60p
per Vodafone share, according to some calculations. That would
imply a share price well over £3. Meanwhile, Vodafone’s CFO said
last week that the company is willing to consider acquisitions and
disposals where the financial rationale makes sense.
Liberty Global has already purchased a Belgian mobile company
in April and we think that there is substance behind this latest
Vodafone M&A speculation. But even if it proves not to be so,
the share looks underpinned by a return to growth and an
attractive dividend yield.
Week 23 | 2 June 2015
Vodafone Group PLC - Price
Source: Factset
1.8
1.9
2
2.1
2.2
2.3
2.4
2.5
2.6
“Our current preference is for the
First Trust NASDAQ 100 Technology Sector Index
Fund (QTEC) which offers equal exposure to
Technology companies in the Nasdaq 100 Index.”
Jude O’Reilly, Senior Research Analyst
Investment Strategy
Tech delivering growth and value
Our recent meeting with one of the most experienced and best
resourced investment teams in Europe dedicated to technology
investing garnered key insights and confirmed our strategy of
using Exchange Traded Funds (ETFs) to invest in this dynamic
and disruptive sector.
The technology sector has been amongst the best to invest in,
along with healthcare and consumer discretionary, rising +95%
over the past three years and +131% over the past five years.
The sector trades on a PE of 15.2x, which is in line with the wider
market (15.2x). However, it is expected to deliver earnings growth
of 9.8% this year and 11.0% next. This contrasts with the market,
which is expected to deliver +4.2% this year and +12.5% next.
Compared to the start of the year, the technology sector is
marginally more expensive now (15.2x now vs 14.2x then) and
earnings growth is slightly lower (2015: +9.8% now and +10.9%
then; 2016: 11.0% now and +11.2% then). Over the same period
the market is quite a bit more expensive (15.2x now and 13.4x
then) and earnings growth quite a bit lower (2015: +4.2% now
and +8.3% then; 2016: +12.5% now and +11.6% then). This
combination of better than market earnings growth and delivery
at the same valuation as the wider market continues to attract us.
The technology investor segmented the sector into three parts:
(1) The large, incumbent technology companies; (2) highly
innovative, fast growing and highly valued companies; and
(3) Apple, a large incumbent with a strong product pipeline
and attractive customer base. The dilemma facing investors is
correctly identifying which incumbent will successfully transform
itself in this changing environment; which innovative company’s
product will go from emerging technology to mainstream; and
when will Apple’s growth disappoint.
While we find the valuation and growth of the sector attractive,
we think it is preferable to invest in a diversified technology
sector ETF rather than picking the winners and avoiding the losers
in such a dynamic sector where the cost of failure can be so high.

4. Dublin
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T +353 1 667 0400
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T +353 21 427 9266
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T +353 66 710 2752
www.goodbody.ie Wealth Management | Corporate Finance | Capital Markets
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Prepared by
Bernard Swords, Chief Investment Officer (does not hold a position in any of the listed stocks)
Brian Flavin, Senior Research Analyst (does not hold a position in any of the listed stocks)
Jude O’Reilly, Senior Research Analyst (does not hold a position in any of the listed stocks)
Produced on 2 June 2015
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