Glencore rallies but Hollywood declines an option on its epic tale

The office of a Hollywood mogul.
Mogul: Pitch your pitch!
Producer: So I’ve optioned a real-life David v Goliath struggle from London, England, where an Average Joe stock analyst is battling Citi over the fate of mines and trading empire Glencore.
Yes Man: Kinda Bonfire of the Commodities?
Producer: Right. So our guy writes this ballsy report saying Glencore’s debts are too big. So the shares crater, sirens whoop at Citi, Glencore’s bank, and Citi scrambles an elite Swat team of analysts and bankers to neutralise him.
Mogul: Who’s our all-action hero?
Producer: Hunter Hillcoat of Investec.
Mogul: Sounds like some kinda jacket Prince Charles would wear for moose shooting. They got moose in London?
Yes Man: Sure thing, boss.
Mogul: We’ll re-name him Eddie McGurk. He’ll be a tough but principled NYPD cop who quits the force to battle optimistic accounting assumptions. What’s Topcoat like?
Producer: He’s a geologist and rides a push bike.
Mogul: So he plays in a rock band weekends and rides a Harley?
Producer: I’ve got Chris Pratt and Mark Wahlberg on speed dial.
Mogul: But who’s Hepcat’s Machiavellian adversary?
Producer: Maybe Glencore’s boss Ivan Glasenberg? He’s South African.
Mogul: Subtitles are for arthouse, not blockbusters. And an English guy would be a better Machiavellian adversary.
Producer: Benedict Cumberbatch is hot right now. And I’m thinking Denzel Washington for Hillcoat’s tough but caring boss Bernard Kantor…
Mogul: …who tells Hatstand: “Kid, you’re the best we got. But I can’t protect you from the CIA, the mob or Citi’s David Wormsley any more. So scram. But take my pump-action shotgun and discounted cashflow model. You’re gonna need ‘em!”
Yes Man: Surefire box office! But what’s the back story?
Producer: Well, Glencore floated four years ago. There were a gazillion banks on the ticket, including Citi, and hardly any independent research. The investment case depended on commodities staying high and the shares were priced at 6.5 times their level after a dead cat bounce and a company statement Tuesday.
Mogul: Get outta here!
Producer: I’m not kidding.
Mogul: Me neither. Get out! Audiences won’t believe a crazy tale like that. This is a factory of dreams, not an institute for the delusional. We can’t compete with the stock exchange on that.

Spigot of free enterprise

It can be tempting to liven up a report on a stolid company with terrible puns. But it would be putty to trivialise the reaction to plumbers’ merchant Wolseley on Tuesday. Confidence drained away after the FTSE 100 titan warned of tough trading in its North American industrial division, which sells oil and gas kit. That left the shares 12 per cent under water.

Full-year trading profits of £857m met forecasts. But bullishness in a stock that had been trading near record highs was also damped by the UK. The division hardly hit the ballcock out of the park with a like-for-like sales fall of 2.6 per cent in the fourth quarter.

Wolseley’s suite spot is the US, so it is natural a correction should flow from there. The reaction looks overheated though. The bulk of North American industrial trading profits would need to leak away to justify a 10 per cent downgrade in earnings per share.

There is no pressure on the final dividend, which rose 10 per cent. And rather than tapping shareholders for cash, Wolseley is mounting a £300m buyback. The strength of the turnround led by Ian Meakins, chief executive, justifies a premium share price rating of 16 times. Shareholders should solder on.

Sports Circuitous

What should we make of Sports Direct’s purchase of a 19 per cent stake in multi-channel retailer Findel? Is this a bold diversification by sportswear tycoon Mike Ashley into rattan effect furniture and One Direction duvet covers (heavily discounted, since they feature ex-member Zayn)?

Studio, a discount home shopping wing of Findel, sells both products. But it seems like a step too far away from the sneaker industrial complex built by Mr Ashley. Speculation therefore focuses on loss-making Kitbag, a producer and retailer of replica kit boasting tie-ins with the likes of Chelski and Barça. Kitbag can sell you a Wayne Rooney shirt for your favourite son or a Luis Suarez top for that nephew you secretly disike.

But if Mr Ashley wanted to disrupt the sale of company with a valuation of £15m-£20m, why do it by buying shares worth £34m? As always, he is keeping the despised City guessing. The real mystery is how Kitbag fails to make money. You should be printing the stuff by printing famous names on shirts that must cost pennies whoelsale.

jonathan.guthrie@ft.com