28 February 20
What a week…markets cave in ~10%
28 February 20
What a week…markets cave in ~10%
28 February 20
Are Australian China facing stocks representing decent risk / reward? (BHP, QUB, A2M, TWE, SGR)
27 February 20
Costa Group shows promise in a weak market (CGC, A2M, Z1P, JHG)
27 February 20
What to buy & avoid as coronavirus fear intensify (AAPL US, FMG, BLD)
26 February 20
Feels like a long 3 days…! (RIO, HLS)
26 February 20
Income Report: IVE Group (IGL) – cut or accumulate?
26 February 20
Overseas Wednesday – International Equities & Global Macro ETF Note (GDX, SIQ, MSFT US)
25 February 20
Stocks down but not out (APX, TWE) + International Alerts **BABA US, MFST US, MC FP, UBS US, SH US, GOLD US, IEM, TBF US, DBA US, GDX US**
25 February 20
Equities panic on cue, time for opportunities (EVN, GDX US, SIQ, TBF US)
24 February 20
ASX hit on virus, drops below 7000 (RWC, GEM, NHF)
Happy Valentine’s Day all and especially my beautiful bride…16th valentine’s day together, and unfortunately it hasn’t been one of my strong points!
The ASX200 tested its all-time high yesterday morning before falling victim to increased concerns around the coronavirus, the death toll has moved towards 1,400 and over 60,000 people are now confirmed as infected, a change in the methodology for quoting case numbers is to blame for some of it, although the sceptic in me never thought China was playing the outbreak’s statistics with a “straight bat”. In any case, the market has become toppy from a risk / reward perspective, we see the potential for Round 2 of panic selling because of the virus risk hanging over stocks, however if that plays out, it’s important to remember that interest rate policy and liquidity is the key driver in this market, and weakness can be bought.
Reporting schedule available here: CLICK HERE
I give a quick update here along with highlights from this week’s local company reporting. Video lasts ~8mins – CLICK HERE
Overall there remains little change to the MM view, we believe that 2020 will continue to be a choppy year for stocks, in hindsight our ideal target for the ASX200 of fresh all-time highs up towards 7200 may prove to have been too optimistic, its why we started selling on Wednesday and Thursday i.e. technical analysis can be very useful but as we often say investors should always remain flexible and scaling in / out of positions is often the best approach. From an index perspective we’re buyers around 6900 and sellers ~7200 but that’s a small part of the story, we also need to consider what stocks / sectors to buy.
MM has increased our cash holding to 12%, we may do a little more if a suitable opportunity arises.
Overnight US stocks recovered stoically from initial sharp losses with the S&P500’s futures recovering from a 1% spike down while most of us slept, although US stocks did eventually settle down 0.20%, the SPI futures are pointing to a flat open locally.
Today we’ve looked for stocks MM will consider buying if we get another wave of selling around the coronavirus / potential impacts on Chinese growth.
US equities fell early on the worsening coronavirus data but as has so often been the case over recent years they proceeded to recover from the lows solidly to re-test fresh all-time highs, before eventually closing marginally lower.
While MM has switched to a neutral stance for US stocks at current levels, we must stress zero sell signals have been generated.
MM is now neutral US stocks as they approach the 3400 area.
US S&P500 Index Chart
At the start of February, we wrote an AM Report titled: The Real Estate Sector looks to have a little more juice in the tank. Yesterday the sectors largest player Goodman Group (GMG) delivered for investors with its half yearly results increasing operating profit by over 14% to ~$530m which translated to an upgrade in FY2020 earnings estimates – a great example of a quality company repeatedly delivering. In our previous note when GMG was at $15.30, we wrote:
“From a technical perspective we still anticipate another ~5% upside in the stock but it’s not cheap with an Est P/E for 2020 of almost 27x while its yield is now under 2%, however the trend of recent years of chasing the quality end of town without too much concern towards price / valuation feels unlikely to change overnight. MM is short-term bullish GMG.”
GMG has performed admirably over recent years but if we just applied technicals to make our investment decisions we would now be neutral / negative, or long with stops below $15.70 – of course at MM we regard technical analysis as a useful addition to support our fundamental analysis.
Goodman Group (GMG) Chart
The worst performing stock in the ASX200 yesterday was Treasury Wines (TWE) which fell another -5.7% taking its drop from 2019 highs to over 40%, this is one China facing stock which totally ignored the recovery in equities over the last few weeks demonstrating the opposite characteristics to those MM is searching for in today’s report.
Global wine supply remains high, which is clearly a positive for consumers!! there is pricing pressure in TWE’s key segments, grape prices in Australia are going up and China will take some time to bounce back, and in any case European supplies into that market are also increasing. Too many headwinds.
MM still has no interest in TWE.
Treasury Wines (TWE) Chart
What to buy if we get another wave of coronavirus selling
Hong Kong’s Hang Seng Index has been a great barometer for the panic levels through China and Asia around the coronavirus i.e. initially it fell over 10% but to-date it has recovered around half of these losses. This price movement illustrates the common idiosyncratic movements of equities as they panic first and ask questions later, I feel the virus is probably as bad as many feared yet the index has regained over half of its losses – a classic example of how opportunities can be delivered to investors by news.
Our opinion is stocks will maintain their upward bias, albeit in an increasingly choppy / volatile manner until the belief resonates through investors that bond yields / interest rates are poised to increase.
Hang Seng Index Chart
Australian stocks fell a third of the Hang Seng which makes sense considering our relative distance/ influence from China, but some stocks / sectors have fared far worse. Now MM has increased our cash levels back towards their norm we have a degree of flexibility to buy stocks into weakness if this does unfold. We are looking for situations where a stock has been rallying for the correct fundamental / valuation reasons but the news flow (not stock specific) has created a correction in the stock, a great example being Tencent (700 HK) which MM holds in our International Portfolio.
MM remains bullish Tencent (700 HK).
Tencent (700 HK) Chart
The Australian Dollar has fallen ~5% since the coronavirus outbreak started rattling markets, a very comprehendible decline considering China’s our largest trading partner and its almost lockdown in certain cities has led to a significant correction in commodities that are the backbone of the local economy. Currencies and bonds are regarded by many as “smarter” than equities, primarily because of their relative depth / size when compared to equities hence we feel the $A might give us a heads up when professionals believe the worst is behind us from the virus.
The Australian Dollar ($A) Chart
This morning I have looked at 3 Australian stocks MM is considering buying / adding to if stocks do correct over the coming weeks – no really new names here but these periods of volatility should be around focus and planning.
1 a2 Milk (A2M) $15.20
Milk and protein business A2M have over 80% of its business China facing which we believe is a positive medium term as produce from our fair shores look set to increase in regard to quality following the coronavirus outbreak. On an operational front we like the way the business has refocused on margins while it grows and while the stocks priced for some growth, we feel that’s warranted considering its track record and market positioning.
MM is bullish A2M, ideally a touch lower.
a2 Milk (A2M) Chart
2 Sims Ltd (SGM) $10.74
Metal recycling business SGM has been recovering since its awful 2018 / 9 and last week’s China inspired spike lower lasted just a few hours, an excellent sign for the bullish and long, like ourselves! We like the capital management program SGM commenced last year which should help the share price and following last Octobers profit warning courtesy of falling scrap metal prices we feel the broom has run its course through the business – we may increase our holding in SGM.
MM remains bullish SGM initially looking for 15-20% upside.
Sims Ltd (SGM) Chart
3 Fortescue Metals (FMG) $11.04
Twiggy Forest’s iron ore success story FMG has already corrected over 18% since coronavirus started dominating the press but on balance we feel a further washout is a possibility, although obviously their half-year results in 5-days’ time are likely to have a significant impact on the company’s share price. This cash cow is likely to continue to pay a very attractive dividend as long as Iron Ore prices stay firm, not surprisingly this remains on the radar of both our Platinum and Income Portfolio’s.
MM is bullish FMG with an ideal buy area around $10.
Fortescue Metals (FMG) Chart
MM likes A2M, SGM, and FMG at current levels and even more so into weakness.
Overnight Market Matters Wrap
· Wall St shook off an early selloff, prompted by an upward revision by China of the numbers infected by the coronavirus, to close only marginally lower. The reassessment of the numbers saw the infected tally jump by around 15,000 to over 60,000 and the death rate likewise soar by 254 to 1367.
· The Dow was down over 200 pts and the Nasdaq -0.8% in early trading but recovered throughout the day with the S&P 500 and Nasdaq hitting fresh highs, but all three indices lost ground in late trading to close in the red, with the Dow -0.4%. The World Health Organisation said that the virus was largely contained within China.
· US quarterly earnings reports were mixed overnight, with Cisco dropping 5% after reporting another revenue decline, while Pepsi, Alibaba and Applied Materials all beat expectations, which saw Applied rally 3% to hit record highs.
· Commodities also had another firmer night led by the oil price, with Brent back above US$56/bbl, iron ore above US$88.50/tonne and copper at US2.61/lb as investors tried to look through the near-term economic impact of the virus. The local futures are flat while the A$ is trading around US67.2c.
Have a great day!
James & the Market Matters Team
Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.
All figures contained from sources believed to be accurate. All prices stated are based on the last close price at the time of writing unless otherwise noted. Market Matters does not make any representation of warranty as to the accuracy of the figures or prices and disclaims any liability resulting from any inaccuracy.
Reports and other documents published on this website and email (‘Reports’) are authored by Market Matters and the reports represent the views of Market Matters. The Market Matters Report is based on technical analysis of companies, commodities and the market in general. Technical analysis focuses on interpreting charts and other data to determine what the market sentiment about a particular financial product is or will be. Unlike fundamental analysis, it does not involve a detailed review of the company’s financial position.
The Reports contain general, as opposed to personal, advice. That means they are prepared for multiple distributions without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of a financial advisor. Market Matters or its author(s) accepts no responsibility for any losses or damages resulting from decisions made from or because of information within this publication. Investing and trading in financial products are always risky, so you should do your own research before buying or selling a financial product.
The Reports are published by Market Matters in good faith based on the facts known to it at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. Although the Reports are based on information obtained from sources believed to be reliable, Market Matters does not make any representation or warranty that they are accurate, complete or up to date and Market Matters accepts no obligation to correct or update the information or opinions in the Reports. Market Matters may publish content sourced from external content providers.
If you rely on a Report, you do so at your own risk. Past performance is not an indication of future performance. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Market Matters disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence.
Financial Services Guide
Date prepared: Wednesday, 22 November 2017
Last update: Friday, 25th October 2019
About this Financial Services Guide (FSG)
This FSG provides you with key information about a range of subscription services offered by:
Marketmatters Pty Ltd (Market Matters) Australian Financial Services Licence No. 488798 ABN (20 137 462 536)
Level 29, Chifley Tower, 2 Chifley Square Sydney 2000
T: 1300 301 868
E: [email protected]
In this FSG, “we”, us” and “our” refer to Market Matters.
Market Matters holds Australian Financial Services Licence No. 488798 (AFSL) and is responsible for any financial services that we provide to you.
This AFSL was issued on 8th September 2016.
The purpose of this FSG is to provide you with information about:
Market Matters operates a website, www.marketmatters.com.au (Website), where customers may, for the payment of a subscription fee, access certain financial information and general advice. In particular, the Website provides:
This FSG relates only to the Website Services.
What financial services we can offer in connection with the Website Services
As holder of AFSL number 488798, in connection with the Website Services we are authorised to provide general financial product advice to both retail and wholesale clients in relation to the following financial products:
The Website Services are comprised of general advice only. That is, none of the advice given on the Website or by provision of the Website Services takes into account any of your objectives, financial situation or needs (Your Personal Circumstances). Before acting on any of the information, advice or Website Services, you must consider the appropriateness of this information in light of Your Personal Circumstances and, if necessary, consult a financial adviser before making any investment decision.
If you are seeking to acquire a specific financial product or security, you should obtain a copy of and consider the Product Disclosure Statement or Prospectus for that product before making any investment decision.
The Website does not provide a trading platform or access to a trading platform. There is no ability to purchase or sell financial products through the Website.
How do I access these services?
You can access these services by going to www.marketmatters.com.au and following the prompts and steps required to sign up for membership. Please read all terms and conditions carefully.
Fees and benefits payable to us and our associates
The Website is a subscription-based service. A yearly fixed subscription fee is payable to Market Matters when you subscribe to the Website which will vary depending on the type of subscription for which you subscribe. At the date of this FSG, the yearly subscription fees are as follows:
Platinum: $1,238 for 12 months
Platinum: $1,993 for 24 months
Subscription fees vary from time to time and are provided on the Website.
The Website does not currently feature third party advertising. Market Matters reserve the right to advertise at a future time for which they may receive remuneration. Any such advertising will be independent of any other content on the Website.
All representatives of Market Matters (Market Matters Staff) receive a salary paid by Market Matters. Market Matters Staff may also receive performance-based bonuses which are based on profitability, the number of subscribers and subscription renewal rates.
Where we refer you to a third party financial services provider, we may receive a referral payment. This referral payment may be a percentage of the fee’s charged by the financial services provider between 0% and 25%, or a fixed amount. These referral payments are made by the financial services provider to Market Matters and are not an additional cost to you.
How do we manage potential conflicts of interest?
Market Matters have implemented policies and procedures to mitigate the risk of conflicts of interest. These include:
Market Matters Staff and Contributors are encouraged to express independent views and opinions on the topics they write about. This is established through ongoing training, external audits and our conflict of interest and staff trading policies. Market Matters Staff are required to serve the best interests of the subscribers, without consideration of any commercial or personal interests.
How is my personal information dealt with?
If you have a complaint about our services, you should take the following steps:
Contact us and discuss the complaint directly. If you do not feel comfortable discussing the complaint with us or your complaint is not satisfactorily resolved within 2 business days, please telephone Market Matters, on 1300 301 868 and ask to speak with the Complaints Officer. We suggest you put your complaint in writing at this time so that the issues are fully documented and understood by the parties. Your complaint should be addressed to:
The Complaints Officer
Level 29, Chifley Tower,
2 Chifley Square Sydney NSW 2000
Market Matters will review your complaint within 45 days and attempt resolution. If you are still not satisfied with the outcome, you may take your complaint to an external dispute resolution scheme. Market Matters is a member of the scheme operated by the Financial Ombudsman Service. You should write to:Australian Financial Complaints Authority Limited (AFCA)
You may also wish to consult ASIC in relation to your complaint. ASIC’s website contains information on complaining about companies and people and describes the types of complaints handled by ASIC. You can contact ASIC on its free call infoline:
Tel: 1300 300 630 or email [email protected]
We maintain professional indemnity insurance to cover our employees and Authorised Representatives (including us) for the financial services they provide, having regard to the following:
If you require further information about these compensation arrangements please contact us.
Terms and Conditions
This website, www.marketmatters.com.au, is published by Marketmatters Pty Limited (ABN 20 137 462 536) ('Market Matters', 'MM', 'us', 'we', 'our') Australian Financial Services Licence 488798
Financial Services Guide
Market Matters Financial Services Guide (FSG) is located here, and contains important information about the financial services provided by Market Matters. You must read our FSG and consider it in the context of your Personal Circumstances before acting on any advice. By accepting the terms and conditions you are acknowledging that you have read the FSG.
Provision of the Reports
Reports and other documents published on the Market Matter’s website (‘Reports’) are authored by Market Matters. The Reports represent the views of Market Matters based on technical analysis of companies, commodities and the market in general. Technical analysis focuses on interpreting charts and other data to determine what the market sentiment about a particular financial product is, or will be. Unlike fundamental analysis, it does not involve a detailed review of the company’s financial position.
The Reports contain general, as opposed to personal advice. That means they are prepared for multiple distribution without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of a financial advisor.
The Reports are published by Market Matters in good faith based on the facts known to it at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. Although the Reports are based on information obtained from sources believed to be reliable, Market Matters does not make any representation or warranty that they are accurate, complete or up to date and Market Matters accepts no obligation to correct or update the information or opinions in the Reports.
If you rely on a Report, you do so at your own risk. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Market Matters disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence.
Past performance is not a reliable indicator of future results. Brokerage costs have not been included in the calculation of performance. As financial products rise and fall in value, returns may be negative. Performance figures are not intended to be a forecast. Market Matters does not guarantee the performance of or returns on any investment.
Employees and/or associates of Market Matters may hold one or more of the stocks reviewed on this website.
Subscriptions and Subscription Prices
To access premium content available on the Market Matters website you may initially subscribe through the complimentary trial which provides you full access to all services for the trial period. You are limited to two trials after which you must subscribe to one or more membership categories available on the website or direct with Market Matters before you can trial the service again, three months after the expiry of your second trial.
To subscribe to Market Matters services and access to the website you may go to the Memberships page of the website, provide the information marked as ‘Mandatory’ and select the payment option for the price quoted (at the time of your transaction) or contact the team directly at Market Matters by phone or email. You will then receive a verification email from Market Matters indicating that your subscription and payment have been accepted and you will be able to access the premium content.
Prices published on the Market Matters website are quoted in Australian Dollars (AUD) and are inclusive of GST and/or all other duties and taxes. Market Matters has used reasonable endeavours to ensure that prices for subscription to its services are published accurately on the website but these prices are subject to change and Market Matters reserves the right to change these prices and will notify you of any increase by email (with the price increase to apply from the time the next payment is due).
Marketmatters Pty Ltd (ABN 20 137 462 536) will issue a tax invoice to paying subscribers in relation to any supply that is subject to GST in accordance with A New Tax System (Goods and Services Tax) Act 1999.
Any member is entitled to cancel their membership at any time. In the event a member does wish to cancel their subscription, cancellations must be notified in writing to:
Level 29, Chifley Tower, 2 Chifley Square, Sydney NSW 2000
or by email to: [email protected]
All cancellations of month-by-month subscriptions will be cancelled and not billed again the following month.
All cancellations within 14 days we be entitled to a full refund. Any introductory gifts, such as, but not limited to; iPads, Fitbit watches, Apple watches, Google Homes, must be returned in their original condition before a refund will be made.
All cancellations made after 14 days of subscription commencement will not be entitled to a refund unless in the event of extenuating circumstances, at the sole discretion of Market Matters.
Subscriptions will automatically renew on the expiry date of current subscription. In these instances the subscription will be renewed at the current rate published on the Market Matters web site, using the same credit card that paid for the initial subscription, unless otherwise requested by the subscriber. A subscriber who wishes to cancel after being renewed in this way will have a “14 day cooling off period” in which they can request to discontinue and will receive a full refund for the renewal payment, this can be done in writing to:
Level 29, Chifley Tower, 2 Chifley Square Sydney 2000
or by email to: [email protected]
Market Matters has not reviewed any of the websites which link to this website or to which this website links. Market Matters is not responsible for the content of any other website or pages linked to or linking to its website. Following links to any other websites or pages shall be at the user’s own risk.
Copyright © 2018 Marketmatters Pty Ltd (ABN 20 137 462 536). No part of this website, or its content, may be reproduced in any form without the prior consent of Market Matters.
This Agreement is governed by and is to be construed in accordance with the laws of New South Wales, Australia. You agree to the non-exclusive jurisdiction of the courts of New South Wales, Australia in respect of any proceedings concerning this Agreement. This website is not available to US and/or EU persons and by accepting these terms you confirm that you are not a US and/or EU person.