18 September 19
Gold & IT stocks best on ground, Energy stocks weigh (CNI, CMA, QAN)
18 September 19
Gold & IT stocks best on ground, Energy stocks weigh (CNI, CMA, QAN)
18 September 19
Income Report: Stepping up and fading the recent move in bond yields – includes portfolio buy-sell alerts (SKI, TCL, FLT, WHC, EHE)
18 September 19
Overseas Wednesday – International Equities & ETF Portfolios (GDX US, NCM, BABA US, TTD US, PSH NA, BAC US, RY CN)
17 September 19
RBA still banging the lower for longer call on rates
17 September 19
Bond yields firm, oil surges should we “run” from growth to cyclicals? (RHC, NCM, BSL, WPL)
16 September 19
Crude spikes, Bellamy’s bid while Sims scraps guidance (BAL, SGM, BHP)
16 September 19
Subscribers questions (BHP, OZL, IIND, MSB, MGG, NCM, ASL, AWC, WSA, HLS)
15 September 19
Market Matters Weekend Report Sunday 15th September 2019
13 September 19
Tech continues to struggle
13 September 19
Does the Healthcare sector look poised to repeat 2018? (CSL, COH, RMD, ANN, PME)
The ASX200 had a disappointing start to the week finally closing down -0.35% after only managing a few minutes in the green just after lunch. The relatively weak performance was amplified by local stocks ignoring a positive lead from both Asian indices and by US futures. However we actually outperformed that runaway train NZ equities which fell -0.6%, perhaps a little “profit taking” simply hit our little region. On the sector level the Energy and Resources groups dragged the chain assuming we ignore the 24% plunge by Vocus (VOC) and subsequent fall by the Telco sector.
Under the hood less than a 1/3 of the ASX200 closed up for the session which confirms the “look & feel” of the day which actually felt worse than the final points finish. When we see stocks like Emeco Holdings (EHL) and Nanosonics gain over 10% on average while Pilbara Minerals (PLS) and Afterpay (APT) fell an average of 8% its hard for sceptics not to agree with MM’s active approach looking to be in the correct stocks and sectors, as opposed to simply “buying the market” – all we have to do is get it right!
Iron ore is also feeling a little tired at present which should come as no surprise to investors after its tremendous rally in 2019, its only corrected ~5% over the last 3-days but with BHP, RIO and Fortescue (FMG) such large influences on the ASX200 it does create a slight headwind. We reiterate that we like the stocks but are considering taking some money from our BHP position into ongoing strength – the iron ore party like most periods of exuberance won’t go on indefinitely.
MM is neutral to bullish the ASX200 following its test of the 6600-area but we remain bullish global equities for now.
Overnight US stocks were quiet with the Dow closing up just 22-points while the SPI futures are calling the ASX200 to open up around 10-points, back at the level before what appeared to a late portfolio selldown into yesterdays close.
In today’s report we have revisited the struggling fund manager space which has endured some horrible moves over the last 3-months like Challenger (CGF) -18.2% and Pendal Group (PDL) -19.1%.
Yesterday saw AGL Energy (AGL) walk away from a deal that we thought might actually go ahead but our perceived risk / reward around the deal fortunately didn’t warrant a position. Following 2 suitors walking away from their respective bids early on in their due diligence periods it’s hard not to become wary of potential skeletons in the closet.
MM has placed VOC in the too hard basket.
Vocus Communications (VOC) Chart
In Mondays questions a few subscribers were interested in our “dogs” Bingo (BIN) and Emeco (EHL) and after yesterday’s performance they are again worth a mention just in case anybody missed Harrys coverage in Monday’s pm report:
1 Emeco Holdings (EHL) up +12.5% to $1.98 – Paradice Investment increased their holding by 5m shares, a popular manager like David Paradice can have that effect on a stock and we see another 10% upside before we will re-evaluate but it “feels right” for now.
2 Bingo Industries (BIN) up +1.9% to $2.15 – It may take some effort to punch through the $2.20-30 area but a $75m buyback that’s only 10% complete should at least underpin the stock.
MM remains bullish both EHL and BIN.
Emeco Holdings (EHL) Chart
Bingo (BIN) Chart
Are the fund managers showing value as the ASX200 tests fresh decade highs?
There are times when a chart from a technical analysis perspective looks so good that we sit up and take notice and the Financials Index is currently a great example targeting another 15-20% upside. However its important to understand this index also includes our banks and insurers so its far from perfect as an indicator for the embattled fund managers but at least it’s encouraging.
Over the last 3-months while the ASX200 has rallied to fresh decade highs we’ve seen the fund mangers continue to fall under a number of headwinds from declining funds under mgt. (FUM) to regulatory issues, the question is are they ready to bounce just like the banks in 2019. In most cases their valuations are pushing high levels of pessimism but its been like that for a while so a catalyst may be needed to reignite the sector, it could be simply the very same fund managers sitting on cash looking for a home that’s not too expensive.
Today we have looked at 5 stocks starting with the star performer Magellan (MFG) and finishing with the perennial “dog” AMP Ltd (AMP). We have left out Janus (JHG) and Platinum (PTM) from the motley group simply because we have touched on them in recent weeks.,
ASX200 Financials Index Chart
1 Magellan (MFG) $48.37
MFG is a wonderful success story not just of the sector but also the whole market, Hamish Douglass has kicked more than a few goals with this international equities group – in May alone the business enjoyed inflows above $260m.
The business benefits from a weak $A and when combined with the stellar track record it has taken the business to the next level in 2019, the companies P/E for 2019 of 25.5x is relatively rich for the sector but deserved at this point in time - its yield of 3.4% part franked, like much of our market, is way above term deposits. However following the markets re-rating of the business its share price in our opinion will now be largely dictated by the performance of global equity markets i.e. a higher market = greater FUM and hence larger fees.
The stocks been the clear go to in the sector this year as investors have remained understandably scarred to take on the other cheaper but higher risk members of the group. This has pushed its PE to 23.8x forward, just a shade below its all-time P/E high of 24.1x and 5 year average or 18.7x . Hence while we like the stock our perceived risk / reward buy level is in the low $40 region. Priced off its average 5 year P/E, MFG is worth ~$38.
MM likes MFG but around 10% lower.
Magellan (MFG) Chart
2 Challenger (CGF) $6.33
The elastic band of pessimism is stretching for CGF which has been smashed this month following a guidance revision to the downside with normalized net profit to now be $545m to $565m – the markets over 20% drubbing of the stocks is now building in a fairly tough few years ahead. The downgrade related in part to poor investment returns across the business. The Funds Management chief was recently “moved on” always an ominous sign plus the shift to selling more annuity products has created a longer term earnings model, it has also forced Challenger to change its investment mix, moving down the risk curve in more conservative but less lucrative investments.
Not a place we want to be at the moment, and it won’t be helped by lower interest rates and higher costs within the business. This is business very leveraged to external factors and those external factors have been a headwind in recent times. I still remember when CGF traded below $1 during the GFC!
Looking longer term though, and if we do see any further panic lows this may create some opportunity, after all the business does enjoy an ageing population tailwind. The stocks currently trading on a Est P/E of 11.8x for 2019 while yielding over 5% fully franked. CGF shares have more than halved over the last 18-months and it’s now clearly a candidate for “tax loss” selling, we see value emerging around 5% lower if its gets clobbered into EOFY.
We may get interested in the coming weeks below $6.
Challenger (CGF) Chart
3 Perpetual Ltd (PPT) $40.98
PPT has actually enjoyed a revival of such in 2019, albeit from a low base but it does illustrate how the stocks in the sector can perform when they kick a few goals. The ASX orientated fund manager actually suffered $1.9m of outflows in Q1 of 2019 with the stocks reaction implying very limited good news is built into the company’s share price; it’s a simple game deliver poor returns and money looks for a different home.
The company obviously enjoys the tailwind of a growing Australian Super pool of money, it just needs to demonstrate it’s a good home for these funds. The stocks currently trading on an average P/E of 15.8x while it yields an attractive ~6.5% fully franked, undoubtedly a factor in the stocks resilience in 2019. Currently its trades on an average valuation, with an above average yield. Better fund performance and PPT could trade in the high $40’s
MM holds PPT in our Income Portfolio and remain comfortable to do so.
Perpetual LTD (PPT) Chart
4 Pendal Group (PDL) $7.20
The Pendal Group was smacked in May following a disappointing interim result which showed a net profit of almost $85m, down over 25% on the same time last year. The blame was laid at the door of lower performance fees which crashed over 90%, they obviously struggled in a volatile market.
The stock is cheap trading on an Est P/E for 2019 of 13.7x while yielding almost 7% part franked, particularly compared to its historical average around 17x, however its weak performance is justifying the discount. We’ve seen with the likes of Janus (JHG) which trades on just 8.5x that fund managers that struggle with performance can sustained low multiples for extended periods.
MM is neutral PDL at present.
Pendal Group (PDL) Chart
5 AMP Ltd (AMP) $2.09
What more needs to be said about AMP, if they could get it wrong they have! While the stock is cheap on an Est P/E of 10.4x while yielding 6.7% part franked, the predictability of what earnings look like in the next 12 months is low. For example, consensus profit for FY19 sits at ~$553m across 12 analysts, however the range between analysts it huge $341m to $831m at the profit line implying a lack of clarity.
Avoiding AMP has been a huge plus for MM over the years so I’m reticent to buy today but a little lower and the risk / reward will start to become interesting. Next big lick of poor news could present the opportunity.
MM thinks AMP is close to a buy as an aggressive play.
AMP Ltd (AMP) Chart
Of the 5 stocks we looked at today none jumped out at us with CGF and AMP looking interesting if they experience aggressive EOFY selling.
At todays prices PPT is our favourite and we remain long in our Income Portfolio.
The main conclusion to MM is while the Financial Sector looks strong it doesn’t yet feel the fund managers will be a major contributor to the strength.
Again nothing new with our preferred scenario - the recent pullback was a buying opportunity although we are initially only looking for a test of / slight new 2019 highs from US indices.
The current dovish stance by the Fed has helped the S&P500 get within 2% of its all-time high, perhaps some positive news from this week’s G20 meeting between on trade between the US & China will create the market optimism for a test of the large psychological 3000 area.
US S&P500 Index Chart
No change again with European indices, we remain cautious European stocks but the tone has improved recently and fresh highs in 2019 look a strong possibility.
German DAX Chart
Overnight Market Matters Wrap
· The US equities started the week marginally stronger, led by the tech. heavy, Nasdaq 100 as investors regain their focus on the Fed interest rate decision this Thursday, with most expecting June to be unchanged, however they seek to read in for any signal of a cut in the near future.
· Crude oil continued its descent, off 1.10% to US$51.93/bbl. as Saudi Arabia conveyed concerns that OPEC and its allies will agree to extend production cuts into the second half of the year.
· Tonight in the UK there will be a second ballot on the leadership contest to select who will succeed as the leader of the country’s ruling party.
· BHP is expected to underperform the broader market after ending its US session down 0.37% from Australia’s previous close.
· The June SPI Futures is indicating the ASX 200 to open marginally higher this morning, towards the 6540 level.
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. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 18/06/2019
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 MarketMatters 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, 23rd April 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.
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.