Afternoon Report / ASX hits 6500, ‘old school’ energy & financials lead the way, Crown cans junkits (CWN, REA)

WHAT MATTERED TODAY

The ASX 200 has now traded up the 6500 level and my ‘gut feel’ is we’ll see at least some consolidation around this range similar to how the ASX pinged itself back to the 6000 level when it was trading in the  5700/6250 trading range between June & early November. While we remain bullish stocks into the end of 2020 /early 2021 with the view that we’ve entered a new trading range, things are looking tired in the short term. About half the market was up today / half down however it continues to be the recovery trade that performs best at the expense of the previously hot names, Whitehaven (WHC) +8% v Afterpay (APT) -6% a clear example of that thematic, while  beaten up Ive Group (IGL) also caught some attention today up by ~15%, taking it’s gain in the last 4 sessions to 44%.

Banks were strong, ANZ the best of them up by 2.45% while there was also decent buying in Energy (BPT + 7.44%) and Mining Services (MND +5.47%) which suits MM’s current positioning across our growth portfolio which is skewed towards those areas. Gold stocks were a clear drag on the session today.  

Asian markets were mixed, Japan & Hong Kong edged higher, China pulled back a touch while US Futures were trading lower for much of the day. 

The ASX 200 finished up +14pts / +0.21% to close at 6498. Dow Futures are trading down -88pts/-0.29%

ASX 200 Chart

ASX 200 Chart – Market short term overbought

CATCHING MY EYE

Crown (CWN) +1.89%: A stock that’s been in MM’s sights for a while now, today we pressed the button and switched from Star (SGR) to Crown (CWN). CWN had been relatively weak for a few months thanks to an ongoing enquiry that cast some large grey shadows over their handing of a range of issues from Junkits to select shareholder briefings, all of which provided a near term headwind for the stock.  We’re certainly not downplaying the enquiry, there was some shocking aspects that came out, however share prices have a tendency to selloff into and during an event like this, before rallying out of it, the old saying of sell on rumour, buy on fact springs to mind. In MM’s view the performance differential was simply too much to ignore and we made the switch today, locking in profit from SGR and buying CWN.

Crown Resorts (CWN)

REA Group (REA) -0.54%: traded higher for most of the session though the market release at today’s AGM sent the stock into a spin. The market seemed hyped up for some positive comments today given the strong results the company posted at the 1st quarter update a little more than a week ago. At that stage EBITDA was tracking 8% better than 1Q20 highlighting the swift recovery in the property market, though cost cutting was the most significant contributor to the growth. Today’s CEO address was a little more cautious than that at the update. Melbourne volumes had flatlined in recent weeks after the sugar hit it received as the economy reopened and “COVID-19 continues to create market volatility” causing REA to defer any price hikes until at least July 2021. The property set up, much like the set up for equities, remains fairly strong - low rates and a less severe than expected move in unemployment should support asset prices.

REA Group (REA) Chart

BROKER MOVES

·         AGL Energy Cut to Underperform at Macquarie; PT A$11.43

·         Oil Search Cut to Neutral at Macquarie; PT A$3.30

·         Mirvac Group Raised to Outperform at Macquarie; PT A$2.91

·         NAB Cut to Underweight at Morgan Stanley; PT A$20.10

·         Westpac Raised to Overweight at Morgan Stanley; PT A$20.40

·         OceanaGold GDRs Cut to Underperform at Macquarie

·         Evolution Cut to Underperform at Macquarie

·         Newcrest Cut to Underperform at Macquarie

·         ALS Cut to Underweight at JPMorgan; PT A$8.60

·         Adore Beauty Rated New Buy at Shaw and Partners; PT A$8.25

·         PolyNovo Cut to Sell at EL & C Baillieu; PT A$2.45

OUR CALLS

Growth portfolio: We switched from Star (SGR) to Crown (CWN) today

Major Movers Today

Have a great night

James, Harry & the Market Matters Team

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