Morning Report / Happy days, a great Suncorp result & a new Chart Pack! (MFG, CWN, SUN, AGL, BAL)

By Market Matters 10 August 18

Happy days, a great Suncorp result & a new Chart Pack! (MFG, CWN, SUN, AGL, BAL)

Market Matters Morning Report 10th August 2018

Firstly, we’ve taken one small step towards a number of planned upgrades to the MM service today which will ultimately culminate in a complete new online experience for subscribers. We listened to the recent subscriber survey and action has commenced in earnest on an array of improvements to enhance the clarity of our views and the timeliness of how they are communicated to you.

Today’s update centres on the Chart Pack with the following amendments included;

1.       We have added a search function on the RHS – “All Charts”.

2.       Charts will be updated intra-week as stocks, sectors and markets experience meaningful moves

3.       The structure is no longer rigid so the stocks & markets covered will regularly change

4.       We have simplified the layout

Turning to the market, yesterday the ASX200 rallied strongly gaining almost +0.5% after struggling for the first hour of the day, the main gains were in the banks, financials and insurance sectors while the utilities sector was the main drag closing down -1.1%. We’ve been looking for the ASX200 to pop above 6300 before potentially failing and the first part of the puzzle dropped into place yesterday with the market reaching 6313, however importantly there are no major sell triggers being offered just yet.

Remember while we are looking for a decent pullback in 2018/9 jumping on the train too early can often be a painful experience i.e. patience is an important quality for the investor.

  • We are neutral the ASX200 while the index holds above 6140 but we remain in “sell mode” albeit in a patient manner.

Overseas markets were again quiet and for a second day they failed to hold onto early gains, the upside is diminishing as we approach the all-time high but no sell signals are yet in place. Interestingly enough, US quarterly  reporting has been the best in history relative to market expectations with ~82% of companies beating the street, yet it’s clear that US stocks are edging higher in a fairly uninspiring way.   

Today’s report is going to look at 5 stocks that caught our eye yesterday as we continue to look for opportunities;

ASX200 Chart

 

Winners

1 Magellan Financial (MFG) $27.60

MFG rallied over 14% yesterday following its full year results with 2 main drivers:

·         MFG beat consensus for the year while also unveiling a larger than expected dividend as the company increased its payout ratio from 75-80% to 95%.

We like MFG’s numbers but investors should remember its likely to be in the firing line if / when a market correction does unfold - which CEO Hamish Douglass believes is a strong possibility.

·         Technically / fundamentally we like MFG but the current risk / reward is not exciting.

Magellan Financial (MFG) Chart

 

2 Crown Resorts (CWN) $14.21

Casino operator CWN shares rallied 6.7% yesterday after its full year results. The results were solid but we believe the main contributor to the rally was the announced $400m on market buyback of its own shares.

We continue to believe CWN is an excellent vehicle to get exposure to the growing tourism sector as the growing Chinese middle class continue to travel.

·         We like CWN  and will consider the stock back towards $14 – less than 2% lower.

Crown Resorts (CWN) Chart

3 Suncorp (SUN) $15.70

SUN rallied 4.7% yesterday following their strong full-year numbers including a special dividend of 8c hence investors will receive a 48c fully franked dividend on the 15th.

I covered the result in more detail yesterday afternoon; Click Here while I also published an AUDIO version of our views on the result – Click Here

We took an almost 40% profit on a small part of our holding in SUN yesterday, following our long-term plan and we intend to monitor the balance at this stage.

·         MM likes its reduced 8% exposure to SUN.

Suncorp (SUN) Chart

 

Losers

1 AGL Energy (AGL) $21.11

The AGL share price tumbled over 4% yesterday following a better than expected result and a larger dividend! The market is looking to FY19 as opposed to today’s numbers and the outlook is poor.

Simply a power utility play as global bond yields rise is not an exciting investment theme, particularly when power prices are such a political pancake at the moment.

·         MM remain bearish AGL with a target well under $20.

AGL Energy Ltd (AGL) Chart

 

2 Bellamy’s (BAL) $9.78

BAL has more than halved from its highs of the year which keeps us mindful of our position in A2 Milk i.e. a number of high growth / valuation stocks have struggled at times in 2018.

Recently Goldman Sachs have done the damage downgrading their forecast for earnings primarily on fears around regulatory delays in China.

·         We are neutral BAL at present but it’s certainly a volatile stock, ideal for the traders.

Bellamy’s (BAL) Chart

 

Conclusion (s)

MM basically agrees with the market yesterday liking the 3 stocks which rallied – MFG, CWN and SUN while being negative on AGL and neutral on BAL.

Overseas Indices

No change, the S&P500 still looks destined to make fresh all-time highs in the next few weeks, this has been our preferred scenario for months with the big question “will it fail around 2900?”.

·         MM intends to increase our BBUS short US ETF position into further strength.

European indices continue to trade sideways in a relatively similar manner to the ASX200.

US S&P500 Chart

UK FTSE Chart

Overnight Market Matters Wrap 

·         The SPI is up 10 points despite small losses on the DJIA and S&P 500 which closed down 0.3% and 0.1% respectively. The NASDAQ was flat.

·         US reporting season continued its positive tone, while renewed trade tensions with China kept a lid on any exuberance. The US has also sanctioned Russia over their use of a nerve agent in the UK.

·         Chicago Fed President Charles Evans said the Fed may need to move rates to somewhat restrictive levels in the next few years to offset the effects of stimulus in the system. Overnight, US PPI came in lower than expected and the 10 year bond rate now sits at 2.93%

·         On the LME, copper was higher, while nickel and aluminium dipped. Iron ore was flat, and oil fell 0.4%.

Have a great day!

James & the Market Matters Team

Disclosure

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.

Disclaimer

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 10/08/2018

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