Afternoon Report / ASX hits early high, then slides into the close (A2M, MQG, SGP) *Buy NFLX.US*

By Market Matters 10 July 19

ASX hits early high, then slides into the close (A2M, MQG, SGP) *Buy NFLX.US*

Market Matters Afternoon Report 10th July 2019

WHAT MATTERED TODAY

A volatile session for Aussie stocks today with strong buying in the morning session hitting a crescendo around 11.30am before sellers emerged / or more accurately, the buyer departed. It reminded me of a day where one big overseas whale was in the market, initially in the futures which then spilled over into the cash for a few hours in the AM. When they stepped away, stocks lost their support and grinded lower. The market peaked this morning at 6718 just as we were finishing the income note and traded down to a 6669 low. A fairly bearish move overall today even though the market finished  +24pts up on the session.

At a sector level, resources underperformed with BHP, RIO & FMG all finishing in the red while the consumer staples were strong led by Coles (COL) which traded to a new all-time post listing high.

Overall, the ASX 200 added +24pts today or +0.36% to 6689. Dow Futures are trading down -48pts / -0.18%. 

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE;

a2 Milk (A2M) +8%: Had a strong day, posting an index leading 8% gain thanks to a UBS upgrade. The bulge bracket investment bank pushed their PT up 25% to NZ$17.50 and moved from their hold equivalent to a buy on stock – shares on the New Zealand exchanged closed at NZ$16.25, adding 6.56% today, 7.7% below the PT. The stock was a market darling until earlier this year when its meteoric rise came to a halt on trade war and China regulatory fears.

UBS have confidence in the company’s ability to penetrate the China market by diversifying their sales channels despite the lingering risks around regulation disrupting the daigou channels – they are forecasting an 11% market share in what is the most profitable infant milk formula market. Brokers are spread on A2M, with 6 buys, 4 holds and 4 sells – the right call here could prove extremely beneficial. The stock has picked up some momentum heading into the result, making us cautious of an over-exuberant market position. 

A2 Milk  Chart

Macquarie Group (MQG) +0.21%: This is a chart which is prompting us to be more cautious in the market at current levels. While the fundamental picture for MQG looks string, the technicals tells us we’ll be able to buy it at lower levels. Never forget, MQG is a mkt linked play and very much exposed to the markets appetite for risk. We took profit on our MQG position earlier in the week . MM is now bearish MQG.

Macquarie Group (MQG) Chart

Stockand (SGP) +2.46%:We added the property company to the MM Income Portfolio today with a 3% initial weighting. It’s trading on 0.9x price to book having just sold a meaningful development asset in QLD at a 30% premium to book value. Trading on 12x, and +6% yield  the stock screens well relative to peers.

Stockland benchmarked again peers

First technical target on the stock is ~$4.80

Stockland (SGP) Chart

Broker moves;

  • Johns Lyng Rated New Buy at Moelis & Company; PT A$1.67
  • A2 Milk Co Upgraded to Buy at UBS; PT NZ$17.50
  • Alumina Rated New Overweight at Morgan Stanley; PT A$3
  • Medibank Private Cut to Underperform at Macquarie; PT A$3.05
  • Spark Infra Downgraded to Underperform at RBC; PT A$2.25

OUR CALLS

In the Platinum Portfolio we sold BHP and bought Domino’s as a shorter term trade. In the income Portfolio we sold BOQ, reduced CBAPF, reduced MXT, bought SGP & TAH while adding to NBI overall through the right issue.

**International Alert**

Major Movers Today – Janus Henderson (JHG) +3%...stop it! A thorn in our side for some time is starting to show some form. Cochlear (COH hit an all-time high today & Reliance (RWC) bounced back from recent weakness.

Have a great night

James, Harry  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 10/07/2019

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