16 August 19
Phew - a big week comes to a close (TLS, OML, COH, NCM, SGR, HLS)
16 August 19
Phew - a big week comes to a close (TLS, OML, COH, NCM, SGR, HLS)
16 August 19
5 stocks we are considering into the current market panic & a word on recent performance (BIN, ALL, MQG, OZL, APX)
15 August 19
Not a good day to miss earnings expectations – market falls 2.85% (TLS, BKL, TWE, SUL, WPL, WHC, ORA, CWY)
15 August 19
Should we buy more gold stocks as volatility increases? - (CSL, EVN, GDX, MFG, NCM, NST, PGH, RSG, SAR)
14 August 19
A mixed day on the reporting front (PGH, CSL, NAB, TAH)
14 August 19
Income Report: Are we finding income opportunities amongst Hybrids? (NAB, TAH)
14 August 19
Overseas Wednesday – International Equities & ETF Portfolios (MFG, COH, CYB, BABA US, 700 HK, 2318 HK, SH US, TYU9, GOVT US)
13 August 19
Magellan to raise capital for future growth after reporting strong result (MFG, CGF)
13 August 19
Keep your fingers on the pulse, there’s lots going on (JBH)
12 August 19
JB defies the retail gloom and tops expectations (JBH, BEN)
The ASX200 had a frustrating week rallying strongly almost testing 5700 on Thursday before succumbing to negative sentiment, both locally and overseas. The Banks and Telco’s led the declines while the heavyweight resources found a bid around optimism on US – China trade negotiations, however as we regularly say “the local market cannot go up without the banks”, of course it can but its very tough going with the “big Four” making up almost 22% of the index by market capitalisation.
Local stocks again perfectly picked the downturn in the Dow which fell over 700-points from Wednesday’s intra-day high. The initial optimism around Trump and Xi’s apparent softening attitude on trade slowly lost momentum throughout the week as markets again became fixated on a looming global recession i.e. the market is looking through a negative lens at present continuing to focus on any poor news flow and of course as we all know there’s plenty around.
I enjoyed reading an article from legendary investor Stanley Druckenmiller on Livewire yesterday with a few important takeout’s from the below 2 poignant sentences.
“But one of my strengths over the years was having deep respect for the markets and using the markets to predict the economy, and particularly using internal groups within the market to make predictions. I was always open-minded enough and had enough humility that if those signals challenged my opinion, I went back to the drawing board and made sure things weren’t changing.” – Stanley Druckenmiller..
Some of the above rang bells with me and has high relevance to MM in 2018 and importantly beyond:
1 – We have been bearish the ASX200 medium-term targeting the 5000 area but we have moved to basically fully invested looking for a bounce towards 5950 as we attempt to add some short-term value / alpha – we must remain very focused in case the bounce doesn’t eventuate.
2 – Some sectors are calling a very tough time for the Australian economy in 2019 / 2020, we must remain open-minded as to whether they are correct -we will cover this in Point 1 later.
MM remains bullish the ASX200 into Christmas / 2019 ideally targeting the 5950 area +/- 50-points – but our conviction is far more muted than a fortnight ago.
Again the Volatility Index caught our eye falling in a week when US stocks closed at their lowest close since April, including another almost 500-point drop on Friday.
Surprisingly the VIX closed down on the week, this is a bullish indicator showing that sophisticated investors do not believe that the risks are high for stocks to fall significantly lower.
Volatility VIX (Fear Gauge) Index Chart
Australian & Global Equity Indices
Technically the big picture is average for stock indices both locally and internationally but for the prudent / in-tune investor this should provide some of the best opportunities since the GFC – we are extremely excited at MM.
Correct stock / sector positioning will enable an investor, both large and small, to be able to confidently buy the market if we do endure a tough few years.
Its important to put our thoughts into perspective regularly…
1 – We are looking for the ASX200 to correct its run up from 3121 in March 2009, an advance of 3252-points over 113-months.
2 – If we assume that the August high at 6373 is the end for the longest bull market in history a typical correction would be back to 4750 over around 4-years i.e. 50%.
3 – Hence we have already corrected 824-points over just 5-months which implies strongly the market needs a rest on the downside, especially as a great deal of bad news is already built into the market.
Generally we do intend to invest with a more conservative approach so we can be aggressive buyers if the correction does head towards 5000 but we will also look to add value into decent bounces – as we are today.
Remember during the post-GFC rally the market had 2 major corrections of 25% and 21.5% illustrating perfectly that markets very rarely go up, or down, in a straight line.
Similarly, looking overseas for clues, our eventual target for the German DAX is the 9000 area. This may be another 15% but theoretically the German Bourse has already sustained well over 60% of MM’s anticipated correction i.e. the risk / reward is not compelling to jump on board the sell wagon at current levels.
German DAX Chart
In the US, the broad Russell 3000 index has already fallen over 40% of the hammering it took during the GFC – from a points, not %, perspective.
Already in the US S&P500 more than half of the members are down over 20% which is referred to as in a Bear Market for the particular stocks. However compared to both Australia and Europe the US does feel vulnerable to deeper falls from current levels.
Russell 3000 Chart
1 Is Australia headed for a recession?
The stock market is sending a very clear and pessimistic message about the Australian economy into 2019 i.e. things are going to get tough. We’ve made a couple of poor calls in 2018 like all market pundits but avoiding exposure to the heavily indebted average Australian household has helped us avoid some major land mines. Just look at the below 3-month returns for some stocks with exposure to the Australian consumer:
Automotive Holdings (ASX: AHG) -34%, JB HIFI (ASX: JBH) -10%, Webjet (ASX: WEB) -27% and CSR Ltd (ASX: CSR) -31% - there are plenty more!
Over the last few quarters falling home prices has been a dominant feature in the financial press, not only are housing prices falling but so is turnover as sellers struggle to face reality and many buyers are finding it tougher to borrow money. People are already spending less whether it be on home renovations, TV’s, furniture or new cars, however stocks usually lead the underlying economy by 6-9 months, hence we expect this to get noticeably worse before it improves.
However we must always look ahead and stocks that are exposed to domestic spending have already been smashed with ~50% corrections commonplace as we see below from household names CSR and Harvey Norman.
We don’t believe it’s time to buy the panic yet BUT we now think the bottom is closer than top for stocks in that sector.
We will be watching for signs of exhaustion on the downside e.g. bad news not leading to weakness at the sector / individual stock level.
CSR Ltd (ASX: CSR) Chart
Harvey Norman (ASX: HVN) Chart
2 The Energy Sector is catching our eye.
Crude oil is sitting over 30% below the years high but as we said a few week ago the next 15% now appears likely to be up, as opposed to the recent trend which is clearly lower. As would be expected the energy sector has followed the price of Crude lower creating a significant drag on the index - over the last 3-months Beach Petroleum (ASX: BPT) -24%, Santos (ASX: STO) and Woodside Petroleum (ASX: WPL) -15.6%.
The question is if $US50/barrel is going to hold how should we try and benefit from a likely recovery in the sector.
Crude Oil Chart
From an investment perspective we believe the question should actually be, regardless of the oil price, what stock in the energy sector would you most like to own.
Ironically the answer is a coal miner! MM is bullish coal miner New Hope Corp (ASX: NHC) targeting 15-20% upside.
Our second favourite in the sector is actually Whitehaven Coal (ASX: WHC) so although we believe crude may haver bottomed we prefer the coal miners in the Energy Sector. The price action simply looks better.
New Hope Corp (ASX: NHC) Chart
Whitehaven Coal (ASX: WHC) Chart
3 The Insurance picture evolves.
The insurance picture has changed noticeably over the last few weeks as concerns around the state of the global economy have escalated leading to lower bond yields = bad news for insurers profitability as they hold their received premiums / cash in such interest yielding bonds.
The sector has had a tough time including Suncorp (ASX: SUN) and QBE Insurance (ASX: QBE) that we own i.e. over the last month QBE is -10.4% & SUN – 4% compared to the ASX200 which fell -2.3%. Last week QBE disappointed the market (again!) with its latest trading update which led to the stock closing down over 5% on the week following a near term hit to earnings.
Our position is back to around breakeven, we do like QBE at current levels but the market is likely to want to see some proof that new management can turnaround this serial underperformer before the shares can advance meaningfully. The stocks relatively cheap trading on a P/E of just over 10x Est 2019 earnings compared to SUN on 13x and ‘sort of’ sector rival NIB Holdings (ASX: NHF) on 15x Est 2019.
Technically we now like NHF the most and SUN, which we have held for ~3-years, the least.
Our next move in the sector is likely to be a sell of SUN & / or QBE, hopefully at higher levels.
NIB Holdings (ASX: NHF) Chart
4 Three overseas goliaths catching our eye
Its not just local stocks that have suffered a tough times recently with some global heavyweights getting smashed e.g. Apple -30%. Today we’ve looked at 3 American titans but the Emerging Markets are likely to dominate our selections in 2019. In July the cash reserves of Apple sat at $243.7bn as the company ups spending but that still equates to about one third of the companies market cap.
Trading on an Est. P/E for 2019 of 12.46x feels good value, Warren Buffett bought a huge 75 million shares in Q1 of this year and added another 522k at $187.30 in Q3 so I assume he’s definitely bullish at $US165!
MM likes AAPL at current levels
Apple Inc (AAPL US) Chart
We’ve touched on JP Morgan Chase (JPM US) previously with a buy level below $US100 which is basically where we are today.
This coincidentally is another stock that Warren Buffett likes as he purchased over 35m shares last quarter at an average price of US109.25, again I assume he likes it almost 10% lower.
MM likes JPM at current levels.
JP Morgan Chase (JPM US) Chart
We’ve been bearish Wells Fargo for most of 2018 targeting the US45 area and as we approach Christmas our target has basically been achieved.
MM is an accumulator of WFC into current weakness.
Wells Fargo (WFC US) Chart
5 The $US is testing our resolve.
MM remains bearish the $US targeting a ~3-4% decline in the short-term, back towards its late September lows. We’ve held this view for over a month but so far with the exceptions of a few failed dips the Greenback has remained firm.
The $US still feels like its “hanging in there” because of volatility in US stocks and ongoing uncertainty around a trade war, not a reason to chase the $US in our opinion.
However its important for us to remember that we are bearish the $A targeting the mid 60c region, or 10% lower. Potentially a conflict of opinion. Hence perhaps we are getting “too close” with our short-term bearish $US call – hopefully not as its would imply stocks will fail to stage some sort of partial recovery.
$US Index Chart
The Australian Dollar ($A) Chart
We remain mildly positive short-term targeting a Christmas rally ideally towards 5950 where MM will significantly increase our cash position.
While the stats / statistical validity of the Christmas rally are there for all to see, unfortunately we’re now more confident of an eventual target of ~5000 for the ASX200 than I am of a Christmas bounce to 5950.
On the stock level, we are considering the following;
Selling: QBE &/or SUN, Janus Henderson and perhaps a small part of our Telstra to fund part of Vocus purchase if we were to go that way.
Buying: Vocus and New Hope Corp
Chart of the week.
This week I have included 2 stocks with very similar chart patterns which unfortunately are negative:
1 MM remains bearish IRE targeting at least 10% downside.
2 MM is bearish PMV targeting at least 15% downside.
Iress (ASX: IRE) Chart
Premier Investments (ASX: PMV) Chart
Investment of the week.
The ACCC’s lack of decision on the TPG Telecom – Vodafone merger may just have provided an ideal opportunity to buy Vocus (ASX: VOC).
Subscribers should remember we like the Telco Sector into 2019.
MM likes VOC technically with an ideal entry level between $3 and $3.10,
Vocus (ASX: VOC) Chart
Trade of the week.
CYB is a stock we have navigated successfully over the last 12-months and its looking very interesting today for the aggressive investor / trader.
MM is bullish CYB targeting a 10-15% bounce.
NB I stress this is not a long-term investment.
CYBG Plc (ASX: CYB) Chart
Our positions as of Friday. All past activity can also be viewed on the website through this link
Weekend Chart Pack
The weekend report includes a vast number of charts covering both domestic and international markets, including stock, indices, interest rates, currencies, sectors and more. This is the engine room of our weekend analysis. We encourage subscribers to utilise this resource which is available by clicking below.
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 15/12/2018
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.