18 August 19
Market Matters Weekend Report Sunday 18th August 2019
18 August 19
Market Matters Weekend Report Sunday 18th August 2019
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)
A solid financial year is behind us with the ASX200 rallying +6.8% before dividends, after enjoying an impressive 23.6% rally from Decembers panic low. The post GFC, cheap money, bull market has continued to provide for the faithful while many investors have missed out having sat on elevated cash levels. However it hasn’t been an uninterrupted rally by the local market with 3 meaningful pullbacks over the last decade of -25%, -21.5% plus last year’s relatively minor -15.1% correction in Australia. At MM we are firm believers in the long-term performance of the stock market, not a big call considering the market has returned an average ~13% pa since 1900 with over 80% of the years producing a positive return – in other words being “long cash” has repeatedly been the poor investment stance.
However at MM we continually look to add value across our respective portfolios through timely stock & sector selection plus of course tweaking cash levels when appropriate e.g. we were heavily cashed up around both of the recent major swing highs enabling us to accumulate stocks into the ensuing weakness. The phrase “keep it simple stupid (KISS)” can be a very useful adage for investing, especially when combined with solid analytics and patience. We continue to believe the market is slowly becoming less attractive from a risk / reward perspective hence we are tweaking our portfolios to a more conservative stance, including higher cash levels, to enable us to be flexible and opportunistic if / when the next decent pullback unfolds.
A phrase we often dust off which can be used to illustrate our thoughts was provided over 100-years ago, when asked how he’s become such a successful investor, Baron Rothschild’s reply was simple:
“I will tell you my secret if you wish. It is this: I never buy at the bottom and I always sell too soon.” – Baron Rothschild.
As we slowly become more conservative into the current market strength remember we went aggressively long around Christmas time, a touch premature considering the final few % dive towards the 5400 area but strategically the correct play, hence again we won’t panic if we continue de-risking ~6700 and the market squeezes a few % higher, unless of course fundamentally something changes our outlook!
At MM we remain in “sell mode” but becoming more selective in our Platinum Portfolio which is now holding ~17% cash, while the Income Portfolio’s remains in ~4.83% cash. However, our freshly launched International Portfolio is still holding 85% in cash which is likely to be slowly and conservatively deployed over the next few weeks.
NB Our MM Global ETF Portfolio will be launched on Wednesday as MM enters another chapter in its evolution.
Short-term MM still remains technically bullish the ASX200 while it can remain above 6580 with the next technical target above 6800.
The markets open on Monday is likely to be determined by investors interpretation on the US – China trade outlook following the G20 meeting in Osaka, Japan. Yesterday lunch time President Trump announced “We’re right back on track with China” and they will be putting out a statements soon, if this evolves as it initially sounds a strong opening for stocks looks likely on Monday.
Last week we saw the Australian 3-year bond yield bounce marginally back towards the psychological 1% level but the impact on the yield sensitive stocks was extremely pronounced. The real estate, retail, transportation and Utilities sectors all had a tough week at the office dragging the ASX200 down even while heavyweights BHP & CBA closed in positive territory.
Our opinion remains the market is fully pricing in 2 interest rate cuts in 2019, taking the RBA cash rate down from 1.25% to 0.75%, hence we feel the risks for stocks are that cuts don’t come as fast, or as deep, as many expect e.g. last week alone the Real Estate sector fell almost 5% as bond yields bounced marginally.
MM has no interest chasing “yield play” stocks until further notice.
However interestingly Warren Buffett said just a few weeks ago that stocks were ridiculously cheap if you believed interest rates / bond yields will remain at current levels but in almost the same breath he expressed his lack of confidence that these low rates will remain a reality i.e. he cannot imagine low rates, high employment and low inflation is a mix that will remain sustainable i.e. something is likely to give.
Australian 3-year bond yields Chart
The “Oracle of Omaha” was specifically discussing the US 30-year bond yields at the time which are currently trading at 2.5%. To put things in perspective if you can borrow money at 2.5% for 30-years and invest in the Australian share market which has averaged 13% pa over a similar time frame why wouldn’t you borrow and buy stocks - it’s almost too easy, it feels like a no brainer arbitrage.
If / when we see a meaningful pullback in stocks they are a MAJOR buy unless a deep recession is unfolding or rates are accelerating higher.
US 10 & 30-year bond yields Chart
We have given some more thought to our contrarian bullish view on the “Little Aussie Battler” which has managed to close out June back above the psychological 70c area. The $A is either trading extremely cheap or the iron price is close to a major correction, our preferred scenario is a bit of both. Hence we remain very wary of stocks which have been pushed higher by the tailwind of a strong $US.
We remain bullish the $A believing the next 10% move will be on the upside rather than the downside.
Australian Dollar ($A) Chart
Australian Dollar ($A) v Iron Ore ($US/MT) Chart
1 – Platinum Portfolio
The MM Platinum Portfolio enjoyed another good week courtesy of solid performances from Pact Holdings (PGH) which rallied almost 20% and Ausdrill (ASL) +16%. The moves illustrated perfectly when the value elastic band becomes too stretched in either direction they’re liable to snap back extremely hard on news that doesn’t warrant the extreme pessimism /optimism. Last week we added to our Pact Holdings (PGH) position while taking a 57% profit in Bingo (BIN) and 12% in Aristocrat (ALL) taking our cash position up to a healthy 17%: https://www.marketmatters.com.au/new-portfolio-csv/.
While we still think the market can trade higher after this weekend’s G20 stocks are becoming rich and we feel the prudent risk / reward strategy is to slowly start moving to a higher cash / more defensive skew over our portfolios.
Following the recent moves we have a number of stocks close, or at, our objectives, while 2 have blown their respective levels away:
Trading around / close to our initial target area – BHP Group (BHP), Iluka (ILU), Macquarie Group (MQG) and Ausdrill (ASL).
Powering through our initial target area –NIB Holdings (NHF).
As we said previously this has proven to be a good time to give positions a little room as fund managers have been keen to make their portfolios look good for the EOFY rule off but that is now behind us and it’s time to start all over again. The important message remains we are considering increasing cash and becoming slightly more defensive but don’t assume we will be grabbing our large profits just to feel good, we will consider each position on their individual merit at the time.
*watch for alerts over next 2-weeks.
Macquarie Group (MQG) Chart
After recent strong rallies by Emeco (EHL), Ausdrill (ASL) and Pact Group (PGH) we only have 3 main “losers” of concern. At this stage we are still not panicking on these underperformers (ORE, CGC and JHG) although I am no longer considering averaging as it’s becoming easy to start feeling they’ve had their opportunity to rally, especially Orocobre (ORE) and Janus Henderson (JHG).
Yet again the broad market threw up very few fresh buy ideas this week as it remains above our initial 6600 target area, remember we are generally looking to sell into current strength, not buy. However there are 3 stocks / sectors that we still have our eyes on:
1 Telstra (TLS) $3.87 – we have fallen on our sword and decided we did take profit on TLS too early. Telstra looks good technically however the rise in the stock price means a lot of optimism is now built into its full year results come August, and for that reason – we would not buy it now. A decline post results would have us interested again below the ~$3.70 region
2 Santos (STO) $7.08 – The oil sector looks capable of a decent bounce over the coming weeks with STO looking well positioned for a short-term move towards $8.
3 Golds – we bought Newcrest (NCM) last week only to watch it underperform compared to other precious metal stocks but we still want to increase our sector exposure into any pullback.
Janus Henderson (JHG) Chart
2 Income Portfolio
The Income Portfolio https://www.marketmatters.com.au/new-income-portfolio-csv/ had yet another quiet week with MM not transacting hence it still holds 4.83% in cash.
Basically no change, until we see any indications that bond yields have bottomed MM sees no major reason to significantly reduce our large market exposure, or re-position / skew holdings towards higher rates i.e. why hold cash in today’s market when yield / income is your objective.
The RBA Cash Rate Chart
3 – International Equites Portfolio
The MM International Equities Portfolio was launched last week and has started slowly as intended buying Apple (AAPL), Barrack Gold (ABX) and Ping An (2318 HK) : https://www.marketmatters.com.au/new-international-portfolio/.
No change, we are still sticking with this for now - “We remain bullish global equities but the “easy money” on the long side feels well and truly behind us hence our construction of an international portfolio is going to be a steady careful process.”
Our favourite overseas stock today is Samsung which we have covered a number of times over the last 6-months – expect a “buy alert in Samsung next week”.
MM is bullish Samsung with an initial target over 15% higher and a stop ~7% lower – solid risk reward.
Samsung Electronics (005930 KS) Chart
The US S&P500 is only 2-3% below our medium-term target for the main barometer of US stocks, hence making us extremely reticent to invest too many funds at current levels i.e. remember we are in “sell mode” overall.
On a regional basis we will be looking for value in the Emerging Markets (EEM) before Europe due to our concern for the future of the EU and bearish view on the $US which should benefit the EEM.
US S&P500 Chart
4 - MM Global ETF Portfolio
MM will be launching this portfolio next week.
Below is a quick snapshot of ETF’s available on the ASX: To be clear, this is a model portfolio that will hold a mix of global ETFs.
We still believe there are a couple of great “plays” worth considering and preparing for but remember by definition major macro views don’t change too often:
1 – A potential spike towards 65c by the $A discussed throughout 2019 will represent great risk / reward buying in our opinion but either way we are bullish the $A over the coming 12-months.
2 – As you all know by now we love gold over the next 12-months, this can be played via ETF’s or stocks, both locally and o/s depending on opinions around currencies and an individual companies quality / value.
3 – We are considering ways to buy the Emerging markets v Europe.
4 – Moving forward we are watching for potential turns in stocks and bonds BUT are in no hurry to fight the current bullish trends in both – see last week’s chart of the week.
A few more days above 2950 followed by a break below 2925 will trigger a “sell signal” for US stocks, potentially important for all 4 portfolios.
S&P500 Index Chart
Short-term Australian stocks look ok but we intend to be “trickle” sellers over the coming weeks, ideally into further strength.
US stocks will trigger a sell signal with a break below the 2925 by the S&P500, similarly we may consider a “cheeky” short around the 3030 area.
Gold still looks great and we want exposure to the sector in our portfolio (s) moving forward.
Chart of the week.
The fundamental story around Europe is not pretty reading BUT it feels very baked into stock prices with nobody talking the region higher, perhaps the crowd is wrong in the short-term, it wouldn’t be the first time!
Technically European stocks look they can defy the markets bearish sentiment and make fresh post GFC highs, over 10% higher.
Euro Stoxx (SX5E) Chart
Investment of the week.
The best investment decision can be a sell as well as a buy. APT was smacked 13% from its fresh all-time high last week on the news that global giant Visa was planning to enter its “buy now, pay later” market. MM flagged this potential scenario a few times in 2019 and in our opinion it couldn’t have been a worse player to kick off the competition, we expect more will eventually follow suit. In our opinion the selling could easily intensify from here.
There’s a saying in business that to make money you need to first, the best or crooked, we question if APT will be the best when Visa line up against them.
MM is bearish APT initially target ~20% downside.
Afterpay Touch (APT) Chart
Trade of the week.
Another sell for the aggressive / sophisticated member, we believe geospatial mapping business has gotten ahead of itself now being valued at $1.69bn. We are expecting a test of the $3 area in 2019, perhaps a sign that the high valuation / growth stocks may see some profit taking, just as they did in late 2018.
MM is bearish NEA targeting 15-20% downside.
Nearmap Ltd (NEA) 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 29/06/2019
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 not withstanding 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.