Afternoon Report / Warning signs again today as sellers dominate the afternoon (NCK, QBE, RFG)

By Market Matters 09 January 18

Warning signs again today as sellers dominate the afternoon (NCK, QBE, RFG)

Market Matters Afternoon Report 9th January 2018


Another day that saw the best of things early on with the market trading up in the morning session before some tepid – subdued profit taking unfolded later on. Some good economic data out today with November Building Approvals shooting the lights out printing +11.7% v forecasts of -1.3% while the Roy Morgan gauge of Consumer Confidence was also strong…

The good read on the consumer prompted more buying in the recently beaten up retailers and that was amplified by an earnings upgrade from Noni B showing that some retailers are actually doing pretty well! Overall, strength in the Iron Ore and Oil price overnight saw the material stocks lead the charge today – BHP up another 1.67% to close at $31.06 while Fortescue put on 8c to close at $5.31. We sold that one too early! Overall the Material stocks added +0.96% while the weakest link was the Health care sector which fell by -0.86%.  We had a very tight overall range today of +/-  14 points, a high of 6149, a low of 6135 and a close of 6135,  up 5pts or +0.09%

ASX 200 Intra-Day Chart – morning optimism sold into

ASX 200 Daily Chart – tight ranges, and market finishing well off highs – suggests our mkt is exhausted – pullback imminent


1. QBE Insurance (QBE) $10.54 / -1.77%; A bearish broker note out from Macquarie on the stock prompted selling today with the silver donut suggesting that with a new Group CEO and CFO, they’re likely to ‘tweak’ long term margin guidance which when you think about it – it’s not a bad call given they’ve missed their combined operating ratio target 7 times from the last 10 attempts! They go onto say that bond yields haven’t ticked up enough, and even though the insurance cycle is turning, momentum remains slow and those factors won’t be enough to offset the tweak in margin guidance. They had the stock on outperform - which is a BUY and now downgrade to neutral – which is a HOLD. We own the stock, have watched our strong profitable position evaporate into a breakeven position and are starting to lose some patience with it. In short, the macro backdrop is very supported and will continue to improve and we thought that that internal issues were being sorted however it seems the business still has some near term risk. I’m reticent to follow Macquarie but this is a stock we’re pondering as a SELL. Perhaps it’s just too big of a leveraged beast – has too many moving parts and is simply too hard at the moment. We hold QBE in the Platinum Portfolio

QBE Daily Chart

2. Nick Scali (NCK) $7.05 / 4.44 %; a combination of a good consumer confidence read and positive sentiment from Noni B who became the second retailer to upgrade this year with first-half sales were up 3% on a like-for-like basis –Nick Scali was bid up today around 4% and importantly, pushing back up through the $7 region to close near it’s $7.08 highs. Good retailers perform in most environments and we own NCK because it’s quality and has an exceptionally strong track record. We also own Harvey Norman however it’s not the quality business that NCK is – however stacks up in terms of valuation. We hold NCK in the Income Portfolio

Nick Scali Daily Chart

3. Retail Food Group (RFG)  $2.32 / -6.07%; You wouldn’t believe it however RFG have downgraded earnings guidance again to “less than the $22.0m advised on 19 December.” The revision was caused by the timing of payments due from a new franchise arrangement. Although the payments are still expected, the market didn’t go easy on RFG, closing down 6% on the day – which was up from session lows however you’ve simply got to be concerned about whether or not management have a handle on this business. Clearly they have completely misread franchisee sentiment which has lead to public dispute and a big rout in share price while their disclosure to the market has been perplexing, with todays downgrade simply adding more kindling to the raging fire… We do not hold RFG

Retail Food Group Daily Chart


No changes to the portfolio’s today…although we are looking to increase cash in the MM Income Portfolio to around 10% - currently 2.5%

Have a great night

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 09/01/2018. 5.00PM  

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.

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.

To unsubscribe. Click Here