28 February 20
What a week…markets cave in ~10%
28 February 20
What a week…markets cave in ~10%
28 February 20
Are Australian China facing stocks representing decent risk / reward? (BHP, QUB, A2M, TWE, SGR)
27 February 20
Costa Group shows promise in a weak market (CGC, A2M, Z1P, JHG)
27 February 20
What to buy & avoid as coronavirus fear intensify (AAPL US, FMG, BLD)
26 February 20
Feels like a long 3 days…! (RIO, HLS)
26 February 20
Income Report: IVE Group (IGL) – cut or accumulate?
26 February 20
Overseas Wednesday – International Equities & Global Macro ETF Note (GDX, SIQ, MSFT US)
25 February 20
Stocks down but not out (APX, TWE) + International Alerts **BABA US, MFST US, MC FP, UBS US, SH US, GOLD US, IEM, TBF US, DBA US, GDX US**
25 February 20
Equities panic on cue, time for opportunities (EVN, GDX US, SIQ, TBF US)
24 February 20
ASX hit on virus, drops below 7000 (RWC, GEM, NHF)
The ASX200 struggled at the start of this week with a small decline of -0.14%, overall it was a messy day with no clear direction and only a few standout moves catching my eye following company reports i.e. JB HIFI +11.5% and Boral (BLD) -10.6%, unfortunately on this occasion MM is currently riding the wrong horse. Elsewhere we saw gold stocks rally strongly while the IT sector was the worst on ground, I cannot remember many days like that over recent years.
One article that caught my attention in the Australian Financial Review (AFR) overnight was titled “China’s factory prices break deflation spell” – basically prices of goods out of China are rising for the first time in a while plus on the ground the populous hoarding due to the coronavirus has pushed inflation up to an 8-year high. We expect the virus to be a definite hiccup in many ways but since the US & China put away the boxing gloves their economy has been improving sending inflation higher – remember one of MM’s core views for 2020 / 21 is inflation and bond yield will rise. Hence for us to be correct China’s growth has only hit a speed bump and the PBOC will kick start it with a vengeance later this year – i.e. bullish for commodities.
No change to the MM viewpoint: we believe that 2020 will continue to be a choppy year as waves of optimism and pessimism wash through stocks, our current best guess is the ASX200 will make fresh all-time highs up towards 7200 before enduring another ~5% correction. The more time the ASX200 spends rotating around the 7000 area the greater will be our conviction to sell a false break above 7150 if it occurs i.e. a rally to fresh all-time highs which cannot be maintained and the index in this case subsequently falls back below 7140.
MM is currently bullish short-term the ASX200 targeting a test of 7200.
Overnight US stocks rallied steadily with the S&P500 up +0.73% while SPI futures are calling the ASX200 to open up strongly, up over 40-points this morning.
In this morning’s notes we’ve looked at the Australian Oil Sector as the commodity extends its decline to 25% building in a significant amount of demand disruption from China in the process – we know a number of subscribers like to buy stocks “on the cheap”.
Reporting season kicking up locally with a reporting schedule available: CLICK HERE
Today we have reports from companies including: AMC, AVN, BPT, CGF, CLW, MQG, SUN, TCL
US equities continue to trade around their all-time highs with the S&P500 up another 0.73% overnight, our preferred scenario is the S&P500 will now rotate between 3200 and 3400, or in simple terms it’s time for a rest following great gains since mid-2019.
MM is now neutral US stocks after they’ve made fresh all-time highs.
US S&P500 Index Chart
Yesterday after reporting Boral (BLD) was hammered -10.7%, back towards its lows of 2020. Yet another downgrade by BLD saw the back of CEO Mike Kane, from a share price perspective this should probably be a positive moving forward and his performance at BLD has certainly not added a lot of value to his CV. This was the 5th downgrade on his watch which makes the cynic in me question his $1.4m base salary and significant bonuses. While we still like the stock and sector and believe the selling to be overdone, there are now more issues at play that will impact the stock price from here.
On the positive side, a global search for a new CEO is underway and given the markets dislike for Mr Kane, an announcement here could be a positive. However, I would be very surprised if a new CEO didn’t take the opportunity to rebase earnings lower, and that’s one of the key risks now going forward in this stock.
MM is now neutral BLD
Boral Ltd (BLD) Chart
On a more positive note one of our gold holdings Evolution Mining (EVN) was the 2nd best performer in the ASX200 rising almost 8% with no major news, gold was only up around $US5/oz for most of the day, certainly no big deal compared to its recent appreciation. MM holds EVN in its Platinum Portfolio making this move even sweeter after the last 6-months pain / frustration, we’ve been very close to selling this position over recent weeks.
Technically MM is now bullish EVN with stops below $3.90.
Evolution Mining (EVN) Chart
Bond yields have arguably been the main fuel for the major post GFC equity bull market which is no major surprise when we consider its low interest rates that both increases the relative valuation of risk assets, including shares, and produces favourable borrowing conditions for companies. In our opinion this tailwind has a touch further to unfold with US Bond Yields looking poised to make fresh swing lows with the coronavirus a major factor, at present equities continue to focus on bond yields not the reason they’re falling. Bond yields have an understandable strong correlation to crude oil prices, with the commodity generally leading by 3-4 weeks, if this holds true bond yields are perfectly positioned to break lower.
MM’s preference is we still see US Bond Yields break their 2019 lows.
US 10-year Yields Chart
When & where will value unfold in Oil Stocks?
Since the coronavirus outbreak we’ve seen the price of crude oil tumble 25% with China the world’s largest importer of crude oil basically “shutting up shop” to contain the virus. With the current death toll at 910 and over 40,000 infected the Chinese economy is unlikely to kick back into gear in the next few weeks but we should remember stocks generally look around 6-months ahead. As touched on earlier we continue to believe that bond yields will have one final spike to fresh swing lows to create an excellent risk / reward buying opportunity, similarly we feel oil is positioning itself for a buying opportunity. There are 2 classic ways that we feel oil may generate an optimum entry into the sector:
1 – Simply a panic washout to the downside by crude oil.
2 – A day when crude falls but the Australian oil stocks surprisingly rally against expectations – a classic buying catalyst, perhaps today?
We are now looking for an opportunity to buy oil stocks.
Crude Oil Chart
The chart below illustrates how we anticipate bond yields unfolding in 2020, a picture we’ve painted for all of 2020. Until our fundamental & / or technical picture deviates from this path we plan to invest accordingly:
1 – MM is looking to buy an inverse bond ETF for our Global Macro ETF Portfolio : https://www.proshares.com/funds/tbf.html
2 – For our Platinum / Income Portfolio’s skew holdings away from the yield play and increase exposure to reflation stories, like crude oil.
US 30-year Bond Yields Chart
Hence today I’ve looked at our favourite 3 oil stocks to buy, or average, into the current weakness in the sector – as can be seen below its clearly been a major underperformer in 2020.
ASX200 v ASX200 Energy Sector Chart
1 Santos (STO) $8.21
Santos (STO) is clearly one of the strongest members of the Australian Energy Sector but it’s still corrected 11% in 2020 due to coronavirus and OPEC failing to agree on production cuts – a common situation that usually gets resolved. We like STO as they continue to execute their strategy in an enviable manner plus there’s always the potential for another takeover offer in the background although the stocks clearly no longer in the bargain basement arena. Lastly for good measure a 2% fully franked yield is ok in today’s environment but as we’ve so often seen over the last 12-months a high yield does not follow into outperformance, if anything the opposite has been the case.
MM are keen buyers of Santos around $8.
Santos (STO) Chart
2 Beach Energy (BPT) $2.37
While STO can be described as the strongest stock in the sector BPT probably carries the torch of being the most volatile, its already corrected 20% from its 2020 high, almost double Santos. Shaw’s analyst is bearish BPT relative to STO describing it as a mini STO without the development upside, however I’m less downbeat. Price action shows this stock is simply a leveraged take on the oil price with the correlation at almost 0.8.
The market wasn’t particularly excited by the companies quarterly update at the end of last month but after an initial dip the stock actually closed up ok.
MM likes BPT around $2.30 and is considering averaging. **Note, the stock reports today**
Beach Energy (BPT) Chart
3 Woodside Petroleum (WPL) $33.56
Woodside (WPL) is clearly the largest player in the space however our concern is that many now view it as an income play, a ‘rich’ comment coming from us as we hold it in the income portfolio. We were looking to cut WPL and we too fussy with the price, our rationale being around increasing capex putting pressure on the dividend which would disappoint many holders.
WPL is currently forecast to yield 5.4% fully franked, however this is not a stock we would be buying for capital growth and we are sellers of the next bounce rather than buyers of current weakness.
MM is neutral / slightly positive WPL.
Woodside Petroleum (WPL) Chart
MM now likes the Oil Sector into current weakness with Santos (STO) and Beach Petroleum (BPT) our favourite 2 picks followed by heavyweight Woodside (WPL).
Overnight Market Matters Wrap
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. All prices stated are based on the last close price at the time of writing unless otherwise noted. Market Matters does not make any representation of warranty as to the accuracy of the figures or prices and disclaims any liability resulting from any inaccuracy.
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 Market Matters 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, 25th October 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.
Where we refer you to a third party financial services provider, we may receive a referral payment. This referral payment may be a percentage of the fee’s charged by the financial services provider between 0% and 25%, or a fixed amount. These referral payments are made by the financial services provider to Market Matters and are not an additional cost to you.
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.