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Month: December 2015

Morning Report Tuesday 15 December 2015

by james Carter

Investors’ focus needs to be specific and on value in today’s environmentGood morning everyoneOverviewThe current market volatility in equity markets can certainly be extremely scary on the surface but also by definition it can yield some great opportunities. When panic hits markets the selling is often led by the futures market, creating waves of arbitrage selling, simply pulling all stocks lower … both solid and troubled companies.Importantly, medium-long term investors who are looking to accumulate stocks for the future should embrace an equity market when it is trading below its long term P/E of 14.4x of the last decade.At the dizzy heights of March / April, when the ASX200 was testing 6000, the market’s P/E was fluctuating between 16 and 16.5x, a lofty 11-14% premium of the last decades average yet many investors felt good, not scarred.Turning to the MarketThere are numerous quotes around about buying when everyone else is selling but aligning this psychology with long term valuations is a starting point adopted by many successful investors. If the ASX200 weakens under 4900 the market will be in the cheap zone compared to its decade average.Market Matters currently remains a buyer in the 4800-4900 region and a seller in the 5350 region.Commonwealth Bank, for example, corrected 27% between March and September of this year but then rallied 16.
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Afternoon Report Tuesday 15 December 2015

by james Carter

  • The rally in the broader market was short lived, as health concerns continue around the globe. The ASX 200 closed on its year lows, wiping all winnings and lost 19 points (-0.4%) to 4,909 after trading as high as 4,969 earlier today.
  • The Telco’s were the outperformer, with Telstra (TLS) rallying 1.2% to $5.23 and M2 Communications (MTU) up 0.6% to $11.29.
  • Despite Iron Ore rallying 1.4% in Asia trade, the Materials sector resumed its descent. BHP Billiton (BHP) closed 2% lower at $16.27, while RIO closed 1% lower at $41.76.
  • In the Mergers & Acquisitions (M&A) side, Pet Care services, Greencross Ltd (GXL) rallied 29.2% to $5.98 after reports of a private equity group attempting to accumulate up to 14.99% of the company.
  • The government announced a wider deficit to $37.4b from the $35.1b forecasted earlier in the year.

Best Sector – Telcos
Worst Sector – Materials

Morning Report Monday 14 December 2015

by james Carter

When the going gets tough the tough get going!Good morning everyoneOverviewExcuse the title of the morning’s note being a little corny but recent times have been the toughest in Market Matters’ history so this is how it feels this morning.With market volatility increasing as we approach the widely predicted interest rate increase in the US it’s time to focus on the market position as a whole. Market Matters recent call to buy BHP around $21.50 arguably saw the most criticism since our inception, clearly not our finest hour and one we have apologised for a few times. Be Assured, we also feel your pain.What’s interesting is that it unfortunately feels like far more people bought BHP in the low $20’s than followed us to sell it at ~$35 – investors still want to love the OLD “Big Australian”. BHP has now crashed under its GFC levels in the mid $18 region and is set to open around $16.50 today – see chart 2.Market Matters currently believes that BHP and resources generally is just too hard and an area to steer clear of for the present. Momentum clearly remains to the downside.Turning to the MarketsThis morning’s press is up to its old tricks calling a plunge for the ASX200 courtesy of the 310 fall by the Dow, the previous Friday’s 370 point rally was hardly noticed by our journalist friends. Nevertheless, the US market remains relatively strong since its August lows, still up 12.3% over the last 5 months – see chart 1.

Afternoon Report Monday 14th December 2015

by james Carter

  • The bears continued to roar and as expected, the ASX 200 was sold down by traders today, particularly late in the afternoon. We had stages in the day when it tried to recover, however, the usual selling came in through the Futures market and by 3 pm we fell 100 points from the day’s high. The broader market ended 100 points (-2%) to 4,928.
  • Selling was across the board, with the exception of gold stocks. Newcrest Mining (NCM) managed to rally 51c (+4.2%) to $12.74 and OceanaGold (OGC) closed up 19c (+7.8%) to $2.62. Meanwhile, Regis Resources (RRL) managed to pick up 18c (+8.6%) to $2.28.
  • The resource names sold off as expected, but didn’t seem to be as bad as some other sectors. BHP Billiton (BHP) closed down 60c (-3.5%) to $16.60, while RIO Tinto (RIO) ended slightly better, down 88c (-2%) to $42.18.
  • The energy sector continues to slide, Woodside Petroleum (WPL) lost 63c (-2.3%) to $26.41. Santos (STO) lost 17c (-4.8%) to $3.34 and Origin Energy (ORG) down 21c (-4.5%) to $4.47.
  • Another landmine was triggered this morning, where Suncorp (SUN) chose a bad day to announce a downgrade their earnings expectations due to losses in their commercial insurance, a falling dollar and poor investment yields. SUN closed 9.8% lower to $11.77.

Best Sector – Health Care
Worst Sector – Energy

Morning Report Friday 11th December 2015

by james Carter

The market’s extremely volatile in places!Good morning everyoneOverviewThe ASX200 has been very volatile over recent weeks, falling 3.6% over the last 5 days with some big names leading the way e.g. ANZ Bank -5.8%, Woodside -8.9%, RIO -5.5% and BHP -3.9%. Recently Market Matters tried to buy the bottom on BHP after calling it down for a few years but we got it wrong and apologise for what has turned out to be an overly aggressive trade. We are however very happy to no longer be exposed to this vulnerable sectorConversely, four stocks that Market Matters have been recommending in their portfolio have been consolidating in a sideways manner and not participating in the day-to-day large and volatile swings that the ASX200 is currently experiencing.Turning to the MarketLooking at some of the stocks in our portfolio:1 Ansell (ANN) $21.39

Afternoon Report Friday 11th December 2015

by james Carter

  • The ASX 200 was very quiet after picking itself off its lows this morning. After a low this morning of 5015 (-22 points) and a high of 5067 (+30 points) just half an hour later, the market closed down 8points to 5,029. For the week it was down 2.37%
  • For those of us looking for some respite to the oil and gas sell off, Origin Energy (ORG) announced it has begun production of its Australia Pacific LNG project in Queensland. However, after seven years in the planning and construction, the news didn’t help the price, with the stock finishing down 10c to $4.68.
  • Resources were quiet, but still down with BHP Billiton (BHP) down 28c to $17.20, whilst RIO Tinto (RIO) was flat on the day at $43.06. Fortescue Metals (FMG) however managed to creep into the black, up 4c to $1.84.
  • The banks were moving between positive and negative territory today with Australia New Zealand Bank (ANZ) reaching a high of $26.46 and a low of $25.96, finishing the day up 3c to $26.22. Commonwealth Bank (CBA) ended the day up just 5c to $78.95 after trading in a range of $1.20. All in all, a very quiet day in the banks.
  • Keep an eye open for the weekend report.

Best Sector – Information Technology
Worst Sector – Industrials

Morning Report Thursday 10th December 2015

by james Carter

5 things that are catching our eye this morningGood morning everyoneOverviewThe ASX200 has experienced a tough time recently falling 3.9% below November’s highs and closing yesterday only 3.3% above its panic September lows – see chart 1. Conversely, the Dow is a very healthy 13.8% above its August low and only 4.9% below May’s all-time high.Obviously, the main point of difference between the markets has been the collapse of resource stocks with BHP -37%, RIO -25% and Woodside -22% for the year respectively.The question a lot of people are asking now is “can the local market get up off the floor and produce a Christmas rally to improve on its -6.1% for the 2015 calendar year”.Turning to the Markets1 Typical Christmas rally

Afternoon Report Thursday 10th December 2015

by james Carter

  • A disappointing session yet again, with the ASX 200 losing 42 points (-0.8%) to 5,038 after trading as low as 4,995 shortly after 1pm.
  • The banks sold off, with Westpac (WBC) the weakest link, down 2% to $31.41 as investors sold the broader market, particularly after the employment data.
  • All were surprised the unemployment data, reporting an additional 71,400 jobs, compared to a consensus of a loss of 10,000. Investors are now factoring a lower probability of a rate cut in the New Year. Note, New Zealand cut its interest rate this morning to 2.5%, while the US Federal Reserve meet next week for the anticipated likelihood of a rate rise.
  • The Major resources had a break from its recent losing streak. BHP rallied 1.9% to $17.48, while RIO closed 2.4% higher at $43.06. Junior Miner, BC Iron (BCI) however, went into trading halt, as it now considers its future due to the descent in Iron Ore prices. BCI was last at $0.19.

Best Sector – Materials
Worst Sector – Financials

Morning Report Wednesday 9th December 2015

by james Carter

Resources are approaching a bad “fantasy” land, where to go?Good morning everyoneOverviewYesterday saw resource stocks get mauled by the market with BHP -5.2%, RIO -4.3% and the energy sector falling 7.4%. As discussed yesterday, the short – medium term outlooks are poor for Iron Ore and Crude Oil with no obvious reason to consider investing in either of these sectors.Many investors and economists have been caught completely off-guard by the severity of the commodities collapse with a Sam Walsh interview 10 months ago currently being quoted often:”Asked by Bloomberg 10 months ago whether Iron Ore could reach $US30/ton he said it was impossible and fantasy land ” – Sam Walsh, CEO of RIO Tinto.Turning to the MarketIron Ore is today at US$38.65 / ton, down a whopping 45% for the year – see chart 1. Our overall caution on resources has not changed and when you look at the P/E ratios of BHP (19.1) and RIO (15.6) versus CBA (14.5) they still look expensive in this very uncertain environment.The weakness in the resources sector continues to put enormous pressure on the Australian economy and we believe local interest rates are likely to stay lower for longer. Stocks with sustainable yield may therefore hold up better than the market is thinking next year; eg, the REITS were quite strong yesterday rallying almost 1%.The healthcare sector is clearly a growth sector on the back of an ageing and growing population together with long waiting lists in the public health system. On the 30th September this year only 47% of the total population had private health insurance; a potentially bad portent for the public health system. So, taking a look at Healthscope, a stock Market Matters likes:Healthscope (HSO) $2.48

Afternoon Report Wednesday 9 December 2015

by james Carter

  • The ASX 200 came under early pressure and fell close to fifty points within ten minutes of the opening. From there it started to improve, albeit slowly in the late morning. However by the 2.30pm it started to lose ground yet again and closed 28 points (-0.6%) to 5,080.
  • The main focus was on BHP Billiton (BHP) and RIO Tinto (RIO) after RIO announced yesterday that it would slash again its capital investment, the second time in four months. RIO hit a low of $40.39 (a loss of $2.01 from the close), before recovering to close at $$42.05, down only 35c. BHP fared better however after it suffered strong selling in the UK last night. However it wasn’t such a bad day after all and it was down just 34c at its worst and closed up 11c to $17.16.
  • The banks were at best mixed. Commonwealth Bank (CBA) had an intraday high of $80.90 (+76c) but faded in the afternoon to close up 15c to $80.29. Australia New Zealand Bank (ANZ) didn’t make it into the plus territory at all and closed down 39c to $26.43.
  • Oil stocks performed stronger today with Woodside Petroleum (WPL) up 14c to $27.03, Santos (STO) up 19c to $3.50 and Oil Search (OSH) closed up 6c to $6.35.

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