The ASX200 continued its quiet start to the week finally closing up +0.2% with the action remaining firmly under the hood with 11 stocks rallying by +4%, or more, while 5 names fell by the same degree. High volatility through reporting season is nothing unusual with investors delivering 2 very clear and different messages to corporate Australia:
- Disappoint on earnings, margins & / or outlook and your stock is likely to suffer badly e.g. Beach Petroleum (BPT), Monadelphous (MND), Ansell (ANN) and NIB Holdings (NHF)
- Impress the market and your stock can be re-rated to the upside in the blink of an eye e.g. IPH Ltd (IPH), Domino’s Pizza (DMP), Nanosonics Ltd (NAN) and Redbubble (RBL).
History tells us that from a statistical perspective stocks which fail to impress with their earnings / outlook and are subsequently sold-off accordingly are destined to underperform for months to come. Obviously there are the occasional exception where the shares reverse higher the day after an initial knee jerk move to the downside but as an investor if you sell a basket of stocks which fall after they report and reallocate the monies into companies which rallied through the same season you are likely to be adding alpha / value to your portfolio. As is often the case the statistics are weighing against human emotion, in this case to buy what feels “cheap”:
- Few people like to sell weakness and buy strength but the numbers don’t lie as “comfortable” investing regularly detracts from optimum returns.
US stocks posted another record high overnight although it was a fairly muted session with the S&P500 rallying +0.15%, ongoing strong earnings helped sentiment with retailer Best Buy & Co (BBY US) illustrating continued demand from the consumer. Comments from Fed Chair out of Jackson Hole this week are likely to inject some volatility into proceedings as investors focus on potential interest rate / stimulus changes into 2022, and beyond.
The SPI futures are pointing to the ASX200 to add another +0.2% early on today as we search for short-term direction.
MM remains bullish the ASX and keen buyers of pullbacks
Add To Hit List
