The dogs of the last 12-months, Banks & Telstra, help the market higher (BAL, CYB, DMP, OZL)
WHAT MATTERED TODAY
The banks helped the index higher as the local market chose strength after the US was closed last night for 4th of July festivities. Resources were mostly lower although energy was higher thanks to slower than expected ramp up in Saudi supply. Telstra continued its recent rally with another 1.8% gain today, helping the telco sector top the boards. The best performer on the index was Sydney Airports – up 3.45%, although half of that came from a very suspect looking end of day match where the stock jumped 13c on almost a third of the day’s volume - looks like an operator error.
Bellamy’s was down heavily again, the worst performer in the top 200 – off 9.6%, down almost 30% in just 2 weeks! While there hasn’t been a great deal of news flow to explain the quick drop, investors are fearing China may not grant approval for its products, the big growth area for the company and the reason why it trades at such a high multiple. Stay tuned to see if these fears are realized.
Bellamy’s (BAL) Chart
Overall, the market added 32points, or 0.52% to 6215 – it has now remained inside a 90point trading range between 6161-6251 for 2 weeks
ASX 200 Chart
ASX 200 Chart
CATCHING OUR EYE
Broker Moves; Domino’s Pizza was the big loser today, thanks to Citi & Credit Suisse both dropping the stock to a sell, the later reducing their target price by 13% and now clearly the most bearish view in the market. Credit Suisse pondered a range of risks to the Domino’s business model – franchise industry under pressure in general, delivery aggregators/disruptors such as UberEats, high expectations out of Europe and unproven in Japan – and heavily discounted future earnings as a result. In our view, DMP is a consumer staples stock on a high growth multiple (35x PE) in an environment that isn’t really supportive, technically looking weak with an initial target below $40.
ELSWHERE….
· Audinate Group (AD8 AU): Rated New Speculative Buy at Evans and Partners
· Domino’s Pizza Enterprises (DMP AU): Cut to Underperform at Credit Suisse
· Elmo Software (ELO AU): Rated New Speculative Buy at Evans and Partners
· Jumbo Interactive (JIN AU): New Speculative Buy at Evans and Partners
· Nanosonics (NAN AU): Cut to Hold at Morgans Financial; Price Target A$3.12
Oz Minerals (OZL) $9.14 / -1.08%; we spoke about copper this morning, with one eye on our Oz Minerals target entry below $9. It briefly dipped into that territory this morning, before rebounding ~1.5% to close at $9.14, just missing our chance to get in while CYB was being sold. There was plenty of chatter about the copper price in the office today – often a barometer of economic activity, is the decline in copper price predicting a downturn in economic activity or is the weakness just volatility as a result of trade war tensions, and a chance to buy into weakness given our overall view of growth and inflation. We have to agree with the later, and are likely to pull the trigger on OZL if we see another dip below $9. Click here to read the morning report for a more detailed view
Oz Minerals (OZL) Chart
OUR CALLS
We sold out of CYB in the Growth Portfolio today after it reached our $6, for a ~10% profit – although we like the Virgin Money deal, and the UK interest rates exposure, it has run hard and selling strength makes sense in regards to our overall view. We may look to buy any significant pullback
Clydesdale (CYB) Chart
Have a great night
Harry & the Market Matters Team
Disclosure
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.
Disclaimer
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