Energy& Materials drag ASX down for 2nd straight day (DLX, WPL, MTS)
Another weak session played out for local stocks today with weakness in Oil and other commodity prices overnight, particularly Nickel (-5%) dragging down those sectors today with the likes of Western Areas (WSA) and Independence Group (IGO) down between 4 & 6% a piece while BHP and RIO lost more than 2% each. Fortescue (FMG) extended its recent slide and is now threatening to break down below its 12 month low which sits around $4.50 – the miner closing today at $4.63. Elsewhere, it was interesting to see that the 2 hospital operators – Healthscope (HSO) and Ramsay (RHC) also copped it on the chin and we remain negative these names, seeing likely downside from current levels. Growth stocks that are finding it harder and harder to deliver on baked in growth assumptions become more susceptible to a sell off in a rising interest rate environment- which we’re clearly seeing.
Anyway, a choppy day but a reasonably tight range of +/- 24 points, a high of 5958, a low of 5934 and a close of 5934, down -0.34pts or -0.58%. The index closing on its lows a fair sign of weakness.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Woodside (WPL) – down today by 43c/1.38% to close at $30.77 with the position we took yesterday around $31.25 now underwater – however we did see some reasonable buying from the lows today and a decent pop up into the close. We mentioned in the income report today however with a 3% allocation it clearly leaves room for adding to the position if further weakness prevails, however I doubt it will. The strong buying from the early lows a good sign that overhang is now gone + there was scale back in a lot of the insto bids for the $2.7bn Shell stock, which was done at $31.10, so not really that surprising to see strong buying appetite sub $31…
Woodside (WPL) Daily Chart
Dulux (DLX) - delivered a very good set of numbers today in their Full Year Result and the stock pupped +6% on the back of it – trading to an all-time high. This is a very good business – strong performance + the outlook was more upbeat than the mkt thought it would be and their +10% increase in the dividend was testament to that …the only issue with the stock at the moment is around valuation – on 20x for a growth stock is not that high however clearly the housing market is showing signs of a top + with interest rates tracking higher = less $$$ for renovation, however you could construct a plausible argument to think that a lick of paint is a good ‘cheap fix’ and therefore their earnings are potentially more defensive than the mkt gives them credit for. This has always been a stock I like, but have never owned for MM - been gun shy really however into weakness this is clearly one to look at. At 20x you need weakness to BUY rather than the prevailing strength today.
Dulux (DLX) Daily Chart
Brokers remain negative the stock however expect some begrudging upgrades to flow through overnight.
Metcash (MTS) - Came up on a scan today that highlighted a failed break out of the range which is typically a bearish sign, although it was only utilising short time periods so not as relevant – but worth keeping on the radar non-the-less. This is company gradually turning around and plugging away to improve their offering, you can see the improvement in their store roll out, the look and feel of stores, their actual retail offering. On 15x and a differentiated strategy why pay 22x for Woolies or 17x for WES? We’re not overall keen on Supermarkets at this juncture but MTS probably to pick of the bunch
Metcash (MTS) Daily Chart
Have a great night
The Market Matters Team
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