ASX 200 breaks out of the 21 week range…Finally! (CGF, BEN, HFA, RRL)
Another positive session for Aussie stocks saw the market break out of its 21 week trading range of 5629 and 5836 channel with the index finally gaining enough momentum to push up into some blue sky - whether it has the strength to push beyond 5850 remains the big question after breaking up to a high today of 5856 and closing back below at 5846. Still, we’ve got to acknowledge the more bullish stance taken by domestic investors in the last week which does demonstrate that the local market can – sometimes at least - run its own race as we enter what’s typically a bullish period for local stocks.
Overall today, the Material sector did best adding 1.55% after underperforming last week while we even saw the much disliked Telstra ticking up on the session – closing at $3.55. On the weaker side, the Real Estate stocks finished down marginally, losing 0.03% - a range today of +/- 33 points, a high of 5856, a low of 5823 and a close of 5846, up 32pts or 0.56%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
In terms of the MM Portfolios, we’re looking to take profits on Regis Resources (RRL) above $4.00 with the stock hitting a high today at $3.95 – so getting close. If done, this will book a profit of ~9% after holding for a couple of weeks. We did envisage to hold for the medium term however the rally in the last week has been strong, while we think the $US may provide a headwind for Gold leading into Christmas. In all likelihood, we’ll be able to buy back in at lower levels at some point.
Elsewhere, we sold HFA Holdings (HFA) from the Income Portfolio taking a decent 35% profit in around ~3 months which is obviously a good result. As we suggested in the Alert, the stock has performed strongly with a number of recent broker upgrades (Ords & Macquarie) prompting some decent buying in the stock. We originally bought due to valuation and high yield and the market has now caught on – bidding the stock up strongly. This has prompted us to go the other way, and sell into strength given reasonably low liquidity in the stock – hence use momentum to get filled.
HFA Holdings Weekly Chart
Challenger Group Financial (CGF) – a stock we bought recently at $11.95 will announce their first quarter annuity sales number tomorrow, with expectations for around $850m. This is down a long way (~17%) on this time last year however CGF have made a conscious decision to reduce sales of shorter dated products with lower margins which helps their capital. I’ll do a Direct From The Desk tomorrow on this topic. CGF closed at $12.52 today.
Bendigo Hybrid – as flagged in the MM Income Report last week, Bendigo today announced a new Hybrid with BEN’s Group Treasurer in today to run through the offer. It’s a small offer, with BEN intending to raise $300 million (more or less can be done), however the offer does include a Reinvestment Offer for an existing security with ~$270m outstanding. Normally these have around 50% roll over rate so the excess will be reasonably small, and with a decent margin and very limited new supply, the security should do well.
In short, the margin of 3.75%-3.95% compares well to existing securities on issue which are trading at a margin nearer to 3%. We’ll put a note out tomorrow given we’re likely to add to the MM Income Portfolio.
Have a great night
The Market Matters Team
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