A weak start to March (DMP, MYR)
WHAT MATTERED TODAY
Weakness in the US market overnight courtesy of Trumps ‘protectionist’ comments flowed through into Asian trade today with the region suffering its 3rd straight session of losses. The local bourse is now down -155pts/ 2.5% from the weekly high. That said, there was reasonable buying from the lows today, mainly supported by the banks which is very typical of this time of year. We’ve maintained our short term bullish stance with the caveat that the 5900 level needs to hold on the ASX 200, and today it did with a low of 5902 before the mkt rallied +26pts into the close. US Futures were trading flat around our closing bell while Iron Ore lost ~1% during Asian trade.
Overall, the S&P/ASX 200 Index finished 44.4 points lower to 5,928.9 points - a drop of 0.7 per cent.
Reintegrating our view; At this point in time we are sticking with our short-term bullish outlook for global stocks while remaining very mindful of our medium-term view which is for a +20% correction commencing this year. We would not be surprised to see todays “Trump tantrum” create a decent swing low for March / April, remember over the last 20-years. Following a decline of -2.5%, or more, by US stocks in February the average return over March / April is an impressive to +4.7% - The S&P500 close down -3.9% in February.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
CATHCING OUR EYE
Some analysis of reporting now starting to seep out and overall the conclusion is that it’s been a good one, JP Morgan reckon the best in the last 5 years. The data probably supports that call if we look at downgrades to upgrades and the quantum of each. We’ve just seen a net downgrade of 0.1% to ASX200 earnings per share and if we compare the last 15 years, the median downgrade was 0.5% - so clearly a better than average season this time around. Expectations vary but overall they’re suggesting decent earnings growth over the next 12 months - Credit Suisse reckon 7% EPS growth for June 2018 and a further 6% in June 19.
I like David Cassidy from UBS and he thinks that “While reporting season has, as always, been mixed at the stock level FY18 & FY19 estimates have on average been edged 1% higher for large caps, which is a bit better than the Australian norm.” He flags Qantas (QAN), Flight Centre (FLT), Fairfax (FXJ), A2 Milk (A2M), Resmed (RMD), Computershare (CPU), CSL, IAG and Origin Energy (ORG) as the large caps that reported well, while on the flipside, weakness was obvious from Star entertainment (SGR), Domino’s (DMP), Harvey Norman (HVN) and Tabcorp (TAH) amongst others.
We wrote about Dominoes this morning questioning the multiple that it trades versus the level of complexity / uncertainty playing out the moment + we think they will struggle to meet full year guidance, however, there was some decent buying stepping in from today’s low that caught our attention and we may just see a short term bounce play out from here – it’s had a lot thrown at it this week + it got hit hard after a poor result and today the selling looks to be exhausted.
Dominoes (DMP) Chart
Another stock catching our eye for the wrong reasons was Myer (MYR) – smacked hard again today and closed at just 40c. It was near ~70c in early Feb and selling here has just become very aggressive. There have been a lot that have tried to buy into this ‘turn around’ deep value opportunity that have just been steamrolled – including the biggest shareholder Solomen Llew through Premier Investments.
He bought ~88m shares at $1.15 less than a year ago which is now worth ~$35m – Ouch!
This one smells, sort of like Retail Food Group (RFG) smelt and I also think Silver Chef (SIV) has a stench at the moment….
Myer (MYR) Chart
OUR CALLS
No trades on the MM Portfolios today
Have a great Weekend all
James & the Market Matters Team
Disclosure
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Disclaimer
All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 02/03/2018. 5.07PM
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