Flight Centre takes off on profit upgrade
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Some consolidation of yesterday’s gains played out in the market today with the Material stocks once again seeing most love while it was the ‘expensive defensives’ that continued to lag. Using Sydney Airports as a classic ‘defensive stock’ and using BHP as a classic risk on bet, SYD has fallen by -7.7% in the last 10 days while BHP has put on +9%. Picking those sort of trends is what the team at Market Matters is all about, and the ‘reflationary trade’ as we’ve called it has further to run. View our resource calls here
Staying on BHP for a moment, the very well regarded research house in the UK, Bernstein, that is has been a long term bear on BHP has just upgraded the stock to a BUY and this was most likely the catalyst for some strong buying in the BIG Australian today – with the stock closing up by +1.64% to close at $24.15. We own BHP in the portfolio with a 7.5% weighting.
BHP Billiton Daily Chart
On the broader market today, as mentioned, the miners led the charge adding +0.92% while the Untidies were hit hardest, down by -1.20% - an overall range of +/- 35 points, a high of 5790, a low of 5755 and a close of 5763, off –20pts or -0.35%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
The gong however goes to the much shorted Flight Centre which ripped up by +10.36% to close at $44.10 on the back of a profit upgrade, a rare occurrence for the retailer after 5 consecutive downgrades to earnings. FLT sighted better sales in their international arms, a good online result and said that full year underlying profit before tax is expected to be between $325 million and $330 million, up from its previous forecast of between $300 million and $330 million.
Short positions are BIG in this stock on the imminent doom of bricks and mortar retailing of travel services, with plenty of said shorts now hurting no doubt!!!
If FLT enters an upgrade cycle which is certainly possible given it’s a momentum business (best shown in the 5 consecutive downgrades we saw), then this could really get it’s mojo back.
Flight Centre (FLT) Daily Chart
Alumina (AWC) is a stock we covered in our New Income Report today and it had a reasonable session – closing up +2.30% to $2.00. A recap below.
Alumina (AWC) $1.96 Forecast P/E of 12.5x Forecast Yield of 6.1% FF
Not your typical income stock however AWC, which owns 40% of the world’s largest Alumina business is shaping up to be a very strong income producer over the next few years with the parent company (AWAC) now ex-capex, with high free cash flow, AWC is likely to get a good stream of earnings, 80/90% of which land in investor pockets. 2016 was a big year for AWC with a restructuring of the business, a new CEO appointed and what seems like clear air ahead for this ‘non-traditional’ dividend stock. We are keen on AWC at current levels for income and growth.
Alumina (AWC) Weekly Chart
Have a great night
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.
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