Australian Investment Blog

Have resources run too far too fast? At the start of 2016 one of our major calls was for a depreciating $US that would revive commodity prices and lead to outperformance from the ASX200 for the first time in a decade. The view of the $US and commodities was spot on but unfortunately due to our large weighting to the banking sector the local market remains the laggard on the world stage. Interestingly last night we had another strong night for resource stocks but the "Fang’s", the darlings of recent times, were negative i.e. Facebook, Amazon, Netflix and Google. Who would have thought at Christmas that by late April BHP would be up 10% but Amazon would be down 7%, especially as the S&P continues to rally towards all- time highs. This is another great example for investors of the cyclical nature of stocks and that running with the crowd can be a dangerous game, even if it feels comfortable and easy at the time! As we have discussed previously the renewed market interest in the underperforming stocks is a tell-tale sign of the maturity of this bull market but not necessarily its end. We have been advocating trading the resources space from the buy side recently but how much fat is now left in the trade as the papers get excited on the sector and analysts start to become bullish upgrading forecasts; where were they in January? BHP Billiton (BHP) BHP looks set to open around $20.10 today, up 2.2%, after further gains from iron ore and crude oil.
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