Morning Report Monday 18 August 2014
Building Stocks disappoint, should we buy the pullback?
Last week we saw the broader ASX200 have a strong recovery, however the leading building stocks fell, which after a stellar 12 months requires further examination. Last Friday, James Hardie (JHX) reported disappointing 1Q14 earnings with margins down in the US. Overall, I believe the market had simply got a little ahead of itself, driving the stock up over 230% in 3 years. My preference in the sector remains James Hardie (JHX) and Dulux (DLX), their respective offshore earnings and current weakness is close to providing good risk reward opportunities. World economies may still be spluttering along, but respective Central Banks remain committed to stimulating their economies through interest rates. Property / construction is a major beneficiary of this course of action, hence I remain comfortable with the sector.
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