Morning Report Wednesday 26 August 2015
Yesterday was an amazing day that saw the ASX200 rally well over 4% intra-day to close up a very healthy 136 points (+2.7%). In simple terms the value that returned to the market was too good to resist and investors aggressively chased value, especially in the banking sector which closed up 4% after opening well in the red e.g. ANZ rallied 6% to close at $27.99 after opening at $26.41 - see chart 1. When panic hits a market its time to simply to stand back and keep it simple stupid (KISS).
1. Is the reason for the panic likely to create any changes to our investment outlook over the next 2-3 years?2.What quality stocks have been totally oversold?
At this point in time, we agree with yesterday's markets view that the Australian Banks have simply become extremely cheap. Commonwealth Bank (CBA) has corrected over $24 ( 25%) and is currently paying a 5.6% fully franked dividend, which we believe is both sustainable and will continue to grow. When stock markets panic the majority of the selling occurs in the futures market as professionals indiscriminately "sell the market", this leads to arbitrage selling which importantly creates selling in the whole market, including quality stocks that we may wish to purchase - thank you! It's important to remember at times of panic to think like world's most famous investor:
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