Macquarie hits the sell button – Market Matters hits the BUY (LNK, RWC, ING, IAG, NAN, WEB)
WHAT MATTERED TODAY
Some more activity across the MM Portfolios today on a day that saw the market sell off hard early before a strong recovery played out late in trade. Macquarie were BIG sellers of a few select names which we’ll cover below with a change in personnel showing that different views are what makes a market. Our problematic position in the MM Growth Portfolio (Nanosonics) actually showed some strength after early weakness and generated a BUY signal with a close above $2.65 versus our trigger level to sell if we saw a close below $2.60. More on this below in the MM CALLS section. Overall, most buying was in the Healthcare stocks today – an area we’re overall negative on however the strength today was clear for all to see while the IT stocks were sold. A range on the mkt today of +/- 28 points, a high of 5986, a low of 5958 and a close of 5982, down -3pts or -0.06%.
ASX 200 Intra-Day Chart – decent BUYING from session lows
ASX 200 Daily Chart
TOP MOVERS
Macquarie had a change of personnel recently in the funds division and interestingly enough, their high conviction calls became less high conviction as reported in the AFR today with decent sell orders going through in the BIG names on their high conviction list. The details can’t be confirmed until T +2 however the AFR reporting that some decent volume going through after the MQG high conviction fund recently lost their portfolio managers, Patrick Hodgens and Blake Hendricks, and its wider team, have also walked. That funds highest conviction's top five overweight positions as at the end of last month were Boral, Link, Qantas Airways, Reliance Worldwide and Woodside Petroleum. Today they’ve sold;
Link Shares Daily Chart -7.1 million Link shares at $8.57, worth $60.9 million, at 1.51pm
Reliance World Daily Chart -10 million Reliance Worldwide shares at $3.88, worth $39 million, at 1.51pm
Inghams Daily Chart -13 million Inghams shares at $3.55 worth $46.2 million, at 1.51pm
IAG Daily Chart -3.9 million Insurance Australia Group shares at $7.29, worth $28.5 million, at 1.52pm
Sims Metals Daily Chart -2 million Sims Metals shares at $14.13, worth $28.4 million, at 1.50pm
It seemed to me, Nick Scali (NCK) also got caught up in the MQG selling perhaps, given the illiquidity in the stock and the BIG sell order in the mkt early – before it recovered later in the day. Still down -5.26% however the selling pressure was indicative of one line being aggressively sold. – typical of a larger holder with a mandate to SELL.
From the Sept QTR Macquarie High Conviction Fund update – Performance was driven by strong stock selection – yet performance was in line with the index..mmmmm
OUR CALLS
We bought Webjet (WEB) this morning after it dipped below $9.50, paying up slightly to get filled at $9.54.This is a reasonably light stock in terms of liquidity so hard to get set in decent volume however there were opportunities throughout the day. We covered this in the AM report today saying that Last time we looked at WEB we were bearish targeting a potential fall towards $9, the stock has now fallen 15% this month and ~$9 is within striking distance. The fall in the online travel booking site was triggered by a trading update with earnings guidance coming in short at $80m, compared to the $89m that analysts were expecting.
The fall is a classic example of what happens to a stock trading on a high valuation which suddenly disappoints the market. However, we do not see major concerns within the business at this stage and the current P/E of 20.8x Est 2018 earnings is rapidly becoming more attractive – the 1.78% fully franked dividend is clearly not exciting at this stage, it’s all about potential capital appreciation. One of the themes we’ve witnessed in more recent times is follow through selling on downgrades for a few days after. The WEB downgrade happened on Wednesday, following through selling yesterday and often stocks find a low on the third day.
We bought today at $9.54 – Daily Chart here
We also thought about NAN this morning after it broke through $2.60 on the downside. In the last few days we suggested that a break below $2.60 would concern us and we’d revisit the holding. In today’s alert we suggested that a likely close below $2.60 would have us out, while a recovery above would keep us in. After weakness early the stock recovered and actually closed up +2.29% - which is actually a bullish sign given buyers stepped up in force below a key technical area. Obviously we’ll continue to asses however the price action today was good.
Nanosonics Daily Chart
Have a great night – keep an eye out for the Weekend Report Sunday
The Market Matters Team
Disclosure
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