Australian Investment Blog

Good Afternoon everyone

Market Data

What Mattered Today

We’ve now had a v’strong rally in the ASX from the 4706 low on the 10th Feb this year up to today intra-day high of 5425. A move of +719 points or +15%. The move has been fairly choppy in nature, with different sectors pulling at different times. Banks one day, resources the next however in aggregate, both sectors have done very well . Breaking up the moves during that time see’s the financial sector up +15.6% while the material sector has put on an aggressive +23% and we actually saw the material sector base out prior to the banks.

Although the financials are clearly the dominant sector in the Aussie bourse, perhaps it’s a case where the material stocks dictate the sentiment within the market and lead future moves? Banks have no doubt run hard, and there was clear profit taking in the sector today. CBA had a high $79.20 this morning, only to close at $77.99. The same trend was obvious in ANZ, WBC & NAB. BHP and RIO on the other hand opened strongly, and powered ahead for the remainder of the day.

Technically, the ASX 200 hit our previously guided target of 5400 early (5425 high) and now trades at 5372. A weak close after the index made a marginal new high and failed. A close above the October 26th high of 5384 would have been more meaningful for the bulls but not to be. Interestingly, as Chris Westin over at IG made mention of this morning the ASX 200 lost 21.5% between 13 April 2015 and 10 February 2016 (or 212 trading sessions), so a close above 5384 would see the index re-claim 50% of those losses in a mere 62 days.

Anyway, it’s been a BIG bounce for Aussie stocks in the last few weeks, and as we wrote this morning, the banks seem poised for higher levels before a deeper correction. That said, some consolidation post the run up would not come as a surprise.

We took some profits today on Healthscope (HSO) – Australia’s No 2 hospital operator – above $2.80 after buying the stock on the 8th December 2015 at $2.48 (+ we received at 3.5cps unfranked dividend) – a circa 15% return. HSO remains a very solid company and growth in healthcare spend, a rising population, age demographic etc will support earnings over time however given the run up in price, and the tepid nature of this market, we elected to take profits this morning. We held 11% of our portfolio in HSO.

Woolworths (WOW) is a stock we’ve spoken of recently, suggested a BUY sub $20. The mkt hates it, and the media is savage on Woolies at a time when the business is actually taking some fairly aggressive steps to improve its operations. Although we think it’s a BIG ship to turn around , and it will take time, rallies from the lows will happen and we’ll be looking at this closely to get on one, preferably coming from the sub $20 region.

Takeover speculation prompted buying today with the stock up +5.46% to close at $22.80

…and Bellamy’s (BAL) continues to get bid up with another very strong day – up +8.01% to close at $12.13. This is a reasonably low volume stock which can move quickly in a short period of time. At the start of the week, JP Morgan put out a very bullish note on Blackmores (BKL) calling a $215 price before the end of 2016 – which seems a big number but in reality, it was trading at this level in January. We like Bellamy’s (BAL) and remain comfortable with our 5% allocation to this quality growth stock.

Stocks & Sectors Today

Source; Bloomberg

ASX 200 Movers

***What Matters Tonight***

European leads are weak with the FUTURES on the FTSE -8, DAX -1 & CAC -15
In the US DOW FUTURES are off -67 and the S&P 500 FUTURES are off 7

Regards,
The Market Matters Team
Level 12 28-34 O'Connell St
Sydney, NSW 2000.

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