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Do you think the current dip a good opportunity to add or build positions?

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Question asked 04/12/2021

Do you think the current dip a good opportunity to add or build positions?

Hi James, I enjoy the content & views on the global outlook, I certainly look to follow some of your moves. Could you please outline why the US which seems to influence other nations is up so significantly when so many stocks are significantly down over the last 12 months. It seems to me a tiny number of stocks are supporting the market entirely with huge market capitalisations. To name some : MSFT + 57%, NVDA +149%, GOOGL +65% and TSLA +100%. A vast number of stocks are actually considerably down over the last 12 months just to name a few : VISA -7%, MA -4%, PYPL -13%, DKNG -32%, PINS -42%. Are there actually signs of an ‘under the hood’ concerns with so many stocks being sold down considerably? This is replicated in Australia with numerous stocks significantly off highs (WPL, PBH, WBC, BOQ, NRW, LLC, IAG, NST, ZIP, TNT) to name just a few. In current circumstances, why is gold not moving significantly higher? Australian banks certainly seem to have declined of late? Do you think the current dip a good opportunity to add or build positions? Your view on the following at current prices, do you see a turnaround for these please : PBH, WBC & BOQ and TNT Thanks, Bernie

Answer

Hi Bernie,

Lots of questions here hence I’ve answered them briefly:

You are effectively discussing something called the advance / decline line which historically is an excellent indication of a stock markets core strength. When a few large cap names carry the index to new highs it’s usually a sign of underlying weakness and in this case its one of the reasons MM believes 2022 will be a more volatile and overall choppier year for equities.
Gold is currently experiencing headwinds from a firm $US and fears that bond yields are set to rise faster than many thought, at this stage inflation isn’t helping the metal.
We like banks after their current pullback e.g. Commonwealth Bank (CBA) has fallen over 15%.
Of the other 4 stocks mentioned, PBH, WBC, BOQ and TNT the Bank of Queensland (BOQ) around $7.60 is probably our preferred option although we also own / like PBH at current which we hold in our Emerging Companies Portfolio. TNT is one I have looked at multiple times, we have an analyst that covers it, however I’ve never been sold on it’s ability to turn a good story with interesting tailwinds into a solid company.

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