Archives: Reports
The GameStop effect took hold of the local market today, with the ASX falling 130pts, the most in more than 3 months as markets globally took notice of the targeted buying of GameStop overnight. For those that missed the news, a group from an online forum took on a number of funds that had shorted shares in the US listed video game retailer, bidding up the stock in a frenzy which eventually saw shares in the struggling company more than double overnight on its fourth consecutive day of gains.
The ASX200 struggled yesterday finally closing down 44-points, or 0.65%, it felt worse at the time but when less than 60% of the index falls the drop is rarely too severe.
A soft return for the local market today following yesterday’s holiday. Iron ore names were the biggest weight on the index as the commodity price took a step back from its soaring heights with traders concerned with tight steel margins
Australia Day is behind us and schools go back this week, to many it feels like summer is already in the rear view mirror although to be precise the 1st of March is the start of Autumn. Almost one month into 2021 and the ASX has ground out a +3.6% gain with the Banks and large cap Resources leading the line, at MM we’ve called this to be a positive year highlighted by some periods of elevated volatility probably the one ingredient that’s been missing totally absent from stocks in January but never say never, the year is young. Investors shouldn’t get too bullish, over the last decade the average gain for Q1 is only +3.5% and we’re already there.
This is a quality growth stock that has strong earnings momentum. More broadly, the market has now pulled back into our 6500 targeted range and we’re stepping up and increasing our weighting to the market. We view this as a moderate risk stock and our initial plan is to hold over the medium term.
A quiet session for the ASX today with the bulk of the market taking the day off to make a 4 day weekend with Australia Day tomorrow – makes sense, although there were a few in office that got ‘stuck on the desk’ like I did. The retailers and IT stocks were the best on ground today while another 4% gain in Fortescue Metals (FMG) helped to support the material sector – we touched on FMG in the AM note today, expecting a big earnings / dividend number in February.
Over the weekend the market news was again fairly thin on the ground although it was very pleasing to again see no new locally transmitted COVID cases, just imagine the US and UK are still posting over 160,000 & 30,000 fresh daily cases respectively. With a vaccine scheduled to be rolled out in March it feels pretty good on both the humane and economic front assuming we don’t become complacent. We should be positioned to recover far more rapidly than many of our trading partners but it’s the ongoing COVID global disruption that’s likely to keep our interest rates lower for longer – remember in November the RBA committed to maintain 3-year bonds at 0.1% enabling banks to offer 4-year fixed home loans under 2%.
The ASX200 keeps climbing the wall of worry, the 6700 magnet is threatening to pass its mantle onto the new 6800 handle and on Friday we closed less than 6% below 2020’s all-time high. The rate of ascent has diminished as the buyer’s appetite for different stocks / sectors rotates almost daily while the underlying index sets its sights on 7000, but it appears in no hurry to reach the next major psychological level. Already in 2021 while the index has ground out a ~3% gain we’ve seen 27 stocks rally by over 8% and 15 stocks fall by the same degree with some interesting names on both sides of the respective ledger:
The ASX200 continued to make fresh 11-month highs yesterday with again only 60% of the index posting gains but with the exception of CSL Ltd (CSL) the winners were focused were it mattered from a points perspective propelling the market over 50-points higher e.g. The “Big 4” Banks, Wesfarmers (WES), BHP and RIO all rallied well over 1%. Global equities are clearly embracing the combination of ongoing huge fiscal / monetary stimulus plus the hope that Joe Biden will deliver stability around global trade.
However it wasn’t all roses under the hood as Cleanaway Waste (CWY) fell over 8% following the retirement of its Chief Executive Vik Bansal after 5-years’ in the seat – the bullying incident and associated uprising a few months ago clearly the catalyst for his departure. While we’ve had Cleanaway on our hitlist for a while, the pullback hasn’t convinced MM that its time to buy back into the business. We are keener on a few stocks that already appear to have found a decent swing low such as Aristocrat Leisure (ALL) which we touched on yesterday – watch for alerts today.
A solid session for the ASX today with our recently frustrating BNPL stock Zip Co (Z1P) rewarding our patience rallying +23% following a positive quarterly update – we cover the high notes below. Their move helped the IT sector lead the gains adding +2.7% in a session that was clearly risk on. The ASX 200 breaking out of its ~8 week trading range which now sets up a move towards all-time highs. I caught up with a good friend this afternoon who’s heavily involved in property, particularly in the Western Suburbs of Sydney. I hadn’t caught up with him for a year and some of the prices being achieved for properties in that region have been extraordinary relative to the feasibilities we’d talked about only 12 months ago, clearly the trend is being supported be low rates and plenty of liquidity, a theme we expect will continue.
