Stocks bounce from daily lows – bullish move short term
What Mattered Today
A very strong effort from the market today despite closing up just +6pts, with the index rallying +40pts from the intra session low which played out around 10.20am. From then on we saw some ebbs and flows but the market grinded higher overall with a squeeze into the close pushing the market into positive territory for the day. Yesterday’s session was weak, with a lack of any real intestinal fortitude from buyers, while today was a completely different story…A strong session and a bullish short term move for Aussie stocks.
We had a range today of +/- 39 points, a high of 5621, a low of 5582 and a close of 5621, up 6pts or +0.11%.
ASX 200 Intra-Day Chart
ASX 200 Daily chart
We wrote a piece this morning on GOLD stocks, suggesting we’d likely add one more to the portfolio today, but we didn’t go through with it. We already have Newcrest (NCM) in the portfolio from around ~$21 and that rallied +3.31% to close at $23.69 today, however the obvious strength in the market from early lows made us second guess our call this morning to add either Regis Resources or Evolution. As always, the centrepiece of the MM service is around live SMS alerts sent when we transact on our own portfolio, and quite simply, it didn’t feel right to be adding to our GOLD exposure today, so we didn’t.
We did however pull the trigger on Star Entertainment (SGR) this morning around ~$3.76, allocating ~4% of the portfolio. We’ve been running the ruler over Star since the sector was rattled following the detainment of Crown staff in China back in October last year. Since then the sector has struggled on concerns that the crackdown on ‘marketing’ to Chinese VIPs would impact earnings, and it most likely will - the extent of which is the main variable. In our view, this represents an opportunity to start buying a quality business that could surprise to the upside when they release their interim result on the 16th February. Before the Crown incident, SGR was trading above $6, and is now more than 22% below that level.
Star Entertainment (SGR) Daily Chart
Some mixed corporate news today with Transurban (TCL) and SCA Property (SCP) reporting strong numbers and both stocks did well, while Macquarie was a tad disappointing versus the market’s upbeat expectations.
Transurban (TCL) said it would pay an interim dividend of 25c which was above expectations of 24.5c + they also increased full year payout guidance from 50.5c to 51.5c, which is clearly a positive. They have $9bn of projects on the go which are all on time and on budget however it seemed they planted the seed for some type of raise for the completion of the Western Distributor – the only project that ‘sort of’ needs funding. This stock is about distributions and in that respect, they said all the right things. A great company which we have traded recently, buying at $9.82, picking up the dividend of 25c and selling at $10.40 - a very short term gain of +8%. We simply think that interest rates are a natural headwind for infrastructure stocks that carry high debt levels, but importantly, as rates go up asset values come down which puts further pressure on balance sheets. TCL finished up +6.36% today or 66c to close at $11.04.
Transurban (TCL) Daily Chart
Macquarie (MQG) was less impressive and dropped more than 3% on open before recovering to end the day down -1.42% at $82.75 following a trading update. MQG has guided to flat earnings from FY16 and they were a tad lower than that, however consensus numbers were looking for +3% growth i.e the market had gotten more bullish than MQG themselves, largely a result of good results from IB’s overseas of late. Worth noting though that MQG now generates 70% of earnings from re-occurring annuity/asset management style businesses compared to just 25% in 2007 – it’s a different beast and importantly, the bulk of that is from overseas. We own MQG from lower levels and remain comfortable with the stock on 12.7 times 2018 earnings and what we think will prove to be a ‘low ball’ update today.
Macquarie Group (MQG) Daily Chart
Sectors
ASX 200 Movers
What Matters Overseas
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