The dogs are starting to bark…!
Further upside today from Aussie stocks however most of the love was towards those stocks / sectors that have been sold down in recent times. The defensive ‘yield play’ that the market is now extremely negative on led today’s buying while RIO, which reported a very strong set of numbers yesterday ended lower (RIO -0.44% / $65.25). The material stocks were the weakest link and we’re targeting sub $25 for BHP and around $63 for RIO. It’s all about market positioning / sentiment and as we said yesterday, what has already been baked into the cake . Contrasting RIO report which was very strong yet the stock finished lower today with AMP which was a weak result but the market dislikes the stock, and it’s very under owned and therefore rallies on the announcement of the buy back. AMP +3.98% / $5.23
Along the same line, the market is still very negative the Telco space after a tough 8 months for the sector, and specifically the likes of TPG Telecom (TPM) and Vocus Communications (VOC) – both rallied well today with VOC up +6.73% and TPM up +4.09%- on decent volume. We bought TPG today as a short term trade targeting ~$7.80…We already own Vocus (VOC)
Vocus Communications (VOC) Daily Chart
We’ve written numerous times recently about looking at stocks that are cheap or stocks that have been sold down too aggressively as a particular theme has unwound – and vice versa on the upside. It’s typical of markets where investors get too optimistic and too pessimistic particular themes. 2017 will be a very choppy year in our view and investors will need to be more active around positioning. Our recent BUYs have been in Star Entertainment (SGR) this week, Henderson Group (HGG) which reports tonight, and TPG as a short term trade today. These are all ‘unloved stocks’ that we think the market has become too negative on .
Suncorp (SUN) released results today and they were messy, but all up more on the positive side than not. Another example of a relatively cheap stock in our portfolio, that has tailwinds from internal business improvement / better management plus will benefit from an improved external environment – interest rates + insurance rates.
In terms of their result, they announced a 1H17 cash profit of $584m, EPS of 44.6cps and an interim dividend of 33cps – they also said they’re looking to sell their Life Insurance business. On the positive side, they’re starting to see reasonable top line growth with OK rate increases for general insurance while costs are staying prettyflat. There’s no doubt that the last few years has been tough for SUN but they’ve got a good balance sheet and excess capital. If they can sell their life book that will improve their return on equity which is a positive. Ex the upcoming dividend the stock is on 12.9x and 6% yield fully franked. Happy holders for now.
Suncorp (SUN) Daily Chart
Elsewhere, AGL had a good result and the stock rallied +4% to $24.00. The divi of 41c versus 33c expected with 80% franking the main driver. 
Reporting really kicks into gear next week with around 60 companies in our universe reporting numbers…
On the market today, we had a range +/- 36 points, a high of 5671, a low of 5635 and a close of 5664, up +13pts or +0.23%. A good rally into the close again another sign that we’re headed higher from here.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
The DOGS of recent times starting to see some buying – insentia + Vocus + Aconex + TPG + AMP have all been under a lot of pressure in recent times
Have a great night,
The Market Matters Team
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