The sea of red won’t help the Maroons tonight!
Weakness pretty much across the board today with the market opening in the red with the selloff building momentum throughout the day – QBE the headline act dropping by –10.28% following a profit downgrade - we own this stock from $10.49 and will cover our views below, but in short, we’re yet to make a call on whether or not to hold or sell – it closed at $11.87. Elsewhere, we took a nice +18% profit on Janus Henderson (JHG) today and now have 15% cash in the MM portfolio, with the expectation that the market will be weak till nearer the end of the month before we hunt around for opportunities before July strength.
On the market today, the Energy sector was hit hardest while Health Care proved most resilient - an overall range of +/- 77 points, a high of 5742, a low of 5665 and a close of 5666, off -92pts or -1.59%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
QBE Insurance (QBE) – tanks on downgrade of FY17 guidance, mainly a result of higher claims in emerging markets – essentially the smaller parts of their business that continue to provide a few issues. They now say that insurance margins will be 8.5%-9.5% and this has led to most analysts downgrading earnings numbers by around 6% this year and next, and around 2% in 2019. The downgrade in itself is disappointing but probably more short term in nature, and could be overcome, it’s more the reputational damage.
QBE was doing a good job of turning around the business, the mkt was gaining confidence in management, they’d cleaned up their balance sheet, had better reserves (even too much in some instances) and were looking better in term of earnings + the macro backdrop. We liked the stock and owned it from mid $10’s – we now think it’s unlikely to bounce in the near term and may struggle for some time.
QBE Insurance (QBE) Daily Chart
Janus Henderson (JHG) was sold today from the portfolio, booking a nice profit of ~18% profit incl dividends. Although JHG remains good value, we’re concerned that the pound may continue to slide and volatility in the equity markets will tick-up leading into the end of June. We’ve also seen an uplift in volatility for Janus in recent sessions, which can often be a sign that a near term top has been put in place. We’ll revisit JHG again if we see more protracted weakness play out in the months ahead. By selling our 5% holding in JHG, our cash position will increase to a healthier 15% - which feels more comfortable at this stage – particularly given we own BT.
Janus Henderson (JHG) Daily Chart
Go the Blues!
The Market Matters Team
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