Viewpoint: Bullish
MM has held this position for almost 2-years and at this stage we see no reason why it wont still reside in our portfolio for another 2-years. The fund tracks 11 of the most liquid agricultural commodities such as soyabeans, corn, coffee and sugar. We simply believe the worlds growing middle class with its increased demand for food will drive up prices faster than improving farming efficiencies can offset – another piece in the commodities supercycle puzzle.
Crude oil slipped almost 2% last night following the Ukraine news, a pretty tempered reaction in our opinion considering its rally in 2022. We anticipate some consolidation around current levels but another push towards the $US100/barrel area remains our preferred scenario, hopefully the Energy Sector will follow for the ride because history does show us that stocks have a habit of failing before their underlying commodity prices.
US stocks enjoyed a firm session overnight following easing tensions towards the Ukraine, we’re still looking for higher prices in this quarter but whether the tech heavy indices such as the S&P500 can test / break Januarys all-time high will be determined by how well the heavyweight tech names can shrug off interest rate concerns i.e. even if we are correct…
Tuesday saw the ASX200 drift lower through the afternoon to finally close down 0.5%, again we saw more stocks in the losers corner but it was another sharp decline by iron ore, and its related miners, which overshadowed a recovery by the tech names. BHP Group (BHP) was the best of the bunch only slipping 0.3% after delivering a solid scorecard yesterday…
SEK +6.08%: An impressive 1H22 result today from the online recruitment platform with revenue of $517m, 3% ahead of consensus while EBITDA was a ~10% beat highlighting the sort of operational leveraged in the business. They also upgraded guidance for revenue to be $1.05bn – $1.10bn for FY22 which was around ~5% better than prior guidance + market expectations.
BHP -0.31%: A wild ride for BHP today after reporting a strong 1H22 result and bumper dividend on a day where Iron Ore fell ~10% in Asia and Energy stocks pulled back from recent highs. In terms of the result, it was strong on most metrics – from NPAT to dividend – a 1H record. NPAT from total operations (including petroleum) of US$10.7bn beat the prior 1H NPAT record…
The ASX traded FUEL ETF has performed strongly over the last 6-months given it has higher exposure to overseas players including Exxon, Chevron, Total, ConocoPhillips & BP. In line with our view towards overseas energy names we intend to give this position further room. We own FUEL in our Macro ETF Portfolio.
Exxon has significantly outperformed the domestic names and although we believe a period of consolidation is likely around the $80 area we can see an eventual move well above $US90 i.e. we believe it will continue to outperform its Australian peers. Interestingly, the stock / sector was lower overnight even as crude oil hit $US94 a barrel for the first time since 2014 suggesting it’s time for a rest for many oil stocks. We own XOM in our International Equities Portfolio.
BHP still looks very capable of testing its 2021 high and considering we reduced our holding from 9% to 6% around the $47 area we feel comfortable giving the position a little room plus an attractive fully franked dividend is looming less than 3-weeks away. We hold BHP in both the Flagship Growth & Active Income Portfolio’s.
As we mentioned earlier European stocks endured a tough session overnight but when we stand back it represents no more than ongoing consolidation which has been unfolding for over 6-months. Overall it’s no surprise to see equities across the region struggle with Ukraine tensions rising however with talk still going on between Putin and Biden they might be getting nervous just when a more optimistic tone would be appropriate – fingers crossed on this one for everyone’s well-being.
