Viewpoint: Bullish
QBE rallied strongly yesterday after beating market expectations with 1H NPAT almost 50% above market calls aided by rising premiums. As we said yesterday this is a volatile / leveraged business which we can easily see trading back to the top of its last few years trading range i.e. $15-17 or at least 20% higher. However history does tell us this stock doesn’t come without risks…
Yesterday saw QBE Insurance (QBE) follow closely on the heels of Suncorp (SUN) in beating market expectations & Insurance Australia (IAG) talking about a better outlook leading to a solid +8.1% rally in the stock. The Insurance Sector appears to be delivering the perfect recipe in todays market with a battered sector that’s on the improve operationally (i.e. rising premiums) which also benefits from rising bond yields, a recipe for higher share prices it would seem.
CTD is a great example of stocks grinding higher but with plenty of volatility within the advance – in this case the stock shrugs of an ongoing poor sector backdrop courtesy of the Delta Variant:
The local market struggled to hold onto early gains yesterday as profit taking hit Commonwealth Bank (CBA) and the IT Sector, it felt like a weak day although we still managed to close marginally higher. Stock rotation was prevalent within the ASX200 yesterday as 15 stocks rallied by 3% or more, while 6 companies fell by the same degree, as we’ve flagged…
PPS +0.79%: Announced that the Interim CEO, Anthony Wamsteker, has been appointed CEO of PPS from 16 August 2021. This is unsurprising, positive and a safe pair of hands for PPS.
Financial platform provider HUB tested MM’s psychology after we decided not to lock in any profits above $28 only for the stock to correct 17% in a rising market. We like the business and as we are holding a relatively small position the opportunity to trim our holding wasn’t on offer hence we decided to stay long which definitely felt uncomfortable last week but cream does usually float and the stock bounced strongly.
MM has been looking to buy S32 into weakness ~$2.70 through 2021 but so far we’ve been too pedantic. It’s the prospect of a failed “pop” which has held us back from chasing the diversified miner into strength.
Recycling business SGM has rallied strongly over the last year but it still offered investors 3 opportunities to buy the stock into 15-20% corrections. The stocks clearly bullish, at this stage we see 2 likely swings over the coming months:
Having introduced a new phrase into our reports yesterday we felt today would be an opportune time to show some illustrative examples at different stages of their evolution. Global equities continue to rally strongly from their March 2020 lows but stock / sector rotation has arguably been the main game in town as investors strive to add value / alpha in this low interest rate environment.
The most recent bout of selling across global equities was caused by Chinese regulators but Asian equities appear to have quickly dismissed their actions and this negative influence is already becoming a memory for many markets. We continue to believe the next major hurdle for equities will be delivered by rising bond yields / interest rates.
