Viewpoint: Bullish
A few themes playing out in line with the MM script today:
1. After an aggressive early sell-off, we saw growth find a ‘washout’ style low and rally. As suggested in recent notes, we think this area of the market is set up for some reversion of recent trends i.e. growth is a short term buy including technology stocks like Afterpay (APT), Zip Co (Z1P) and Xero (XRO) along with CSL which hit a $242.00 low before rallying to close at $250.16, up 1.69%
Shares in Insurance Australia Group were smacked this morning before being put into a trading halt for a few hours over lunch. Rumours were swirling that IAG had a large exposure to the underwater finance firm Greensill.
Being a fossil fuel based business WHC is not a popular stock with many investors on both the retail and institutional side but with lack of popularity often comes value. We believe that WHC fits this description perfectly while also very much being a recovery stock as it needs economic activity to push the coal price higher – our initial upside target is 20-25% higher.
REA has been sold off almost 20% amid the scramble to abandon the growth sector but property markets remain strong and REA has performed strongly through the difficult pandemic period e.g. in the 2nd half of 2021 revenue only declined 2% whereas operating expenses were slashed 13%
Dexus is the largest office landlord in the country and is clearly suffering at the hands of the WFH (work from home) phenomenon, however to MM, the eventual reality will be that the office remains the primary place of work while greater flexibility will be offered around the edges
The BNPL space continues to dominate the press as the volatility to the downside gathers momentum. Over the last 4-weeks APT has corrected 32% into our identified major technical support area, from a risk / reward perspective we are now bullish APT which coincides with our short-term positive outlook for the IT Sector – that’s a contrarian call which certainly looked off the mark yesterday!
While Z1P, APT & Co slipped ever lower its was encouraging to see our position in ALL start to gain some traction yesterday, it appears to be benefiting from being tagged as a GARP stock i.e. ”Growth at a reasonable price”.
NEXTDC (NXT) develops data centers. The Company develops and operates carrier and systems integrator neutral data centers in Australia. NEXTDC’s customers will also be able to use the data centers as connectivity and content hubs.
Commodity prices have rallied strongly since COVID first hit the world in Q1 of 2020 with the huge stimulus being pumped into the system by central banks helping to lift the price of commodities almost across the board
The more growth and potentially irrational exuberance that growth stocks have enjoyed in recent times the harder they’ve been smacked, previous market darling Tesla (TSLA US) has become a huge underperformer falling 40% in a handful of weeks to actually close on Friday down 15% for the year.
