Viewpoint: Bullish

2022 was a transformative year for the Big Australian after spinning out their Petroleum assets and looking to takeover copper giant Oz Minerals (OZL). It’s one of a number of deals BHP has done over the past decade to refocus it’s assets, going all the way back to the spin out of South 32 (S32) in 2015. The prudent work of management has clearly…

XRO has been the major disappointment across this sweet of positions over the last year as valuation contraction has weighed heavily on the share price, yesterday it caught our attention as it rallied +4.6%, hopefully, some bargain hunters are entering the fold.

Digital property business REA has suffered from both tech and real estate headwinds but in simple terms, we believe the 50% rerating was overdone at this stage of the cycle.

It may surprise many subscribers that MM has included property giant GMG in today’s report but its correlation to tech is unquestionable with its decline since late 2021 moving almost step for step with the correction by the Australian Tech Sector.

ALU has struggled compared to its peers over recent weeks as buyers appear to have gone in search of bargains as opposed to chasing the top performers. This Printed Circuit Board (PCB) design platform reported excellent FY22 results last August, revenue was $221m and EBITDA $81.1m while their FY23 guidance was also significantly better than consensus hence it’s unlikely we will be selling this particular holding into weakness. 

CSL is now the local market’s 3rd largest company with a market cap of $138bn, Australia’s most successful biotech/healthcare stock remains well below its 2020 high very much in line with the majority of the growth sector following the recent rally by the global bond yields. The company has done nothing wrong but international equities have seen a revaluation of the growth names due to the mentioned rising bond yields.

CBA is now the local market’s 2nd largest company with a market cap of $181bn again it’s hard to be bearish on Australia’s largest bank with an estimated $2.10 fully franked dividend looming in February.

BHP is currently the largest stock on the ASX with a market cap of $252bn and after touching fresh all-time highs at $50 yesterday morning it’s hard not to be bullish, especially with a forecasted $1 fully franked dividend looming in February. However, while we like “The Big Australian” over the coming years we’re not keen on chasing this initial breakout to new highs.

SUL +7.68%: the retailer traded to a near 11-month high today after announcing preliminary 1H numbers. Sales were up 11% across the board on a like-for-like basis led by strength in Macpac, Supercheap and rebel, though some weakness in their BCF brand weighed. The company noted a significant drawdown in inventory, helping to reduce costs and improve margins. The company pointed to a strong Christmas trade and expects profit before tax (PBT) of $213-218m, a small beat to expectations.