Viewpoint: Bullish
The unloved property company was trading at $1.56 when flagged and yesterday it closed at $1.785, up 14% in the past month or so to be the 2nd best performer on the list. We still like CNI and have a medium-term target of ~$2.50, expecting the share price to continue to make higher lows, and higher highs. Yielding 6.3% and trading on 12x we think this remains a standout property pick.
Crude oil has quickly surrendered its recent gains as recession fears again became front and centre of investors’ minds, it’s bizarre how strong economic data is driving recession fears but it, unfortunately, demonstrates that investors have limited confidence that the Fed can balance its fight against inflation without avoiding a painful economic downturn.
US indices extended the previous days falls illustrating markets’ nervousness towards any strong economic data which could threaten higher yields. Losses were led by the heavyweight tech names in a clear illustration that the nervousness was very bond/Fed-focused, the Energy stocks experienced the largest declines while the Utilities were the only sector to close up.
The ASX200 slipped away 0.5% on Tuesday after the RBA rate hike, no surprises really considering that while the majority of economists were calling the 0.25% move it wasn’t fully baked into bond prices hence the small intra-day rally in yields and the $A. Considering how far local stocks have rallied from both their October low and overall proximity…
The junior player out of the group is still a $3.6bn business today which as a stock has a very similar look and feel to its sector peers. The stock is priced more for relative growth trading on a P/E for 2023 of 13.6x while “only” being forecast to yield 3.2% over the coming 12 months.
The Big Australian has rallied to within 3.7% of its all-time high with the diversified miner enjoying the tailwind from iron ore and a number of other commodities – similar to the ASX Accumulation index if we include BHP’s dividends over the last 2 years its already trading at all-time highs!
RIO has bounced ~34% from its November low but it’s still only trading on a P/E for 2023 of 8.8x while it’s expected to yield almost 5.6% over the next 12 months – RIO can be considered as a lower Beta play than FMG when playing the iron ore market.
FMG has already bounced ~50% from its November low but it’s still only trading on a P/E for 2023 for 10.3x while it’s expected to yield almost 10% over the next 12 months – importantly its payout is forecast to fall over the coming years in line with a declining iron ore price.
On Melbourne Cup day we wrote a report titled “Iron ore is under $US80/tonne is it time to reconsider buying”, at the time we went from being bearish about the sector to neutral which in hindsight wasn’t bullish enough, especially as we seriously considered Fortescue (FMG) as a yield play for our Active Income Portfolio. The markets now enjoying improved…
US stocks retreated overnight after surprisingly strong economic data sent bond yields and the $US higher which in turn reduced the market’s recent appetite for the “risk on” trade. The S&P500 finished the session 1.7% lower with bargain hunters noticeable by their absence i.e. the markets reasonably balanced around current levels.
