Viewpoint: Bullish
Yesterday saw the ASX200 eke out a small +0.25% gain following the RBA’s rate hike at 2.30pm – local stocks initially jumped on the news only to fall away in the last hour of trade as investors’ focus quickly switched to a weakening US futures market. By the days end, we had a balanced number of winners and losers with some noticeable buying entering the Tech and Gold Sectors with the former bouncing +1.7%.
RRL +10.69%: a record last quarter helped Regis rally today with the gold miner managing its production better than peers in a tough period. A total of 124koz was produced in the 4th quarter, up 20% QoQ, taking the full year’s production to 437koz, just shy of the midpoint of previous guidance. Costs were higher though and the company expects the average cost for the full year to come…
Retail drinks and hospitality business EDV has performed well through 2022 managing to largely ignore all of the macro factors in play. People are partial to a drink during tough times and the owners of Dan Murphy’s and BWS are clearly well-positioned for this trend. The group enjoy online sales In excess of $1bn with 40% of its sales now digitally influenced – ordering online at Dan Murphy’s and picking up through the drive-through delivers a great customer experience!
Packaging business ORA has slowly but surely appreciated since COVID, a very comfortable journey compared to many stocks & sectors in 2022. We believe ORA is reasonable value trading on an Est P/E of 17.7x for 2022 while its 4.2% unfranked yield is a useful top-up for performance. The company is growing in North America while inflation has been navigated by timely price increases i.e. the business…
Supermarket operator COL delivered a solid result in April with sales growth driven by accelerating inflation, everything looks solid over the next year or two with COL but it will need population growth to expand meaningfully moving forward. The stock is not particularly cheap trading on an Est P/E of 23.9x for 2022 but a sustainable 3.4% fully franked yield makes it relatively easy to be patient if concerns are growing towards much of the ASX.
European equities are failing to embrace any yield relief from bonds as economic concerns and geopolitical tensions remain the dominant factors at play e.g. Germany and other parts of the region are finding it hard going to cast aside dependency on Russian oil. We can see a bounce in the Stoxx but until we see a resolution in Ukraine it’s hard to imagine any meaningful outperformance.
US stocks were closed overnight for Independence Day while the futures market gave no indications for what lays in store for the rest of the week. We remain bullish on the tech stocks initially looking for 8-10% upside as bond yields slip lower although the market clearly remains extremely nervous.
CSL was the market darling for the decade before COVID but as so often occurs investors started to only focus on the quality of the business as opposed to the fair value of its shares hence the 30% correction since early 2020 as the crowded trade again proved to be a dangerous place to be invested. We bought into the stock’s pullback in early 2021, it’s been a fairly long journey for only a +6% paper return thus far.
The ASX200 started its first full week of July on the front foot rallying +1.1% on broad-based buying which saw over 80% of the main board close up on the day. All sectors rallied with only the industrials and utilities advancing less than 0.5%, the underlying strength flowed through from the bond market which has started to question how fast central banks will hike rates as recession fears increase, global economic data…
