Viewpoint: Bullish
WDS traded up almost $2 early yesterday morning before surrendering over half of the gains to close up just +2.7%, not a great performance considering the surge by oil. We believe oil will ultimately test the $US90/barrel area which should provide a healthy tailwind for the Australian Energy Sector .
BSL is Australia’s largest steel company which focuses on flat steel products including slab, hot rolled coil, and plate. The company’s main facilities include the North Star steel plant in Ohio, USA, and the Port Kembla Steelworks, the largest steel production facility in Australia plus it operates a US$1.36bn JV with Nippon Steel.
Poultry giant ING has still got a market cap of $1.1bn even after a period of significant underperformance from the stock both before and post-COVID.
CGC is Australia’s leading producer in the $8bn fresh fruit and vegetables market, the company operates over 3000 Ha of farmland, 7 mushroom facilities, and 20 Ha of glasshouse facilities across Australia in 4 core categories: Mushrooms, Berries, Tomatoes (glasshouse-grown) and Citrus. CGC enjoys the number one market share ranking in each of its core categories. The company operates offshore through JVs in Morocco and China and licenses its blueberry IP in the Americas and Morocco.
While the running yield of ~3.2% and yield to maturity of 4.65% is not overly compelling when a 1-year term deposit is offering 4.5%, it’s the fixed-rate nature of these returns that are appealing as a hedge against future economic pain which would lead to aggressive rate cuts. In other words, this is one for the pessimists that want portfolio protection in the event that things sour from an economic standpoint.
The US banking crisis continues to slowly improve but that is leading to a bounce in bond yields which is weighing on growth stocks e.g. the US 2 years have rallied from 3.55% to 4.07% in just 3 days.
PMV -2.49%: the retail group reported 1H numbers today which were well ahead across most metrics, however, the initial rally in its shares was sold into, ending the session lower. Sales were a ~15% beat to expectations while Retail EBIT was around 5% ahead of the market.
Surprisingly, even after the recent rally sent gold back toward its all-time high the speculative position in gold remains relatively low, which in our opinion underpins the bullish breakout potential for gold. Precious metals might need to consolidate as the banking crisis hopefully slowly abates but as the hiking cycle comes to its conclusion we believe it’s just a matter of time before gold breaks above $US2,100/Oz.
The ASX200 is down over 300 points in March having already wiped out all of the impressive gains in January and early February, investors now find themselves becoming increasingly nervous toward 2023. At the moment we have a stock market focusing on an unstable banking sector and a looming recession which by definition is weighing on the two most influential sectors in the Australian market. Medium-term we wouldn’t be surprised to see the local index remain within the confines of the last 2 years as we wait to see how well central banks can deal with the post-easy money period.
