Viewpoint: Bullish
US stocks added to gains which the S&P500 futures made during our day session yesterday, the “risk on” sentiment was helped by comments by Joe Biden that he would reconsider tariffs introduced by Trump on China. Bond yields advanced slightly which helped US banks lead the charge overnight although all 11 market sectors closed positive for the session.
NZ based on-line accounting business XRO has seen its share price basically halve as valuation contraction hammered the growth stocks and in particular those like XRO who were trading on extremely large P/E’s. However we still like the core business its just a matter of what’s a fair price in todays rapidly evolving market, at this stage the $110-120 area feels about right.
HUB rallied over 4% yesterday although it remains significantly below this year’s high, we feel this platform operator has been gaining traction for 3-4 weeks and still like this business into the EOFY:
Gaming machine business ALL rallied another +1.8% yesterday, the company delivered a solid result last week which has now seen the stock bounce over 18% in less than 3-weeks. For those that missed it ALL’s 1H22 update included a supportive $500mn buyback.
As Australia welcomes a more environmentally friendly government crude oil prices remain strong and a challenge of $US120/barrel feels more likely than a break back under $100. Its important as investors that we remember that while the world accelerates down a path of EV vehicles and green energy the journey takes time and fossil fuel companies will remain cash cows for many years even if they are unpopular in many circles.
The chart of WEB looks like a carbon copy of QAN i.e. since the outbreak of COVID the travel and tourism sector has largely moved as one. Interestingly this is one stock that in many analysts opinion missed expectations in areas with their result yesterday but the shares managed to rally albeit only +1.4%. Revenue was up 258% to $138mn which was a small miss for Goldman Sachs but operating cash flow came in at $71.5mn, way ahead…
The iconic Australian airline has been grinding higher post COVID although it keeps falling short of our +$6 target area. This month the national carrier launched a takeover of Alliance Aviation in a scrip deal for over $900mn, we like this move which should immediately be earnings accretive but its had a limited impact on the share price. The company has a strong balance sheet and has done a very good job…
China is currently in talks with Russia to buy its oil to build up their depleted strategic reserves, it’s no surprise that China is keen to buy this cheap oil which most of the world wont touch, it can dictate terms! With the EU looking to ban all Russian oil by the end of the year its simply giving India and China the opportunity to access cheaper oil in today’s tight market, it feels very wrong emotionally but correct economically.
WOW -5.61%: it’s not often we see ‘Woolies’ down nearly 6% however the negative sentiment flowing from Target’s result in the US prompted a significant sell-off right across the retail sector in Australia, and not even staples were spared. Rising costs are the main issue here however it’s important to note that WOW and other sector players like Wesfarmers (WES) have not enjoyed the strength that the likes of Target have in the US which has seen their shares rally 2.5x in the last 2 years.
ALL +6.74%: A tough day to bring out a good set of results, however, that’s exactly what ALL did and they still managed a solid session despite the overall market weakness. For 1H22 they produced adjusted net profit after tax of $580.1m which was up 42% year on year while they announced an interim dividend of 26cps. The composition of the result was strong and was well ahead of market expectations across the board, in the vicinity of…
