U.S. Retail Sales Weighing On Rates

Posted on | by Leon Hinde | Leave a Comment on U.S. Retail Sales Weighing On Rates

U.S. Retail Sales fell for a third straight month in February as households cut back on purchases of motor vehicles and other big-ticket items, pointing to a slowdown in economic growth in the first quarter.

Consumer spending, which accounts for more than two-thirds of U.S. GDP, appears to have slowed at the start of the year.

The combination of weak consumer spending data and global manufacturing data has been enough to see yields run into resistance.

The peak optimism on synchronized global growth and inflation pick-up, now appears to have passed.

With yields moving lower, we’re likely to see a better environment for the yield sensitive sectors. Telecommunications, Utilities, Consumer Staples and Real-Estate.

Some of the local names in these sectors include: SYD, TCL, AGL, GPT, SCG and WFD.

The chart below illustrates the yield on the 30-yr bonds falling relative to the shorter dated 2-yr bonds. This is typical during a period of slower economic growth.

 

 

Medibank Is Approaching The Buy Zone

Posted on | by Leon Hinde | Leave a Comment on Medibank Is Approaching The Buy Zone

Medibank is trading near the $3.00 support level.

We see little in the way of earning growth over the next 12 months, however, with stock now on a 4.2% dividend yield, we expect to see renewed buying interest.

We recommend overlaying a covered call strategy to generate 10 – 12% cash flow on an annualised basis.

Buy near the support zone and look for a rally back to $3.15 before setting the call strategy.

Medibank Private

 

 

Will The Royal Commission Weigh On Local Bank Shares?

Posted on | by Todd | Leave a Comment on Will The Royal Commission Weigh On Local Bank Shares?

Hearings in the long awaited banking Royal Commission start today with the examination of evidence and some questioning of witnesses.

The main focus for will be in the mortgage segment of the banking business, which includes over $1.7 Trillion in residential mortgages.

We believe one of the pricing risks to the banking shares revolves around the alleged $500 billion in “liar loans”: or loans which have been made using false information.

What’s worse is that over $92 billion of these loans are alleged to have been generated by bank officials falsifying information.

We believe the impact of the Royal commission has already been priced in to a degree. However, we still see the price risk going forward skewed to the downside.

The chart below of the BetaShare ASX Financial ETF illustrates the current neutral reading in the local shares.

BetaShare QFN ETF

 

 

 

 

 

 

CTX Is Approaching The Buy Zone

Posted on | by Todd | Leave a Comment on CTX Is Approaching The Buy Zone

Since posting a two-year high of $37.00 on February 27th, shares of CTX have dropped close to 12% to reach $32.60 in early trade today.

Much of this down move has been in response to its full year results, which saw operating profits only marginally rise above their guidance.

We sold the May $36.00 calls for shareholders on February 28th for $1.00.

Those calls are worth about 35 cents today and investors will get paid the 61 cent dividend.

We don’t currently have a buy signal for CTX. However, based on the recent price action above the key support area of $31.50, we expect to see one soon.

CalTex