All four major banks, and the regional names, are now displaying Algo Engine sell signals. Currently we have no bank long holdings within our model portfolio.
Within the financial sector our preference remains for ASX and IAG. Both offer a fully franked dividend yield, and when combined with a covered call, we’re generating 10 – 12% annualized cash flow.
Our concern about the low ROE for the domestic banks is driven by weak housing loan growth and the rising cost of funds. These conditions keep us cautious on the banks, especially when combined with the present group of ALGO sell signals.