BHP announced the return of the full US$10.4 billion proceeds from the sale of the mining giant’s US shale assets.
The funds will be returned to shareholders almost immediately through a combination of an off-market buyback in Nov/Dec 18 (US$5.2 billion) and a special dividend of US$5.2 billion payable in January 2019.
BHP has been under an ALGO buy signal since September 11th at $31.20 and we see the next chart resistance level at $35.40.
BHP
Over the last 5 tradings days, our Algo Engine has generated a number of buy signals in oversold blue-chip stocks, as well as the leading market indices and ETF’s.
We believe the market is finding support based on valuation and yield, consequently, we’re likely to see buying support build.
The graph below is the index on the ASX 100. The graph below that highlights the technical structure we’re watching out for further down the road.
Will the major indices put in place a lower high pattern and generate an ALGO sell signal?
It is too early to position portfolios around this possibility and for now it is “buy the dip” in quality names. However, keep the following image in mind as we work through the December – February periods.
In Monday’s webinar we looked at a number of high conviction ideas and positioned buy-side entry levels in oversold names.
The following stock codes are a reminder of companies that should have made it onto your watch lists:
ANN, LLC, AMC and IRE
West Texas Intermediate (WTI) Crude Oil price dropped 1.3% overnight to post their worst monthly performance in over two years.
The combination of trade wars, the global equity market slump and increasing oil stockpiles has raised concerns about oil demand, which pushed the WTI price 10.8% lower during October.
However, with official US sanctions on Iranian oil set to begin on November 4th, some analysts are looking for a bounce in crude oil prices.
Our ALGO engine is currently showing buy signals in the local oil names: WPL, STO and OSH.
We look for all three of this stocks to firm over the near-term with OSH reflecting the best value on a relative basis
At $27.00, ALL is at about 17.5X estimated FY 2019 earnings.
In addition, given ALL’s exposure in the USA, a further fall in the AUD/USD will act as a tailwind for earnings going into next year.
ALL is part of our ASX Top 50 Model portfolio and we have an upside target of $40.50 over the medium-term.
The share price of CWN dipped to a 10-month low of $12.25 on Monday.
At the current level of $12.60, the stock is trading at less than 20X FY 2019 earnings for a partially franked yield of 4.5%.
Crown is included in our ASX Top 100 Model Portfolio.
Our near-term price target is just over $14.20, with a longer-term view to $15.75
Amcor looks oversold and we expect to see a rally back to $14.00 over the next 8 weeks.
Amcor announced a proposal to acquire Bemis in August, when the deal was valued at about $9 billion.
Bemis operates 56 packaging plants in 12 countries but most of its operations are in the USA; Amcor operates 195 packaging plants in 43 countries.
Amcor will shift its main share-market listing to the New York Stock Exchange in the all-scrip buyout, which would make it the world’s largest plastic packaging group.
It will ditch the ASX as its primary home, but still intends to give Australian shareholders exposure through Chess Depository Interests on the ASX.
We expect hedge funds to begin unwinding their short AMC long Bemis position which will create added buy-side demand into the market for AMC shares.
Amcor
We recommend buying both Downer EDI & CIMIC Group at current levels.
Both of these infrastructure names have pulled back materially from their June highs without any negative changes to their growth prospects.
From a technical perspective, we see medium-term upside targets of $7.50 and $51.50, respectfully.
We recommend buying Medibank Private at current levels.
Since trading down to $2.62 on Monday, the stock has risen 6% and reached $2.79 in early trade today.
The internal momentum indicators are now pointing to resistance near $3.10.
Medibank Private
CSR reports its 1HFY19 earnings on Friday and the market is looking for EBIT of $170 – $180 million for the 6 month period.
Boral, James Hardie and CSR have all been under pressure from short sellers and we are expecting to see some reversal of this trade.
The building stocks, in general, are looking oversold.
CSR
Ramsay Healthcare remains in a Algo Engine “sell” condition, however, after the share price correction from $85 to $52, we now see value beginning to emerge.
Shareholders in Swedish hospitals group Capio have given the approval to RHC’s 51% owned French subsidiary A$1.3bn takeover offer, to proceed.
With all conditions now satisfied, the deal’s expected settlement will be early next month.
Watch for RHC to turn positive and generate an Algo Engine buy signal in the coming months.
RHC
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