BHP Firms On US Asset Sales

Posted on | by Leon Hinde

Shares of BHP have jumped over 2% to $34.50 in early trade following the announcement of the sale of their onshore shale assets in the USA.

British Oil giant BP will pay USD 10.5 billion for the bulk of the energy assets, while Texas-based Merit Energy will buy the other $300 million worth of assets.

The company has pledged that the USD 10.8 billion from the sales will be returned to shareholders, but hasn’t been clear about how and when.

BHP has rallied from the April “higher low” formation and is now trading at the upper range of our price target.

Our advice to blog readers in April was to buy BHP and se  ll the $35.00 strike call options to enhance the cash flow.

BHP

James Hardie : A Buy/Write Strategy

Posted on | by Leon Hinde

Our Algo Engine generated a buy signal for JHX recently at $21.50.

With the US housing cycle remaining strong, (although weak numbers in June are the reason for some caution), and James Hardie having a dominant market position in fiber cement, we think the long term trajectory for earnings & margins are strong.

FY19 revenues should increase 20% and underlying EBIT will jump from $380m to $480m.

With the stock trading on a low 2.2% forward yield, we recommend adding a covered call option to enhance the income.

Selling the $23.50 October strike adds $0.50 per share of additional cash flow.

JHX goes ex div $0.30 on the 12th of December.

 

Buy RIO Ahead Of Earnings Results

Posted on | by Leon Hinde

Our Algo Engine triggered a buy signal recently in RIO at $79.00.

We retain our “buy” bias on RIO heading into the 1H earnings result on the 1st of August. Half year forecast net profit after tax is estimated at $4.6b 

The result will likely be ahead of analysts forecasts and the company should also announce an increase to their share buy-back program.

RIO goes ex-div $1.40 on the 10th August.

Rio Tinto

China – Cannons Are Firing

Posted on | by Leon Hinde

During times of conflict, there’s a saying in the market:  “you should buy when the cannons are firing and sell when the champagne corks are popping”.

More specifically, the current trade war between the US and China is likely to be resolved and the 20% correction in Chinese equity indexes may be looking overdone.

The IZZ iShares ETF provides exposure to large cap Chinese stocks. We see a buy side opportunity at $57.00

 

CIMIC – High Conviction Idea Delivers A 20% Return

Posted on | by Leon Hinde

From our Monday “opportunities in review” webinar, CIMIC was a high conviction buy idea heading into earnings season.

The strong share price reaction to last week’s 1H profit  announcement  sent CIMIC shares  20% higher.

The result came in ahead of analysts forecast with revenue growth and profit growth of more than 10%.

1H Revenue +11% to $6.9 billion, EBITDA of $794 million +11% and NPAT $363 million +12% and on the same time last year. 

Whilst the stock price now looks full value based on a forward yield of 3.3%, we continue to like the longer-term fundamentals.

Cimic Group

 

IAG – Opportunity Builds

Posted on | by Leon Hinde

Although we don’t have a current Algo Engine buy signal in IAG, the stock is in the ASX 50 model portfolio from the original higher low pattern in 2017.

The recent share price retracement, from $8.70 back to yesterday’s low of $7.84, means we have the stock on our radar again.

Strong earnings growth, 5% fully franked dividend yield and an increase to the share buy back program should provide a floor under the share price.

We see IAG as a solid “buy/write” opportunity delivering 10 – 12% annualised cash flow.

 

IAG

 

 

FMG Is A Buy Write Strategy

Posted on | by Leon Hinde

FMG is oversold relative to BHP and RIO.

Strong production numbers and improving low grade ore pricing discounts should flow through to better near-term share price performance.

We recommend adding a covered call option to enhance the cash flow.

The graph below displays the increase in Ore shipment from the Port Hedland port in WA.

FMG

 

RIO – Likely To Boost Share Buyback Scheme

Posted on | by Leon Hinde

Our Algo engine generated a buy signal recently in RIO at $80.00 and the stock remains in our ASX50 model portfolio.

In the next 12 months, RIO will generate over $10 billion in free cash flow on top of the $7 billion+ from asset disposals. We anticipate the excess funds will be returned to shareholders though an increased share buyback program.

Of the existing $2.9b buyback, RIO has now completed $1.7b.

FY19 revenue $38b, EBIT $13b supporting a  forward dividend yield of 5.6%.

RIO has their June quarter production numbers out tomorrow.

Rio Tinto

 

 

 

Register for Monday’s Webinar

Posted on | by Leon Hinde

In our next webinar, I will review high conviction ASX buy and sell opportunities from the recent algo engine and model portfolio signals.

Opportunities in Review

  • Host: Leon Hinde, Head of Equity Strategy at Investor Signals
  • Date: 16th of July 2018
  • Time: 11:30am Qld/NSW/Vic time, 9:30am WA time
  • Duration: 45 min

Please use this link to register and we’ll send you the event link and a reminder email one hour before the webinar begins.

If you cannot make the time, then register anyway and we’ll email you a link to watch the replay.