The S&P/ASX 200 Index finished the week down 0.4%.
The best performer was the Materials sector, up 1.7% and the worst performer was the Utilities sector, down 2.2%.
The XJO chart below shows the index remains in a “lower high” formation.
We continue to like the following healthcare names, RHC, RMD, SHL, CSL and MPL.
Ramsey Healthcare reports FY17 earnings on the 30th of August and consensus is looking for $537m.
FY18 EPS is forecast to increase by 20% to $2.60, DPS $1.32 placing the stock on a forward yield of 1.8%.
AZJ has recognised an A$526m impairment to its Bulk assets, and continues its Inter-modal review.
AZJ noted continues to face challenging market conditions and we feel investor sentiment will be negative leading into the FY17 results on 14 August 2017.
AZJ has previously guided towards FY17 EBIT within A$800-850m range.
Regular viewers of the ASX top 50 video market report, will recognise AZJ as a stock we’ve been warning about, in 2017. Our concern relates to the sustainability of the high dividend payout ratio and the probability of the company being forced to announce a cut at the August result.
Recent Algo Engine buy signals in BHP and WOW continue to perform strongly.
An overnight rally in metal and oil prices will support BHP in today’s trading and investors may wish to consider selling covered calls into November, at or near the $26 strike price.
Woolworths reports earnings on the 23rd August and the market will be looking for underlying EPS growth of 8% to support the 22x earnings multiple.
With WOW now trading on forward yield of 3% and a relatively high multiple, we encourage investors to sell $28 Dec call options to boost the annual cash flow return.
Computershare reports earnings on the 16th August.
At 20x forward earnings and 2.6% dividend yield, we feel CPU will likely disappoint and deliver earnings below market expectations.
Any bounce in CPU from these levels will provide an opportunity to consider building new short exposure.
James Hardie trades at 26x forward earnings with a 2.7% forward yield.
Again, we consider this name expensive and likely to disappoint investors when JHX report earnings on the 8th August.
A rally back towards $21.00 will provide an opportunity to reset short exposure.
As an update to last week’s post on GrainCorp, we again remind readers that GNC is approaching an oversold level.
We expect support will likely develop at or near the current price level.
The trade in GNC is likely to be a corrective move from oversold conditions.
The stock price is unlikely to develop into a meaningful uptrend. We recommend a stop loss below the final pivot, or entry point. GNC
$8.50 – $9.00 is buying support with $9.50 is the profit target.
On 12th July, our Algo Engine triggered a buy signal in Sonic Healthcare, at or near $22.20.
We see this as a level of price support and our base case is that Sonic trades sideways, at or near the current price.
Sonic reports earnings on the 16th of August and we expect underlying EPS growth of 8%, which will support a forward dividend yield of 3.8%.
When combining a covered call option, we’re generating 10 – 12% cash-flow per year.
Our Algo Engine triggered a buy signal in SEK back in mid-June, when the stock was trading at $16.15, since then the price action has rallied to $17.50.
We consider the current price level as full value and investors should consider either taking profit, or selling covered call options.
Seek reports their earnings on the 16th of August and the market is expecting underlying EPS growth of 10 – 15%, delivering NPAT of $192 million.
Our Algo Engine triggered a sell signal in BOQ at or near $12.15.
The price action is making a “lower high” formation and the short-term momentum indicator is rolling over.
As IAG share price retraces from the recent $7.00 high, investors should expect our Algo Engine to generate a buy signal.
Buying support is likely to develop in the $6.25 to $6.50 range.
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