With bond yields likely to stabilise and strong passenger growth numbers, (across Australia’s east coast), we see SYD as a buying opportunity.
We also recommend selling covered call options to enhance the yield.
SYD is expected to release full year traffic numbers in late January 2018.
Sydney Airport
Wesfarmers (WES) has agreed to sell its Curragh coal mine in Queensland to US miner Coronado Coal Group for $700 million plus a value share agreement.
We suggest the company is likely to reduce borrowings to some degree, as earnings have been reduced, and subject to franking credits may return capital to shareholders.
We believe a reasonable strategy is to sell $45.00 June call options for $1.02 credit and expect to keep exposure to the $1.03 dividend declared on the 20th February.
Wesfarmers
In an increasingly expensive market, finding low volatility investments at a discount can be difficult.
We consider the recent sell-off in AMC and AGL represents a low risk entry level for a buy-write strategy.
AMC pays a 25.6 cent dividend on the 24th February and AGL pays 41 cents on the 23rd February.
We are then adding covered call options to enhance the yield and allowing for moderate capital growth.
The strategy is achieving 10 – 12% cash flow on an annualised basis.
Resmed has formed a higher low formation following an increase in buying support at $10.87.
We recommend buying RMD and placing a stop loss below $10.75.
Resmed
We highlight the higher low structure in IZZ – iShares China Large-Cap ETF.
Our Algo Engine triggered a buy signal in MVB, (Vaneck Vectors Australian Bank ETF), on 4th December at $27.14.
With the current momentum across equity markets, we consider the signal an opportunity to gain broad based exposure to the banking sector, with a stop loss below $26.50.
Both ING and IVC remain on our watch list following recent Algo Engine buy signals.
We recommend investors continue to monitor these names, as they are now approaching oversold levels.
In late November we highlighted GE as a counter trend buy.
We maintain that GE offers deep value for longer term investors and highlight the recent buying interest which is starting to build.
GE has now rallied over $1.00 or 7% from the November low.
GE shares sold off following the re-statement of accounts and recognition by investors of the cash flow issues, bloated expenses and under performing business units.
The new CEO, John Flannery, is now in place and announced a restructuring plan last month along with a 50% cut in dividend.
Like any large organisation, these changes take time to address and implement. However, 1 – 3 years out we’ll start to see a very different GE begin to emerge.
If you’d like to add GE to your portfolio or other international shares, please contact leon@investorsignals.com
Our Algo Engine generated a buy signal in the AUD Betashares Australian Dollar ETF on the 11th December at $14.75. Since then, the ETF has rallied 10% in line with the Australian dollar bouncing from .7510 to .7870.
On the flip side, we’ve seen the USD Betashare ETF make lower lows and lower highs.
We feel that the counter-trend which has played out during the past month will begin to normalise and we are likely to see a shift back towards USD strength.
We recommend investors look at Amcor with a view towards a buy-write strategy.
Owning the stock at $15.50 and selling slightly out-of-the-money calls into June 2018 generates 10 – 12% cash-flow, when combined with the February dividend of $0.25.
FY18 underlying EPS growth should be in the 5 – 7% range, placing AMC on a 4.3% forward yield.
Amcor
Level 17 Chifley Tower
2 Chifley Square
Sydney, NSW 2000
1300 614 002
Investor Signals Pty Ltd
ABN 44 143 555 453