The current market weakness provides investors with the opportunity to add AMC and SHL to their portfolios at a reasonable entry level.
We advise selling out-of-the money call options on the other side of the February/March dividend period.
The above strategy is producing 10 – 12% annualised cash flow from the dividends and call option income.
General Electric has sold off following the announced business restructure and cut in dividend. Based on forward earnings and 15x multiple a conservative valuation is $16 for GE shares.
Look for buying to develop within the $16 – $18 range.
General Electric
On the 7th of November we posted an alert regarding the “short trade” set-up in QANTAS. Since then, QAN has sold off from $6.34 and is now trading at $5.77.
The price action will likely find buying support in the $5.50 – $5.75 range and traders should look to close out the short side position.
QANTAS
Woodside Petroleum has now sold off $2.00 since making a high of $33.37 on the 7th of November.
After having a recent profitable trade in WPL, we again look to the buy side on further price retracement and view $30 – $30.75 as a low risk entry level.
Shell has announced the sale of 71 million shares or 8.5% of WPL’s register. Shell’s ownership will be reduced to 4.8%. The consideration will be approximately A$2.2billion.
Woodside
AMP was recently added to our ASX top 20 and top 50 model portfolio. The stock has traded higher and we now look to sell covered call options to enhance the return.
AMP trades on a 5.4% yield and will pay $0.14 in February 2018.
We continue to hold Woolworths in our client portfolios as an income holding. With 3 – 5% EPS growth and 3.7% dividend yield, WOW is likely to trade within a price range of $25 – $27.
Selling $27.00 June 18 call options and collecting the March dividend delivers an annualised cash flow of 10%+
The S&P/ASX 200 Index finished the week up 1.17%.
The best performer was the Property Trusts sector, up 4.3% & the worst performer was the Telecoms sector, down 0.6%.
In Wednesday’s blog we looked at the basket of yield sensitive stocks that were likely to rally. WFD was highlighted as a counter trend trade and as the price approaches $8.50, we feel the stock will begin to run into selling pressure.
Investment banks mostly retain a bullish outlook for Santos. Recovering oil prices and greater confidence in rising production from the Gladstone LNG project, along with PNG expansion likely to underpin the share price.
Santos has lowered costs considerably and their balance sheet has improved, with gearing forecast to hit 20%. Higher oil prices may see dividends reinstated earlier than forecast.
Technically, the stock has broken out from the last lower high formation near the $3.90 level, our Algo Engine will generate a buy signal in the coming months, (following a price retracement) and we’ll be sure to highlight it on the blog, when it occurs.
Our Algo Engine triggered a sell signal in Suncorp following yesterday’s close price. The sell signal resulted in Suncorp being removed from both our ASX top 20 and ASX top 50 model portfolios.
The original buy signal was triggered on the 4/8/17 at $13.43 and then again on the 11/8/17 at $13.29.
There is a price gap in Suncorp on the 2/8/217 at $14.39. We expect the stock to run into selling pressure between $14.18 and $14.39.
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