Let’s take a quick look at a few names that should prosper from the Christmas period spending activity. In the US I’ve focused on Amazon and FedEx as two relevant examples and domestically, I’ve looked at Harvey Norman and JB HI-FI.
We had buy signals from the algo engine on these names and our preference was the long position in HVN, which has now rallied 10% from the November low.
Chart – Amazon
US stock Indexes closed modestly lower during Thursday’s thinly-traded preholiday session. With the lower trading volumes expected over the holiday and US Earnings season commencing in a few weeks, investors seemed reluctant to bid up prices of indexes that are already hovering near all-time highs.
The SP 500 and the NASDAQ Composite booked their first consecutive losses in three weeks, as the post-election rally has lost momentum over the last few sessions.
It’s worth noting that since November 4th, all three of the major US Index have posted respectable gains with the Dow Jones 30 rising 11.2%, the SP 500 up 8.3% and the NASDAQ Composite gaining over 9%.
Therefore, it’s really not surprising to see stocks take a breather going into the Christmas break.
Shares of Brambles have bolted to new 3-month high at $12.35 as the trading conditions in the US and European markets continue to reflect a sustainable revenue outlook.
The international pallet, crate and container supplier is looking to benefit in FY 2017 from a recent joint venture in the in the Oil and Gas sector, as well as, a restructuring in their container division.
Despite a change in CEO, our EBIT remains unchanged in the 9.0% range, which is in the lower end of management’s 9-11% range.
In the near-term, we see price resistance in the $12.75 area and will look to sell covered calls in the $13.00 area to enhance the low 2.8% forward dividend yield on offer.
Woolworths has rallied from the November $22.20 support level. Based on consensus earnings the stock trades 18.5 times FY17 earnings and 3.8% dividend yield.
The earnings update in Jan/Feb will provide greater clarity on the turnaround following the Masters business failure and the refocus on Woolworth’s traditional food and liquor business.
REA Group has announced the sale of its European assets to Oakley Capital Private Equity for $190m. Profit on the sale is expected to be around $170m. REA Group should see earnings pickup into 2017 & 2018 with FY18 revenue likely to grow by 10% to $850m and EBIT by 15%+ to $420m.
FY17 DPS $0.90 and FY18 DPS $1.10, places the stock on a forward yield of 2.1%.
REA payout 50% of earnings and the dividend is fully franked. The recent algo buy signal at $46 provided a solid entry point. We recommend applying a stop-loss on a break below the November low of $45.50
Shares of the Commonwealth Bank (CBA) posted a new high for the year at $82.65 as the bank announced it has sold its remaining stake in the US financial services company, Visa Inc.
The CBA sold its stake in Visa for A$439 million, realizing a post-tax profit of A$278 million. Against this profit, CBA has also announced a one-off accelerated amortization on certain capitalized software assets, totalling A$275 million.
While the accelerated amortization is more than offset by the profit on the sale of the bank’s Visa holdings, we see this move as reducing the potential for earnings uplift going into 2017. As such, heading into the February dividend, we see price resistance at or near the $83.00 level.
The ASX 200 (XJO) is only 10 points away from testing the 5611 high set on the 1st of August 2016.
Cochlear generated an algo buy signal at $114 and it looks like the price may build a base and trade higher. Apply a stop loss on a break of the $113 December low.
Crown Resorts has announced several changes to their strategic business plan to simplify the business and enhance their balance sheet.
The firm has decided to cancel its Alon project in Las Vegas, sell off a major stake in its Macau casino business and cancel plans to spin off its international business.
The company will sell off almost half of its holdings in Melco Crown Entertainment for $1.6 billion, using the proceeds to cut debt, pay a special dividend of $500 million and enable a share buyback of around $300 million. Crown’s share of Melco’s annual net profit dropped by 60% in 2016 to $43 million following a corruption crackdown by Chinese authorities.
We still like the long side of CWN, although our upside target has been lowered from $14.00 to $12.50 following earnings revisions due to CWN’s reduced stake in Melco. CWN currently trades on 10x FY 17 estimated EBITDA and is on pace for a 5% yield for FY 2017.
Level 17 Chifley Tower
2 Chifley Square
Sydney, NSW 2000
1300 614 002
Investor Signals Pty Ltd
ABN 44 143 555 453