On 11th of July we reminded readers of the blog that we viewed the recent Algo Engine signal on IPL, as one our preferred buy-side signals.
IPL today has opened up 6.5% higher and is now up over 10% from the recent low.
Considering the recent volatility in fertiliser prices, we suggest taking profits in the current $3.55/60 price range.
Incitec Pivot
Our Algo Engine triggered a buy signal in Sonic Healthcare, following the recent sell-off from $24.60 back down to $22.30.
We continue to see Sonic delivering 6 – 8% EPS growth and a 3.7% dividend yield. The stock is fair value at or near the current price and investors can consider SHL as a suitable buy-write for enhancing portfolio cash flow.
The Dow Jones and NASDAQ charts below show the indices continuing with the “higher high and higher low” formation.
The XJO shows a slightly more bearish pattern, as our local market struggles below the recent 5850 high.
Recent Algo Engine buy signals in BSL and AWC have performed well, with prices rallies of 20%+ in the past few months.
China has been ramping up production of both alumina and aluminium in the lead-up to potential capacity cuts. Alumina Ltd (AWC) is potentially the largest beneficiary, given it is a pure-play on the industry.
Rio Tinto and South32 also seem well-placed to benefit. We will reconsider these names on the next Algo Engine buy signal.
We’ve been buyers of BHP on the recent pullback to $22.50 with an upside target of $25 – $26.
We advise, either locking in gains within this price range, or alternatively, selling at-the-money call options into September.
We continue to like the setup in CTX, WOW and IPL. We also feel that TCL and SYD are now approaching oversold levels.
Our Algo Engine triggered a sell signal in GE back in December 2016.
At that time GE was trading at or near $32.50 and since then the stock has sold off and is now trading $26.00.
FY17 refining margins have improved from last year after averaging US$12.40 versus US$10 over 1H16.
We expect CTX stock price to find support at the current price level and trade higher off the back of the earnings result announced in August.
Assuming DPS of $1.15, we have CTX on 3.7% yield, and when complimented with a covered call, we ‘re delivering 10 – 12% annualised cash flow.
The S&P/ASX 200 Index finished the week down 0.31%. The best performer was the Materials sector, up 2.1% and the worst performer was the Health Care sector.
The XJO remains below the recent 5850 “lower high” formation, as displayed on the graph below.
Our Algo Engine has flagged a buy signal in TCL with the price trading at or near $11.60.
With a 10% underlying dividend growth supported by free cash flow, we feel TCL should trade back up into the $12.25 level, as bond yields retrace from their current short-term rally.
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