At $21.00, BHP will be trading at the 50% retracement level of the 2016 rally.
Often, we’d expect this level to provide buying support. The Algo Engine is now flagging the higher low structure and therefore, within the $21.00 – $22.50 range, we look to identify the short-term momentum indicators turning positive, to confirm our entry point.
ORIGIN INCREASES INTEREST IN PROSPECTIVE BEETALOO JOINT VENTURE TO 70%
Origin Energy Limited (Origin) today announced it had increased to 70% its share in the Beetaloo Joint Venture after acquiring Sasol Petroleum Australia Limited’s (Sasol) 35% share.
Origin CEO, Frank Calabria said, “Having recently announced the discovery of a material shale gas resource in the Beetaloo Basin, Origin has seized the opportunity to increase its interest in the Beetaloo Joint Venture by acquiring Sasol’s 35 per cent share.
Our Algo Engine triggered a buy signal in early March at or near $6.25. We remain long the stock and see upside potential to $8.00.
Caltex held its AGM today and reported NPAT of A$154m for Q1FY17. This was up 2% on same time last year.
EPS should increase from $2.18 in FY17 to $2.30 in FY18. Placing CTX on a forward yield of 3.5%
Forecast FY18 revenue $16b & EBITDA $1.1b
We like CTX as a buy-write.
Scentre Group (ASX: SCG) today announced its first quarter update for the three months to 31 March 2017. The Group’s operations continue to perform strongly with developments progressing well and comparable speciality sales up 2.4% for the 12 months to 31 March 2017
The Group maintains its guidance for full year growth in funds from operations (FFO) of approximately 4.25%. The distribution guidance of 21.73 cents per security is also maintained.
We like SCG as an income contributor to client portfolios. When complimented with a tight covered call, we’re delivering 10 – 12% annualised cash flow and allowing for moderate capital growth.
WOW has reported very strong Aust Food sales for the 3Q17.
If we assume FY18 revenue of $57b, EBITDA $3.5b, Net Profit $1.55b and dividends increasing from $0.70 in FY17 to $0.80 cents in FY18, it places WOW on a forward yield of 3%.
Based on the above metric, we think WOW is now fully valued and investors should add a covered call above the market to enhance the return.
Our Algo Engine is flagging NCM within the current higher low price structure.
ANZ reported cash earnings of $3.41b and a dividend of $0.80 was in line with expectations.
Revenue was weaker than consensus estimates as net interest margins disappointed.
The next recession will be difficult for Central Banks as already low interest rates, inflated balance sheets & high deficits will likely result in a diminishing effect of policy tools to fight off deflation.
Economy
US GDP has slipped from 2.5% to 0.7% in the March quarter. A long way from the 3.5 or 4% the Trump administration says is achievable. More worrying is GDP appears to be trending lower and now showing only 0.2% growth. The March employment numbers were unexpectedly low, auto sales are dropping due to rising defaults and lenders tightening lending standards. Student loan defaults are rising and mortgage applications are no longer growing.
Many market commentators are dismissing the negative GDP trend as “seasonal issues” and are forecasting a sharp rebound in the June numbers. We’re not so sure and continue to feel that risk assets will soon come under pressure & portfolios should be defensively positioned.
Markets
The bulls will say, yeah but that doesn’t matter, stock prices are rising S&P500 earnings are growing at an average rate of 6%, (ex-energy), and 11% including the rebound in energy related profits, as oil prices recover from this time last year.
Technology giants Microsoft, Google, Apple, Facebook & Amazon are all delivering tremendous earnings growth and this can’t be denied, however, we’ve seen these names suffer during past recessions. They’re not infallible
Conclusion
With the bulk of the S&P500 delivering minimal top line revenue growth, PE’s expanding in a backdrop of falling GDP and rising bad debts, we feel caution is justified.
Local ASX Instruments to consider BEAR, BBOZ, YANK, BBUS & GOLD ETF’s along with Index XJO Puts . Overweight, healthcare, consumer staples, technology & yield sensitive names.
Chart – US GDP Trend
We continue to hold IAG as a preferred position following the Algo Engine buy signal triggered on the 31st of January at $5.70. The stock is now trading $6.20.
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