The NASDAQ Index is now under Algo Engine sell conditions, US March quarter earnings kick off next week and the impact of the blackout period, (meaning company share buy-backs are suspended), needs to be considered in conjunction with the potential for weaker earnings.
Our trigger remains a break in the 10 day moving average, which is currently 1 to 2% lower than the last close price.
{ASX:WOW) announced on April 1, 2019, that it will be conducting an off-market buy-back to return up to A$1.7 billion to shareholders.
Completion of the off-market buy-back will be in May with the buy-back price expected to be announced on May 27.
The stock looks overvalued at 24x earnings and 3.3% yield.
ASX is among the best performing stocks within our ASX 100 model portfolio. The stock remains under current buy conditions and the earnings have been slightly upgraded, following the release of the March quarter trading data.
The upgrades were driven by stronger than expected ASX 24 derivatives activity. Volumes increased 11% on the same time last year, with a record month in March 2019.
Cash equities turnover was up 9% year-over-year.
At 26x earnings and 3.2% yield, the stock looks expensive but it does offer a relatively safe harbour.
All major equity indices are now showing Algo Engine sell conditions. The NASDAQ has led the charge higher and the FANG stocks in particular, have outperformed.
Technically, we suggest investors overlay the 10 day average on the NASDAQ and build a defensive position once the index trades below the average.
Wesfarmers has made a takeover bid for Lynas.
Lynas Corporation, Ltd. is an Australian rare-earths mining company, listed on the Australian Securities Exchange as a S&P/ASX 200 company. It has two major operations: a mining and concentration plant at Mount Weld, Western Australia and a refining facility at Kuantan, Malaysia.
Wesfarmers at $33 provides a low risk entry level, short term growth is limited, we therefore suggest selling a covered call to enhance the income return.
Call our office on 1300 614 002 for more detail on the derivative strategy.
An improvement in Chinese gaming data & revenue should help to support Star Entertainment and Crown Resorts.
Crown is under Algo Engine buy conditions and we see value at $11.50.
Woolworths Group is under Algo Engine buy conditions and is a current holding in our ASX 100 model portfolio.
The company is conducting a $1.7 billion off-market buyback which is 7 to 8% earnings accretive on an after-tax basis. Australian superannuation funds on a 15% tax rate are set to benefit from the off-market buyback.
Woolworths is trading on 23x FY20 earnings, which partly reflects the value of the off-market share buyback. If we assume the buyback is creating up to $2.00 of added value, fair value post the buyback, is sub $30.
Even at $29 – $30, it places WOW on 21x FY20 earnings and 3.1% dividend yield.
This places the stock at a very high valuation relative to the long-term average.
JB Hi-Fi is under Algo Engine buy conditions and was added to the ASX 100 model in late 2017.
JBH was one of the top performers in March, rallying over 15%. Part of this strength can be attributed to short sellers buying back, or closing out their positions. This is reflected in the fall in data on “open shorts” in JBH.
Flight Centre Travel Group is under Algo Engine buy conditions and is a current holding in the ASX 100 model portfolio.
After going ex-div on the 21st March for $0.60 and paying a special div of $1.49, FLT now looks to be finding buying support at $40.00.
Woodside Petroleum is a current holding in our ASX 100 model portfolio.
Recent production guidance suggests 2019 will likely deliver relatively flat production growth. WPL trades with an implied oil price of around US$55.
Upside in the share price still exists and we suggest adding a covered call option to enhance the income return.
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