ETF Update: OOO Is Tracking Crude Oil Higher

Posted on | by Todd | Leave a Comment on ETF Update: OOO Is Tracking Crude Oil Higher

Prices of West Texas Intermediate (WTI) Crude Oil moved higher in New York trade, extending the recent rebound to a sixth straight session after a decline in US crude production eased concerns about deepening oversupply.

WTI futures settled up 19 cents at $44.93 per barrel after hitting a two-week high of $45.45 earlier in the day.

Supply disruptions in the Gulf of Mexico from Hurricane Cindy, as well as, increased demand for gasoline in front of the long July 4th weekend have also supported the move higher in Crude.

On June 23, we posted a report suggesting Crude Oil prices had become technically oversold and a reversion higher was likely. We are still looking for a extension of the move higher into the $46.50 area.

Investors looking to profit from higher Crude Oil prices can look to buy the BetaShare ETF with the symbol: OOO.

We started adding OOO to client portfolios in the $12.30 area.

We calculate that when WTI trades back to $46.50, the price of OOO will be near the $14.60 level, which is a reasonable area to take profits.

BetaShare ETF: OOO

 

 

 

 

Insurance Australia

Posted on | by Leon Hinde | Leave a Comment on Insurance Australia

IAG expects to see elevated reserve releases in FY17 of ~5% of NEP, and has
upgraded insurance margin guidance to 13.5-15.5%.

We think IAG is now expensive for a general insurer, trading on 18x  FY18 earnings.

Given the current tailwinds, any pullback in price will be moderate and at $6.50 the stock is well supported by a 5% dividend yield.

IAG remains an attractive buy-write.

IAG

 

Rotation Out Of Banking Stocks

Posted on | by Todd | Leave a Comment on Rotation Out Of Banking Stocks

Since Treasurer Scott Morrison announced a banking levy in the May 9th budget, banking stocks have been sold off across the board.

It’s become clear that a fair percentage of this investment flow has rotated into the local Insurance names with IAG and Suncorp both posting material gains since early May.

We hold both of these stocks in client portfolios and they are now up 12% and 8% since mid-May, respectfully.

With respect to the re-valuation in the banking shares, NAB has posted a fresh low at 29.00 in early trade today.

Both WBC and ANZ are approaching the lows posted in early June, while MQG and CBA have held up better but are still pointing lower.

On balance, we continue to expect to see rotation out of the banking names to the benefit of the insurance stocks.

IAG

Suncorp

NAB

Tabcorp – 2019 Earnings Outlook

Posted on | by Leon Hinde | Leave a Comment on Tabcorp – 2019 Earnings Outlook

There are encouraging trends in the core Tabcorp wagering business and the pending merger with Tatts remains an attractive investment case.

Following the Tatts merger, we look at the earnings profile of Tabcorp in 2019 and assess the forward yield and EPS growth.

We estimate Tabcorp could see EPS increase by 15% by FY19, helping to underpin a forward yield of 6%.

Chart – TAH

 

 

RIO – $3bn Share Buy-Back

Posted on | by Leon Hinde | Leave a Comment on RIO – $3bn Share Buy-Back

RIO has confirmed that Yancoal remains the preferred bidder of Coal & Allied post a revised and improved offer from Yancoal yesterday.

We expect material free cash-flow (FCF) to be passed through to shareholders despite iron ore falling from its February peak.  In FY18, RIO could return up to $3billion  through share buy-backs.

We remain cautious on the outlook for spot iron ore prices. However, the low levels of debt, low cost of production and aggressive capital management undertaking by RIO will help to provide share price support.

FMG, RIO & BHP will likely see a minor rally from the current oversold conditions,  before turning lower.

Chart – RIO

Gold Update: Looking For Higher Prices

Posted on | by Todd | Leave a Comment on Gold Update: Looking For Higher Prices

On June 8th, we posted a report on Gold just as the spot price was about to break back above $1300.00 for the first time since last November.

Instead, the yellow metal failed at resistance and has rotated lower finding support at the $1240.00 level.

In that same report, we commented on how the share price of NCM was lagging behind the spot price due to supply concerns from the idle Cadia mine in NSW.

At this point, the spot Gold price and the share price of NCM seem more in sync with both slowly moving back above key resistance levels.

With local stock valuations still very high, we suggest investors look to increase exposure to Gold. We recently took profits in EVN at $2.50 and will look to re-position over the near-term.

We also suggest investors can look to buy the BetaShare Gold ETF with the symbol: QAU.

Newcrest

Evolution

BetaShare Gold ETF: QAU

Take Profit – Ramsey Healthcare

Posted on | by Leon Hinde | Leave a Comment on Take Profit – Ramsey Healthcare

After buying Ramsey Healthcare on the recent pullback to $68.50, we now look to take profit at today’s price levels.

Within the healthcare space, we continue to like SHL, RMD, CSL and Ramsey Healthcare. Although, they’re starting to look a little expensive from a PE perspective.

Trimming profits with a view to buying back in on a pullback makes sense, or selling tight covered call options at current price levels.

Chart – RHCASX:RHC

 

Downside Risk For MQG

Posted on | by Todd | Leave a Comment on Downside Risk For MQG

Shares of MQG lost over 2% for the week as internal momentum indicators are now rolling over into negative territory.

In addition to the negative technical picture, MQG faces a major class action suit over allegations some of its investment advisers artificially inflated the price of a small mining company before a sudden collapse wiped out many of its investors.

According to an article in the Sydney Morning Herald, the investment bank’s brokers are accused of deliberately “ramping” stock in Cleveland Mining Group: a Brazilian iron-ore mine project with a potential value of $34 billion that turned out to be a “worthless patch of jungle.”

Initial price support can be found at the June 8th low of $86.05. A break of that level could see downside range extension to the February 9th low of $82.30.

Macquarie Group (MQG)

ETF Update: Buy OOO For A Bounce In Crude Oil

Posted on | by Todd | Leave a Comment on ETF Update: Buy OOO For A Bounce In Crude Oil

Over the last 4 weeks, the price of WTI Crude Oil has dropped over 20% from $52.00 to just under $42.00.

Increased shale production, more supply from Non-Opec nations and the unwinding of large speculative long positions have all factored into the recent price slide.

However, from a technical perspective, we consider the price risks asymmetrically skewed to the upside from current levels. The likelihood of some sort of weather or politically-base supply disruption should also be taken into account.

For investors looking for a pure-play in a rebound in Crude Oil prices, we suggest looking at the BetaShare ETF with the symbol: OOO. 

Shares of OOO are currently trading at $12.20.

On June 8th, with WTI trading at $46.00 per barrel, shares of OOO traded as high as $14.30. We believe this is a reasonable trade dynamic for a a short-term rebound in the WTI Crude Oil price.

BetaShare ETF: OOO