Defensive Buy Ideas – 10 – 12% Cash Flow
We like the look of TLS, SHL, WOW & CTX when combined with a covered call option.
A combination of the dividend, franking credit and call option income is generating 10 – 12% cash flow on an annualised basis.
Algo Buy Signal – Origin
Our Algo Engine has flagged a second buy signal within the uptrend on Origin that started back in January 2016.
The first “buy on the dip” signal occurred in March 2017 at $6.25 and now a new Algo Engine buy signal has been triggered at $6.90.
WPL, OSH and ORG are all likely to find support and trade higher from the current price levels.
QBE – $1billion Share Buy-Back
On account of heightened claims activity in QBE’s Emerging Markets (EM) division, QBE has downgraded its FY17 guidance.
However, we remain optimistic regarding the QBE turn-around and feel the cycle is bottoming for QBE and the outlook is encouraging.
With the stock trading 10x forward earnings and 6% yield, along with a 3-year A$1bn buy back, which was announced in February, QBE is worth adding to your watchlist.
QBE is likely to commence their share buy-back program by late August 2017 and buying ahead of this time should be rewarded with higher prices into 2018.
Recent Signals – WOW & SOL
Our Algo Engine triggered buy signals in both WOW and SOL; both opportunities are worth further consideration. Buying support is likely to increase at or near the current entry levels.
Reminder: We now have a new tutorial video in the help menu which explains the navigation of the watch-list feature, this includes reviewing the recent algo signals and customising your own watch-list.
If you need more help, please call our dealing/help desk on 1300 614 002
ETF Watch: Buy BBUS
Against a backdrop of rising interest rates, weaker economic data and political gridlock, the SP 500 is still trading within 1% of its all-time high price of 2451.
The US Federal Reserve has lifted the Fed Funds target three times since the SP 500 posted its pre-election low of 2025 on November 9th of last year.
The tightening of credit conditions combined with lower corporate loan growth has been a trigger for material corrections in US equity markets in the recent past.
Investors looking to profit from a fall in the SP 500 can look to buy the BetaShare ETF with the symbol: BBUS.
BBUS is an inverse ETF, which means the unit price will rise as the SP 500 Index trades lower.
BBUS is also weighted, so that a 1% move in the SP 500 Index translates to a 2.5% change in the unit price.
The unit price of BBUS is currently near the $7.00 level. We calculate that when the SP 500 trades back to the November low of 2025, the unit price of BBUS will be in the $10.75/ $11.00 area.
BetaShare ETF: BBUS
ALGO Buy Signal For Woolworth’s
The ALGO engine triggered a buy signal on WOW at yesterday’s close at $25.10.
This is purely a technical signal. However, with the dividend yield close to 3.8% with the price at $25.00, it looks like a reasonable defensive stock in an uncertain market.
We’re looking for a price recovery to the $27.00 area to take profits or write covered calls to enhance portfolio returns.
Woolworth’s
Caltex Is Nearing The “BuyZone”
The price of WTI Crude Oil hit a 7-month low of $42.75 in New York trade last night. As a result, shares of CTX have opened 1.5% lower near $31.20.
Last week we suggested that clients take profits in CTX long positions in the $34.00/25 area.
We will look to re-enter long positions for a reversion move higher back into the $34.00 area over the medium-term.
Caltex
Tabcorp & Tatts Merger Approved
The Australian Competition Tribunal has approved the proposed merger of TAH and Tatts Group (TTS), on the basis that they are satisfied that the merger will result in substantial public benefits and on the condition that TAH divests its Odyssey gaming business.
We see scope for upside in TAH share price as a result of synergy cost savings and the prospect of a large scale share buy back program in 2018.
Chart Update – XJO
The XJO has formed a minor lower high and lower low formation. 5836 now acts as resistance.
Bad News For Aussie Banks
Australian banking names received a double-dose of bad news last night as the Parliament passed the $6.2 billion banking levy and Moody’s downgraded their long-term credit ratings citing risks associated with the local housing market.
Shares in all the major banks have opened lower today with Westpac half-a-percent lower. The banking stocks have posted a rebound over the last few sessions but now look poised to re-test the lower price levels seen in early June.
Our ongoing concern about the banking sector’s current valuations have been: limited growth in the loan generation area, as well as, deteriorating quality of their overall loan exposures.
The banking levy, which commences July 1st, and the prospects of higher funding costs due to the credit downgrade won’t improve the banking sector’s profitability over the longer-term.
ANZ
CBA
MQG
NAB
WBC
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