We recommend accumulating Origin on the current share price pullback
Buy zone $7.50 – $8.00.
We will update the initial upside target in a future posting once the stock re-establishes upside momentum.
Origin Energy
As a result of trade tensions between the US and China, prices of raw materials and precious metals have been trading sideways to lower.
The same price pattern has emerged for the shares of mining companies that export these materials.
In this environment, the shares of the lower cost producers will generally perform better as the raw material price begin to improve.
During the last quarter, OZL reported that their production costs for copper had dropped from 97 cents a pound to 72 cents a pound. In addition OZL has a strong balance sheet and may expand their share buyback plans over the next 6 months.
OZL is part of our ASX model 100 portfolio. We see good support in the $8.80/90 area with an upside target near $10.20 over the medium-term.
OZ Minerals
Our Algo Engine generated a buy signal in EVN, following the recent higher low formation.
Via our “Opportunity in Review” webinars and blog commentary, we recommended an entry level at $2.65. The stock now looks to have found support and we suggest holding the position.
Apply a stop loss an a break of the recent low.
Evolution Mining
Shares of Transurban have been holding above the $12.00 mark since the ACCC approved the company’s bid on Sydney’s WestConnex tollway. Shares are currently in a trading halt.
The green light from the regulator clears the way for TCL to acquire other domestic assets to build on its future growth in earnings.
TCL currently own 15 of the 19 toll roads in Australia. This gives TCL an advantage over other bidders since many tollways feed into other strategic motorways.
The company plans to do a capital raising for $4.8 billion to fund the acquisition. $4.2 billion of this will be in the form of offering shares at $10.80.
We don’t have a current ALGO buy signal on TCL and would look for lower levels to enter long.
Transurban Group
Boral reported FY18 results which were ahead of market consensus , with net profits of $514 million.
North American guidance was a little weak, with one-off costs and
operational issues creating a drag on earnings, the market remains hopeful the risks on the Headwaters integration recedes.
Based on FY19 earnings growth of 12%, Boral now trades on a 3.8% forward yield. We remain cautious whilst the the lower high price formation and ALGO sell signal is in place.
Boral goes ex-div $0.14 on the 4th September.
Our preference in this sector remains CIM and DOW.
Boral
This month was the best August for the NASDAQ index since the Dotcom bubble 18 years ago.
Both the SP 500 and the DOW Jones 30 indexes posted their best August performances since 2014.
More specifically, Apple shares gained 20% and Amazon shares rose 12.5% during August. Together, these two names accounted for 25% of the entire NASDAQ gain last month.
It’s worth noting that share buyback programs for US listed stocks have increased over the last three years and are on track to reach $800 billion this year.
As illustrated in the chart below, August is usually the busiest month of the year for repurchasing stock and the pace drops off during September and October.
With US stocks at record highs and the local ASX index near a 10-year high, we urge investors to approach the market with caution at the current valuations.
Using our ALGO engine, we employ technical indicators to identify stock specific opportunities across a broad market spectrum during all market conditions .
Give us a call on 1-300-614-002 to discuss our current model portfolio holdings.
Over the next month we will run a special coverage segment on US stocks and review the performance of recent Algo Engine buy signals within our S&P100 model.
To kick-off, what better way to start than looking at Warren’s portfolio?
Here are his top 25 holdings…
Ramsay Healthcare reported FY18 results in-line with market consensus, however, the FY19 guidance was below expectations.
Underlying earnings increased 7% in FY18 and that growth rate is likely to slip to 4 – 5% in FY19. With the stock on a forward yield of 2.7% we see further downside risk to the share price in the short-term.
RHC is a high quality business and we’ll be watching for the next Algo Engine buy signal.
Material earnings benefits from new hospital projects are expected in the coming years; we see both Healthscope and Ramsay Healthcare as long-term value plays with a defensive yield.
Buy Healthscope today and remain patient for the entry condition into Ramsay.
URW reported 1H18 earnings of €6.61 per share, which was ahead of market consensus forecasts.
Full year guidance 12.75-12.90 per share was maintained for the combined entity and synergy cost saving targets were upgraded.
URW will be looking at 3 billion + in asset sales as they rationalise their portfolio, post the Westfield acquisition. Progress on this front, along with more detail in the next earnings update, should help to drive further share price appreciation.
Group EPS growth is forecast at 5% and the the stock is now on a forward yield of 6%.
Unibail-Rodamco
Our ALGO engine triggered a buy signal for WBC on Monday’s ASX close at $27.76.
This “higher low” price pattern is referenced to the low of $27.24 posted on June 14th.
WBC shares got a lift yesterday after investors reacted positively to the bank’s out of cycle increase of variable rate mortgages.
Effective September 19th, WBC will impose a 14 basis point increase to all standard mortgages, which will lift the rate to 5.38%.
In previous postings, we have cited compressed margins and decreasing loan creation as a potential headwind for the banking sector and consider the recent upside price action as corrective in nature.
We expect the other major banks to follow WBC’s lead and lift variable mortgage rates over the next few days.
Westpac
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