We recommend investors look at Amcor with a view towards a buy-write strategy.
Owning the stock at $15.50 and selling slightly out-of-the-money calls into June 2018 generates 10 – 12% cash-flow, when combined with the February dividend of $0.25.
FY18 underlying EPS growth should be in the 5 – 7% range, placing AMC on a 4.3% forward yield.
Amcor
Our ALGO Engine triggered a recent buy signal in AGL at $23.38.
With the stock now making a further “higher low” formation at $24.50, we highlight the current price as a reasonable entry level.
AGL is likely to upgrade their dividend payout in 2018 & 2019 which will see the stock re-rate and trade into the $26.00 range.
AGL is a suitable buy-write for income portfolios and is a current holding in our ASX 50 model.
AGL
Shares of Sydney Airport are down today as the company went ex-dividend and will pay shareholders 18 cents per share.
This pencils out to a yield of 4.8%.
SYD has been in our Top 50 model portfolio since July 3rd and our ALGO engine triggered a buy signal on July 31st at $6.70.
With the 52-week high at $7.75, we believe there is a solid argument for owning SYD at or around current levels.
Sydney Airports
Shares of RIO Tinto are trading near a 6-year high of $75.00 as the resource giant announced yesterday that it would buy back an additional $1.9 billion worth of on-market shares by the end of 2018.
This is in addition to the $1.5 billion worth of shares the company bought back in 2017 as part of RIO’s commitment to return the proceeds from the sale of its Coal & Allied assets to shareholders.
With the share price over 8% higher since December 1st, the internal momentum indicators are approaching an over bought condition.
However, RIO has been a cornerstone stock in our model portfolio since March 6th, when it was trading at $61.50, and our ALGO engine triggered a buy signal on April 18th at $58.00.
It’s reasonable to expect some type of price correction in the near-term, but we would expect longer-term buying support in the $71.40 area over the next few weeks.
Rio Tinto
Shares of WOW were full of holiday cheer as they hit a 4-month high of $27.55 in early trade.
The internal momentum indicators have been in overbought territory for over a week, so we suggest shareholders look to take profits above $27.20.
Our ALGO engine signalled a sell signal at $26.50 on November 2nd. We see the next key level of support for WOW at $26.60.
Woolworths
Our ALGO engine triggered a sell signal for CBA on November 13th at $81.55.
Since then, the share price has dipped to $78.00 but has lifted on year-end buying to $80.40.
The internal momentum indicators are pointing lower and we expect to see a break of the $78.00 level early in the new year.
Clients who are selling CBA short on the SAXO Go platform can place a stop in the $81.70 area, with an initial profit target near the November 3rd low at $77.20
Commonwealth Bank
Our ALGO engine originally triggered a sell signal for JHX on November 22nd at $21.50.
The chart below shows that an additional sell signal was generated at Friday’s close at $22.40.
JHX has been grinding higher, on lower volume, with support from unexpectedly strong housing data out of the USA.
Over the last week, the US new home sales, building permits and existing home sales have all printed higher than consensus forecasts.
From a technical perspective, JHX is still following a “lower high” pattern based on the May 2nd high trade at $23.20.
With a current P/E of 30.00, the stock is on the expensive side of its industry peers and due for a material correction lower.
James Hardie
After posting a low of $1238.00 on December 12th, Spot Gold has moved higher and reached $1270.00 in NY Trade last night.
The response of Newcrest shares has been relatively muted, but we expect a pick up over the near-term.
Our ALGO engine triggered a buy signal for NCM on December 15th at $21.75.
We still prefer the long side of NCM, along with the smaller producers SBM, SAR and EVN, and have an upside target near the November 29th high of $24.25.
Newcrest Mining
The recent move higher in longer-dated US Treasuries has created a headwind for some of the yield sensitive names listed on the ASX.
Over the last 10 days, the US 10-year notes have risen from 2.28% to just under 2.50%.
This 10% move has also lifted the 2yr to 30yr spread from 85 basis points to a full 100 basis points.
The impact on local shares has been a 4.5% drop in TCL and a 3.3% fall in SYD.
Looking forward, it’s reasonable to expect the US yields to soften and the yield curve to flatten.
Given the current correlation to the local shares, we see the US flattening trade as potential positive for the local names such as TCL, SYD, WFD and GPT
US 2yr versus 30yr spread
Shares of Domino’s Pizza are up over 2% at $45.60 as a research report from Morgan Stanley forecasts the stock rising to $53.00 over the next 12 months.
The report suggests the recent fair-wage claims and complains from franchisees have been overstated in the sell off in the share price.
The report also points out that DMP is the third most shorted stock on the ASX, with 16.5% of the company in the hands of short sellers.
From a technical perspective we see a key price hurdle in the $50.00 area, which is the bottom of the price gap lower on August 11th.
Short-term traders looking to buy DMP should place a stop around the $44.80 level.
Domino’s Pizza
Level 17 Chifley Tower
2 Chifley Square
Sydney, NSW 2000
1300 614 002
Investor Signals Pty Ltd
ABN 44 143 555 453