In an increasingly expensive market, finding low volatility investments at a discount can be difficult.
We consider the recent sell-off in AMC and AGL represents a low risk entry level for a buy-write strategy.
AMC pays a 25.6 cent dividend on the 24th February and AGL pays 41 cents on the 23rd February.
We are then adding covered call options to enhance the yield and allowing for moderate capital growth.
The strategy is achieving 10 – 12% cash flow on an annualised basis.
Resmed has formed a higher low formation following an increase in buying support at $10.87.
We recommend buying RMD and placing a stop loss below $10.75.
Resmed
Our ALGO engine triggered a sell signal on WOW on November 2nd at $26.05.
Since then the share price has lifted over $1.00 as speculation continues surrounding the ACCC’s decision to reject BP’s offer to buy WOW’s 500 petrol station network.
A potential “triple top” formation is in play in the $27.70 range and we suggest exiting long positions for now.
CFD traders can look to sell WOW on our SAXOGo Platform in the $27.30 area with an initial target of $26.15 and a $28.10 stop.
Woolworths
Shares of TLS have traded back into a significant technical price area.
Looking back to mid-August, the share price was beaten down from $4.33 to $3.50 just 10 trading sessions. This price action has left several gaps on the daily chart which are now being challenged.
TLS goes ex-dividend on March 1st and is on about a 6% yield at current prices.
It’s reasonable to believe that the current technical buying could lift the share price back over $4.00, which would still pencil out to over 5% yield, fully franked.
We still believe accumulating shares of TLS in this price range will benefit investor portfolios throughout 2018.
Telstra
It’s been just under a month since the Westfield board recommended shareholders accept $32 billion takeover from French firm Unibail-Rodamco.
Since then, the share price has softened, has never traded at the cash and script offer of $10.01 per share, and closed at a post-announcement low of $9.18 on Friday.
Part of the recent weakness seems to be tied to the cash component of the deal valued at USD 2.67 per share.
The AUD/USD has risen from .7550 to .7850 since the deal was announced, which roughly corresponds to the 4.5% fall in the WFD share price since December 12th.
With the stock going ex-dividend on February 13th for 16.43 cents per share, we believe WFD is good value in this range for a move back into the $9.80/90 area in the near-term.
Westfield
We highlight the higher low structure in IZZ – iShares China Large-Cap ETF.
Our Algo Engine triggered a buy signal in MVB, (Vaneck Vectors Australian Bank ETF), on 4th December at $27.14.
With the current momentum across equity markets, we consider the signal an opportunity to gain broad based exposure to the banking sector, with a stop loss below $26.50.
Both ING and IVC remain on our watch list following recent Algo Engine buy signals.
We recommend investors continue to monitor these names, as they are now approaching oversold levels.
In late November we highlighted GE as a counter trend buy.
We maintain that GE offers deep value for longer term investors and highlight the recent buying interest which is starting to build.
GE has now rallied over $1.00 or 7% from the November low.
GE shares sold off following the re-statement of accounts and recognition by investors of the cash flow issues, bloated expenses and under performing business units.
The new CEO, John Flannery, is now in place and announced a restructuring plan last month along with a 50% cut in dividend.
Like any large organisation, these changes take time to address and implement. However, 1 – 3 years out we’ll start to see a very different GE begin to emerge.
If you’d like to add GE to your portfolio or other international shares, please contact leon@investorsignals.com
Our Algo Engine generated a buy signal in the AUD Betashares Australian Dollar ETF on the 11th December at $14.75. Since then, the ETF has rallied 10% in line with the Australian dollar bouncing from .7510 to .7870.
On the flip side, we’ve seen the USD Betashare ETF make lower lows and lower highs.
We feel that the counter-trend which has played out during the past month will begin to normalise and we are likely to see a shift back towards USD strength.
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