Record Levels of Margin Debt

Posted on | by Leon Hinde | Leave a Comment on Record Levels of Margin Debt

At the end of July 2017, margin debt on the New York Stock Exchange reached an all-time high of $550 Billion. 

Prior to the 2007 market correction, NYSE margin debt peaked at 2.63% of GDP. In 2000 margin debt peaked at 2.78%.

NYSE margin debt to GDP now stands at 2.86%.

As the Fed prepares to reduce their holdings of Treasuries and MBS securities on its balance sheet, we may start to see tightening credit conditions in the U.S financial markets and a general withdrawal of market stimulus from the BOJ and the ECB.  

 

 

 

US GDP & 10YR Bond Yields

Posted on | by Leon Hinde | Leave a Comment on US GDP & 10YR Bond Yields

The technology sector in the US continues to perform against a backdrop of data showing stronger-than-expected growth in the US economy.

The US economy expanded at its most robust pace in more than two years in the second quarter, supported by solid consumer spending and a pickup in business investment.

GDP rose at a seasonally and inflation-adjusted annual rate of 3% in the second quarter.

Interestingly, the bond market remains less than convinced with the 10 year yields retreating to a low of 2.11%, down 50 basis points from their 2017 high of 2.64%.

 

Ramsey Healthcare – FY17 Earnings

Posted on | by Leon Hinde | Leave a Comment on Ramsey Healthcare – FY17 Earnings

Ramsey reported FY17 NPAT in line with guidance at A$543 million, up +12.7% on the same time last year. Revenue was also in line at A$8.7 billion.

All divisions contributed to earnings growth with Australia & Asia as the standout.

Assuming underlying EPS growth of 15% into FY18, we have Ramsey on a 2.2% forward yield, as dividends increase to $1.45 per share.

We view Ramsey as a strong buying opportunity on the next higher low formation, or Algo Engine buy signal.

 

 

Housing & Construction – BLD, JHX & CSR

Posted on | by Leon Hinde | Leave a Comment on Housing & Construction – BLD, JHX & CSR

Boral reported FY17 results that were inline with market expectations, with underlying EBIT of $460m NPAT of $343m. A final dividend of $0.12 per share (50% franked) was declared, taking the full-year dividend to $0.24, up 7% on FY16 and representing a payout ratio of 82%.

FY18 forward dividend yield, based on $0.26, is 3.5%.

The investment case for Boral is the strength of Australian infrastructure and US housing,  however, the trends within the housing and construction stocks look less than favorable.

 

Algo Buy Signal – AMP & SUN

Posted on | by Leon Hinde | Leave a Comment on Algo Buy Signal – AMP & SUN

We continue to take a very cautious approach to the market, especially when we look at potential negative events over the next 8 weeks. Also, realizing that we approach this juncture at peak valuations for many global equity markets.

With the above in mind, Investors could be forgiven for wanting to sit on the sideline or only hold the highest of quality names. Traders on the other hand, will continue to remain active and apply stop-losses as a way of mitigating risk.

The Algo Engine has recently flagged buy signals in AMP and SUN. Both of these are reasonable prospects for a bounce from the oversold conditions, although stop losses should be established below the recent pivot point.

Algo Update – GNC

Posted on | by Leon Hinde | Leave a Comment on Algo Update – GNC

Following a number of analysts upgrading the outlook for Graincorp, the stock rallied over 5% in yesterday’s session.

We’ve been tracking this name, waiting for a reversal with increased volume and conviction. With the stock closing yesterday at $8.64, we now consider the $8.16 low as new support and look for a base to build at or near $8.50, with upside potential to $9.00.

 

 

ALGO Update: Stay Short BOQ and BEN

Posted on | by Todd | Leave a Comment on ALGO Update: Stay Short BOQ and BEN

The ALGO engine triggered a sell signal for BOQ on July 25th at $12.00, and for BEN on August 18th at $12.49.

Over the last two weeks, shares of these two regional banks have sold off less than the shares of the 5 larger domestic banking names.

Over the near-term, we see that divergence fading and expect the downside momentum in BEN and BOQ to pick up pace going into September.

We have adjusted our target prices to $11.15 in BEN and $12.05 for BOQ.

Bank Of Queensland

Bendigo Bank

US Labor Day Preview

Posted on | by Todd | Leave a Comment on US Labor Day Preview

During yesterday’s Asian session and into the London time frame, investors were anxious about North Korea’s provocative missile launch, the flooding disaster in Texas, and the looming US debt ceiling debate.

However, once the US session opened, investor’s attenton  turned to preparing for the Labor Day long weekend, which marks the end of the Northern Summer.

The NYSE will close early on Friday and will remain closed all day next Monday.

Volume on the Dow Jones 30 was barely 220 million, down 25% from the 3 month rolling average of 310 million per day.

As the chart below illustrates, the SP 500 remains below the 30-day moving average with a downward bias.

S&P 500 Index