Caltex Trade Recommendation

Posted on | by Leon Hinde | Leave a Comment on Caltex Trade Recommendation

Caltex delivered upbeat profit guidance following strong performances in Lytton and Marketing & Supply divisions. Fy17 revenue $16b, EBIT $900m on EPS of $2.30 and DPS of $1.20. This represent year on year underlying growth of around 10%.

The chart below shows the market’s favourable reaction to the updated guidance with CTX rallying $1.40 from yesterday’s session lows. CTX trades on Fy17 PE of 13x and 4% dividend yield.

Here is our strategy recommendation on Caltex…

Buy CTX at market, sell May $32.50 call for $1.00 credit. March dividend will be $0.50+

Total return if exercised 13%+ in 5.5 months.

Chart - CTX
Chart – CTX

FED’s 25 basis point increase

Posted on | by Leon Hinde | Leave a Comment on FED’s 25 basis point increase

The US Stock market slipped lower on the back of the Federal Open Market Committee’s (FOMC) policy announcement today. The market wasn’t surprised by the FED’s 25 basis point increase in the Overnight Fed Funds target, but the “Dot Plot” forward guidance shows policymakers are looking for 3 rate hikes of 25 basis points in 2017.

This view is more aggressive than the 50 basis point move the FOMC discussed back in September, which pushed equities lower and lifted the yield on the US 10-year treasury notes to a three year high of 2.57%. It’s worth noting that the 10-year yield traded at 1.35% in July; which means the yield on the US benchmark treasury note has essentially doubled in less than 5 months.

In her post-announcement press conference, FED chief, Janet Yellen, described the move as a “very modest adjustment”, which suggests this year’s forward guidance may mean another move on rates as early as May 2017.

We don’t see this a trend-changer in the major US stock indexes. However, we do see scope for a near-term correction back to the 19,450 level in the DOW Jones 30 and a move back to 2190 in the SP 500.  

Chart - Dow Jones
Chart – Dow Jones

Dow Jones 30 Review

Posted on | by Leon Hinde | Leave a Comment on Dow Jones 30 Review

This is a 5 minute video looking at the buy and sell signals within the Dow Jones top 30 stocks.

Investor Signals now offers US stocks and we can work in partnership with you to build and manage a portfolio that captures both long and short trading signals.

email me leon@investorsignals.com if you’d like to discuss what we can do to help with your US portfolio exposure.

Wesfarmers – Limited Growth

Posted on | by Leon Hinde | Leave a Comment on Wesfarmers – Limited Growth

Over the last four years, Wesfarmers’ share price has traded in an $8.00 range between $38.00 and $46.00. Although the diversified company has consistently paid out fully franked dividends and has been yielding around 5% over the past few years, the lack of share price appreciation has been a concern for longer-term shareholders.

While the Bunnings division of the company has been gaining market share with the demise of Masters, it seems the market rates Wesfarmers earnings lower reflecting a view that the Coles division faces increased competition from the discount chain, Aldi.

Wesfamers has also entered the UK hardware sector with the acquisition of Homebase January of this year, which has yet to show a similar level of success as the Bunnings division.

We don’t expect the limited upside of the share price to improve anytime soon and will continue to employ the covered call strategy on rallies up to the $43.00 area; collecting the franking credits, a dividend of over $2.00 per share and the option premium. Our strategy is helping to boost cash flow to 13%+ per annum

Chart - WES
Chart – WES

 

Gold Hits 10-Month Low

Posted on | by Todd | Leave a Comment on Gold Hits 10-Month Low

Gold traded at fresh 10-month low at 1151.00 as a stronger US Dollar and the prospects of higher US interest rates continues to pressure the yellow metal.

Since trading as high as $1335.00 on November 9th, Gold has lost close to $200.00 per ounce. And while technical indicators are showing oversold conditions on the daily charts, we still see scope to test the $1100.00 support level last seen in January.

NCM - New Crest Mining
NCM – New Crest Mining

Flight Centre – Short Signal

Posted on | by Leon Hinde | Leave a Comment on Flight Centre – Short Signal

We’ve been on the short side of Flight Centre for most of 2016.

The share price rebounded from their early November low of $29.50 to close last week at just under $33.00. However, structural headwinds, recent earnings shortfalls, and overly optimistic guidance suggest clear skies are not ahead for the firm.

On November 4th, Flight Centre indicated that 1H 2017 profits before tax (PBT) would decline 18 to 28%. The company maintained an FY17 earnings guidance of $320m – $350m. We believe this is overly optimistic and unlikely to be achieved given international flight price deflation.

Gradual ongoing selling pressure in FLT could see a low around $28 in early to mid 2017.

Chart - FLT
Chart – FLT

 

Healthcare – Watch For Buying Interest

Posted on | by Leon Hinde | Leave a Comment on Healthcare – Watch For Buying Interest

Healthcare names are being sold off due to their high PE ratios and negative sentiment towards the sector, which is permeating from the US healthcare stocks leading the sell off.

Keep these on your watch list as the selling will likely exhaust and we’ll look for entry levels triggered by the algo engine.

Chart - RHC
Chart – RHC
Chart - CSL
Chart – CSL
Chart - COH
Chart – COH