Buy AMC & SHL
AMC and SHL offer low risk entry points following the recent selling pressure.
Algo Update – TCL, SYD & AMC
Following recent Algo Engine buy signals, we’ve seen solid price performance in TCL, SYD & AMC.
At the time of the algo buy signal, we highlighted these stocks to members as preferred buying opportunities.
However, we now see the stocks as near full value. Yields have compressed relative to 12 month EPS growth and investors should look to take profit, or sell at the money covered call options.
Amcor – FY17 Earnings Update
AMC has delivered FY17 operating earnings of $1.09 billion, up 3% on FY16. The Board declared a final dividend of $0.235.
Underlying net profit for the 12 months to June, came in at $700 million or 4.5% higher on the same time last year.
At 19x forward earnings, AMC is expensive.
However, earnings are defensive and the company should still achieve average EPS growth of 8% into FY18, (net profit in the range of $750 – $770 million), placing the stock of a forward yield of 3.7%.
We expect AMC to trade within a range of $15.00 to $16.50.
Amcor
Algo Update – Amcor Buying Support
Following the recent Algo Engine buy signal, Amcor has now formed a solid base at $15.40. We have an upside target of $16 – $16.50.
We recommend adding December covered calls to the Amcor holdings to increase cash-flow and enhance portfolio returns.
Algo Buy Signal – Amcor
Our Algo Engine triggered a buy signal on Amcor as the stock forms a “higher low” pattern at or near $15.30.
Amcor reports earnings on the 22nd August, the market in looking for EPS growth of 8 – 10%. The recent rally in the AUD may see forward guidance reduced slightly, if the AUD was to stay above $0.80.
We continue to like Amcor as a buy and hold portfolio position, complimented with a covered call option. We’re allowing moderate capital growth and when combining the dividend with the covered call option, we’re generate 10 – 12% annualised cashflow.
Algo Update – AMC & IPL
We continue to like the buy-side opportunity in AMC and IPL, following the recent Algo Engine buy signals.
Buy Amcor – Back at Support Level
Amcor is trading on a high multiple of 19x forward earnings and a 3.8% dividend yield. However, the earnings are relatively defensive and we’re expecting 8% underlying EPS growth.
The stock should find support at or near $16 and is an appropriate consideration as a buy-write for client portfolios.
SYD, TCL And GPT Show Upside On Rate Reversion
Over the last two weeks, yield sensitive names like SYD, TCL and GPT have all dropped over 10% from recent highs.
One of the main drivers has been the change in interest rate expectations from G-7 central bankers and the subsequent rise in short-term paper.
Moving forward, we see more likelihood of G-7 rates reverting lower within the year’s range and providing upside potential in the stocks above.
Other stocks we like on the basis of lower local rates are: AMC, WOW and MPL.
We see reasonable upside potential in the names and will employ the derivative overlay strategy (selling covered calls) to enhance the portfolios returns.
Transurban
Sydney Airport
General Property Trust
Amcor – Core Holding
Amcor has remained one of our preferred portfolio holdings. We see 8% EPS growth over the next 12 months and the stock trades on a forward yield of 3.8%.
The current price is beginning to approach full value and we recommend selling the $17 call options into December to enhance the return.
Defensive Stocks For An Uncertain Market
Recent price action in the local ASX market suggests we’ve entered a period of heightened volatility and potential for downside risk. Since posting the high for-the-year at 5945.00, the index for Australian shares has dropped almost 4%.
Looking across the spectrum of ASX top 100 stocks, we have found several names which can offer defensive value in a broadly sideways to lower share market.
These include: IPL, MPL, WOW, CTX, QBE, SHL, SYD, TCL, AMC, and IAG.
We consider these stocks to have the potential for moderate capital growth and, combined with a buy/write strategy, will offer 10 to 12% cash flow on an annualized basis.
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