Defensive Stocks For An Uncertain Market

Posted on | by Todd | Leave a Comment on 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.

ASX: XJO Index

 

 

Insurance Group Australia (IAG)

Posted on | by Todd | Leave a Comment on Insurance Group Australia (IAG)

Insurance Australia Group (IAG) reported a 4.3% drop in first-half profits to $446 million, which was down from $466 million from the previous corresponding period but slightly higher than the street’s expectations.

Amid an atmosphere of increased claim pressures, Australia’s largest insurer by market share announced its gross written premium grew by 4.7% to $5.8 billion.

IAG declared an interim, fully franked, dividend of 13 cents per share to be paid on March 30th. This dividend represents a cash payout ratio of 64.3 %.

IAG – Bounces Off Support

Posted on | by Leon Hinde | Leave a Comment on IAG – Bounces Off Support

We highlighted in this month’s video report that IAG would likely find support at $5.50. The stock has since traded down and tested the $5.50 range and buyers have pushed the stock back to $5.80.

We see a place for IAG in portfolios based on FY17 earnings of $900m, EPS $0.36 and DPS of $0.32 which places the stock on a forward yield of 5.5%. We compliment this with a tight covered call option to increase the cash flow to 12% on an annualised basis.

$6.00 remains resistance and we don’t see the stock trading above this level in the short term.

Note: IAG has implemented an optimisation program that will reduce gross operating costs by an annual run rate of at least 10%, or $250m by the end of FY19.

Chart – IAG