TCL Firms On Lower US Yields

Posted on | by Todd | Leave a Comment on TCL Firms On Lower US Yields

On October 5th, shares of TCL  traded as low as $11.62. At that time the US 10-year bonds were yielding 2.40%.

US yields have now dropped to 2.28% and TCL’s share price is over 6% higher at $12.30.

This interest rate correlation and sensitivity is linked to several other ASX stocks including WOW, SYD and SCG.

With the odds of a FED rate hike in December still over 70%, we see limited upside in TCL beyond $12.50.

As such, we like selling the $12.50 TCL calls into March and collecting the 40 cents premium.

In addition, TCL is set to pay a 27 cent dividend in December, which will bring the total cash flow from the derivative overlay strategy to 67 cents.

   Transurban Group

 

Algo Update – TCL, SYD & AMC

Posted on | by Leon Hinde | Leave a Comment on 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.

AMC
SYD
TCL

 

 

 

 

SYD, TCL And GPT Show Upside On Rate Reversion

Posted on | by Todd | Leave a Comment on 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

 

ALGO Update: Buy Signals For GPT, SYD and TCL

Posted on | by Todd | Leave a Comment on ALGO Update: Buy Signals For GPT, SYD and TCL

Over the last three weeks, shares in local infrastructure and property trusts have really taken a beating.

Some of the yield-sensitive names have lost between 5 and 10% as Australian interest rates in the 2yr to 5yr tenors have followed global interest rates higher.

One of the major aspects of the recent rise in rates has been the consensus amongst G-7 central bankers that the era of low rates and financial stimulus will be coming to an end.

It’s our base case that the market has gotten ahead of itself with the prospects of sustainable higher yields.

With global equity markets still at elevated levels, a material repricing, or “risk-off” period, in the market would increase the demand for “safe haven” government bonds, which would ease rates lower.

The specific stocks that we are following include GPT, TCL and SYD.

The ALGO engine triggered buy signals in these three names at yesterday’s close.

Given the sharp sell off that these names have seen over the last few weeks, we feel the upside potential is an reasonable trade.

GPT

TCL

SYD

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

 

 

ASX Yield Sensitive Names Rally

Posted on | by Leon Hinde | Leave a Comment on ASX Yield Sensitive Names Rally

With bond yields moving lower in the US, we’ve seen strong buying interest in domestic yield sensitive names.

The rally is nearing the peak and taking profit  or selling tight covered calls is advised. History shows yields compressing below 4% will act as resistance for further share price advances.

Chart – TCL
Chart – SYD
Chart – WFD
Chart – SCG