RIO – $3bn Share Buy-Back

Posted on | by Leon Hinde | Leave a Comment on RIO – $3bn Share Buy-Back

RIO has confirmed that Yancoal remains the preferred bidder of Coal & Allied post a revised and improved offer from Yancoal yesterday.

We expect material free cash-flow (FCF) to be passed through to shareholders despite iron ore falling from its February peak.  In FY18, RIO could return up to $3billion  through share buy-backs.

We remain cautious on the outlook for spot iron ore prices. However, the low levels of debt, low cost of production and aggressive capital management undertaking by RIO will help to provide share price support.

FMG, RIO & BHP will likely see a minor rally from the current oversold conditions,  before turning lower.

Chart – RIO

US Update: Divergence In Market Breadth

Posted on | by Todd | Leave a Comment on US Update: Divergence In Market Breadth

As the SP 500 continues to trade near all-time highs, market analysts are reviewing various metrics to determine whether US Stock prices have more upside, or if they are ready for a downside correction.

One of these metrics is “Market Breadth.” Market breadth is a technique used to gauge the direction of the market by measuring the number of stocks trading higher versus the number of stocks moving lower

“Positive” breadth occurs when more stocks are moving higher than lower and vice versa for “negative” breadth.

The breadth numbers are used to determine whether the market has positive momentum or negative momentum.

The chart below shows that the SP 500 and market breadth have been diverging since late-April.

To put this divergence into perspective, as of last Friday, nearly 40% of SP 500 stocks were trading below their 200-day moving averages. In addition, 6% of the stocks listed on the NYSE hit new 52-week lows last week.

We will watch these measures closely to see if the current market pricing is resolved to the upside, or if the US Indexes commence a correction lower.

SP 500 vs Market Breadth

 

Gold Update: Looking For Higher Prices

Posted on | by Todd | Leave a Comment on Gold Update: Looking For Higher Prices

On June 8th, we posted a report on Gold just as the spot price was about to break back above $1300.00 for the first time since last November.

Instead, the yellow metal failed at resistance and has rotated lower finding support at the $1240.00 level.

In that same report, we commented on how the share price of NCM was lagging behind the spot price due to supply concerns from the idle Cadia mine in NSW.

At this point, the spot Gold price and the share price of NCM seem more in sync with both slowly moving back above key resistance levels.

With local stock valuations still very high, we suggest investors look to increase exposure to Gold. We recently took profits in EVN at $2.50 and will look to re-position over the near-term.

We also suggest investors can look to buy the BetaShare Gold ETF with the symbol: QAU.

Newcrest

Evolution

BetaShare Gold ETF: QAU

Take Profit – Ramsey Healthcare

Posted on | by Leon Hinde | Leave a Comment on Take Profit – Ramsey Healthcare

After buying Ramsey Healthcare on the recent pullback to $68.50, we now look to take profit at today’s price levels.

Within the healthcare space, we continue to like SHL, RMD, CSL and Ramsey Healthcare. Although, they’re starting to look a little expensive from a PE perspective.

Trimming profits with a view to buying back in on a pullback makes sense, or selling tight covered call options at current price levels.

Chart – RHCASX:RHC

 

Downside Risk For MQG

Posted on | by Todd | Leave a Comment on Downside Risk For MQG

Shares of MQG lost over 2% for the week as internal momentum indicators are now rolling over into negative territory.

In addition to the negative technical picture, MQG faces a major class action suit over allegations some of its investment advisers artificially inflated the price of a small mining company before a sudden collapse wiped out many of its investors.

According to an article in the Sydney Morning Herald, the investment bank’s brokers are accused of deliberately “ramping” stock in Cleveland Mining Group: a Brazilian iron-ore mine project with a potential value of $34 billion that turned out to be a “worthless patch of jungle.”

Initial price support can be found at the June 8th low of $86.05. A break of that level could see downside range extension to the February 9th low of $82.30.

Macquarie Group (MQG)