US Credit Card Defaults On The Rise

Posted on | by Todd | Leave a Comment on US Credit Card Defaults On The Rise

US media reports suggest the US economy is flashing a warning sign that could mean US is headed for a downturn.

Credit card companies are starting to grow nervous as the net charge-off rate, or the percentage of loans that credit card issuers write off as a loss, has just hit its highest level in four years, a continuation of several quarters of the rate rising.

The trend hit all major card issuers and is starting to eat into bank earnings. The current rate is 3.29%, but it is still a long way from the peak hit in 2010 of 10%.

The rate had dropped for 24 straight quarters during the recovery, until a reversal in recent quarters.

The “cause and effect” logic is that once credit card defaults begin to rise, the default rate on mortgages also begins to rise, which is a much bigger problem for the US economy.

Credit Card Default Rate  

 

Woolworths – Algo Update

Posted on | by Leon Hinde | Leave a Comment on Woolworths – Algo Update

We’ve been long Woolworths following the recent Algo Engine buy signal.

Through adding a $28 December covered call option we’ve boosted the annualized cashflow to 10 – 12%, which includes capturing the $0.58 September dividend.

WOW reports on the 23rd August. The stock is trading on 20x FY18 earnings and 3.3% forward yield.

FY17 EPS is likely to around $1.50 per share and the market is forecasting underlying EPS growth into FY18 of 8 %, to $1.65 per share.

Chart – WOW

 

 

 

Resource Basket – Algo Signal Review

Posted on | by Leon Hinde | Leave a Comment on Resource Basket – Algo Signal Review

In late May our Algo Engine started flagging the “higher low” structure in large cap resource names, including a number of resource specific ETF’s.

Within the ASX 100, FMG, RIO and BHP were the standout Algo Engine buy signals. In client portfolio’s we allocated towards BHP as our preferred exposure.

Over recent weeks, a rally in Iron Ore prices from US$56 per tone to US$72 per tone, has helped to accelerate the share price advance, and crude oil back at almost $50 per barrel has helped BHP.

Fund managers continue to position in BHP ahead of a potential corporate restructure, as the market speculates on the divestment of the US shale and energy assets, into a  separate listed US company.

BHP reports on the 22nd August .  Assuming FY17 total dividends of $1.10, BHP trades on a 4.7% yield. EPS forecasts into FY18 should remain similar to FY17 at around $1.70 per share.

Chart – BHP
Chart – RIO
Chart – FMG
Chart – QRE

 

 

 

 

 

Algo Buy Signal – Amcor

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

Chart – AMC

 

 

 

 

Boeing Lifts The Dow In July

Posted on | by Todd | Leave a Comment on Boeing Lifts The Dow In July

The Dow Jones 30 Index posted its 5th consecutive new record high close today at 21,891.

During the month of July, the Index gained 570 points, or 2.6%.

As the chart below illustrates, 310 of those 570 Dow points were generated by one stock: Boeing.

Boeing shares climbed over 24% during the month of July from $197.75 to $246.00. In just the last 5 trading sessions, Boeing shares rose 16% from $212.50 to $246.00.

Since the Dow is a price-weighted Index, a higher point value, or Beta, is assigned to higher priced stocks.

Boeing