Month: November 2017

Westfield is leading the recovery in yield sensitive names, as bonds in the US rally and bond yields move lower. WFD, TCL, SYD & SCG are examples within the ASX top 50 that are currently finding renewed buying support.

It is somewhat of a surprise for the market, as investors were mostly betting on higher US interest rates. The surprise catalyst, was last week’s slightly weaker employment growth numbers, (based on market expectations),  and flat growth in hourly wage numbers.

TCL, SCG and SYD are current holdings within our ASX 50 model and WFD should only be considered as a counter trend trade with a stop loss below the recent low.

The following six charts show a down trend. The CEOs of the major banks are cautious on the outlook for revenue growth.

No reason to believe we’re likely to see a meaningful recovery.

SCG released its 3Q17 operational update today, FY17 guidance  of 4.25% growth, DPS of $0.21, placing the stock on a forward yield of 5.5%.

We continue to view SCG as a suitable income strategy for portfolios when complimented with a tight covered call option.

The above strategy is generating over 10% per annum in cash flow from the call option and dividend income. We don’t expect much in the way of capital growth.

Westpac’s 2H17 result was consistent with the trends we’ve seen within the other banks, mainly weaker-than-expected income offset by very low bad debt charges.

Overall WBC’s result came in 2% below consensus with revenue growth at 2.8% and NPAT for 2017 up slightly on 2016 of $8b.

The outlook for WBC into 2018 is for flat EPS growth, meaning EPS of $2.40, DPS $1.90 delivering a yield of 5.9%.

With oil rallying and the US dollar retracing, (yields in the US retreat), it’s reasonable to consider buying BHP and selling Qantas.

Apply stop losses on a price reversal through prior support/resistance levels as indicated on the charts below.

Orica has reported a FY17 NPAT of $386m with EBIT in-line with consensus $707m. The market is concerned about flat EPS guidance into next year and cost headwinds with increased operating expenses on R&D, IT and at corporate level, to exceed additional$100m+ .