Gold Stocks in Review

Posted on | by Leon Hinde

Gold has sold off in recent trading sessions, following the strength in the US dollar. The sell off has now created Algo Engine buy conditions in Evolution Mining, St Barbara, OceanaGold  & Northern Star Resources, all of which are current holdings in the ASX 100 model.

Newcrest Mining is still in the early  stages of forming a higher low and may take another few days before  we see an Algo Engine buy signal appear.

OZ Minerals – FY18 Earnings

Posted on | by Leon Hinde

OZ Minerals was removed from our ASX100 model late last year after generating 144% return.

The stock is now under algo sell conditions.

OZL reported FY18 earnings that beat consensus with NPAT of A$228m. Dividends were lifted to $0.15

We’re buyers of OZL on the next algo engine buy signal. We will remain patient as the general price backdrop for resources  is  over extended in the short-term.

 

Dow Jones – Sell Signal

Posted on | by Leon Hinde

Global markets are in the early stages of rolling over, as a combination of weaker data from China, Europe and the US weighs on investor confidence.

The U.S. economy added just 20,000 jobs last month, marking the weakest month of job creation since September 2017. Economists polled by Dow Jones expected a gain of 180,000.

Data out of China showed its exports slumped 20.7 percent from a year earlier, far below analyst expectations and wiping out a surprise jump in January.

The European Central Bank slashed its growth forecasts for the euro zone and announced a new round of policy stimulus.

As readers will be aware, we’ve been tracking the XJO to break the 10 day moving average as a confirmation of the short-term indicators supporting the longer-term Algo Engine “sell” signal. If we apply the same analysis to the Dow Jones, we see a more advanced break in price action.

ASX 50 in Review

Posted on | by Leon Hinde

US Markets

US equities continue to remain at a significant P/E premium to the rest of the world despite no longer having an earnings growth advantage. 2019 EPS growth estimates for the S&P500 are now at 4%, down from 12% 6 months ago. Technical indicators look stretched once again, and we’re back at levels where selling pressure will build for most major US indices. 

High PE growth names still require considerable investor caution, whereas, yield sensitive areas are likely to remain well supported, even if market volatility pickups again in the coming weeks or months.

At a global level, value in China, India & Brazil, along with ongoing liquidity from Japan, will add some level of support. China has been aggressively easing monetary policy and cutting taxes for more than six months, as an offset to their crackdown on excessive credit growth last year and headwinds from US tariffs. We think there could be more stimulus from China forthcoming.

Emerging market growth goes from +3% in 2018 to +7% in 2019, in contrast S&P500 EPS growth drops from +23% in 2018 to just +4% in 2019.

Domestic

ASX 200 headline PE has reverted towards its long run average of 14x earnings, the Australian equity markets are likely to run into selling pressure with the XJO at 6100 points. This is due to limited earnings growth and the extended rally in resources.

In today’s ASX Top 50 Market Update Video Report, we analyse the ASX top 50 stocks and identify the names we’re currently holding in the model and those that are likely to underperform following weak earnings announcements.

Lendlease – 1H19 Earnings

Posted on | by Leon Hinde

Lendlease released 1H19 earnings last week and the initial reaction from the market has been negative, with the share price moving lower.

The company indicated the Australian Engineering business is non-core, which suggests we will soon see a trade sale of some description.

In FY20 we see a normalization of the Lendlease business, following the cost overruns in the FY19 results. FY20 we see revenue at $13bn and EBIT at $1.2bn.

FY20 yield is running at 4.8%. Value is emerging, watch the shot-term indicators for a positive reversal.