WPL & ORG

Posted on | by Leon Hinde

Within the Energy sector we like Woodside Petroleum and Origin Energy as our preferred exposures.

WPL offers 5% franked dividend yield and when combined with a covered call option, we’re generating 10% cash flow whilst allowing for a moderate level of capital growth.

ORG offers appealing capital growth prospects as the company pays down debt and reinstates a more progressive dividend policy.

Strong oil prices and increasing LNG production numbers are tailwinds that are likely to continue for ORG. Capital expenditure is also tracking  lower than guidance and these factors combined are helping to add to group cash generation.

 

Spark Infrastructure – Algo Buy Signal

Posted on | by Leon Hinde

Spark Infrastructure is under Algo Engine buy conditions following the higher low formation at $2.20.

Spark Infrastructure has a long history of owning and investing in essential service infrastructure. Their networks deliver electricity to more than 5 million  Australian homes and businesses.

This enters our radar and we’ll continue to review the earnings outlook and business fundamentals.

 

 

Market Sell-Off Explained

Posted on | by Leon Hinde

If a picture tells a thousand words, maybe nothing more needs to be said?

Long-Term graph of the NASDAQ. 

US Markets are muddling through the March quarter earnings as investors grapple with a weak earnings picture and trade tariff related issues. The bar was lowered significantly heading into the March quarter earnings season. Where consensus expectations were looking for -5% EPS growth, we’re now 75% of the way through the S&P500 earnings and the average EPS is tracking around -1%.

The graph above of the long-term pattern in the NASDAQ, highlights where investors’ concerns should be pointed. Elevated PE ratios in an environment of flat to contracting earnings could soon become a big problem, especially for technology stocks where in some instances there is little to no profit.

Short-term we’re watching the 10 day average on the NASDAQ and highlight last night’s close below the average. Longer-term, we remain cognizant of the need for the NASDAQ index to revert to the mean.

For more detail, please call our office on 1300 614 002.

 

CBA – Earnings & Valuation Review

Posted on | by Leon Hinde

Commonwealth Bank of Australia reported 3Q19 cash earnings of A$2.2bn,
being below market consensus by 10%.

Analysts have downgraded FY19 earnings by 6%, (which incorporates the $500m post tax remediation charge), while FY20 and FY21 estimates are also lowered on weaker revenue numbers.

CBA currently trades 13x earnings on a 5.8% yield. A key risk for the business is an adverse turn in the credit cycle, which is not reflected in the current share price.

CBA has been under Algo Engine sell conditions following the lower high formation over the past 3 years.

 

 

 

 

 

IPL – Reports May 20th

Posted on | by Leon Hinde

Incitec Pivot reports 1H19 earnings on Monday the 20th of May. We’re expecting the result to disappoint the market and we place our readers on alert.

Queensland floods and plant disruptions will offset any benefit from higher fertilizer prices. If the earnings release is as negative as we forecast, we feel that a buying opportunity will present soon after the announcement. 

We see the FY19 issues largely as one-off in nature and there will likely be an opportunity to profit from a recovery in the back-half of 2019. 

Keep this one in your diary and look out for next week’s update on the blog. We’ll identify the entry level, post the result.