U.S. Retail Sales Weighing On Rates

Posted on | by Leon Hinde | Leave a Comment on U.S. Retail Sales Weighing On Rates

U.S. Retail Sales fell for a third straight month in February as households cut back on purchases of motor vehicles and other big-ticket items, pointing to a slowdown in economic growth in the first quarter.

Consumer spending, which accounts for more than two-thirds of U.S. GDP, appears to have slowed at the start of the year.

The combination of weak consumer spending data and global manufacturing data has been enough to see yields run into resistance.

The peak optimism on synchronized global growth and inflation pick-up, now appears to have passed.

With yields moving lower, we’re likely to see a better environment for the yield sensitive sectors. Telecommunications, Utilities, Consumer Staples and Real-Estate.

Some of the local names in these sectors include: SYD, TCL, AGL, GPT, SCG and WFD.

The chart below illustrates the yield on the 30-yr bonds falling relative to the shorter dated 2-yr bonds. This is typical during a period of slower economic growth.

 

 

Scentre Group, Westfield & Listed Property

Posted on | by Leon Hinde | Leave a Comment on Scentre Group, Westfield & Listed Property

Scentre Group announced their estimated distribution for the six month period ended 30 June 2017 will be $0. 10 cents per ordinary stapled security.

Scentre Group will announce its results for the half year ended 30 June 2017 on Thursday, 24 August 2017.

Charts – SCG

The chart  of Westfield below illustrates the price action is now in an oversold range.

Chart – WFD

Our Algo Engine triggered a buy signal in the SPDR Property Fund ETF.

Chart – SFL

 

 

Scentre Group – Update

Posted on | by Leon Hinde | Leave a Comment on Scentre Group – Update

Scentre Group (ASX: SCG) today announced its first quarter update for the three months to 31 March 2017. The Group’s operations continue to perform strongly with developments progressing well and comparable speciality sales up 2.4% for the 12 months to 31 March 2017

The Group maintains its guidance for full year growth in funds from operations (FFO) of approximately 4.25%. The distribution guidance of 21.73 cents per security is also maintained.

We like SCG as an income contributor to client portfolios. When complimented with a tight covered call, we’re delivering 10 – 12% annualised cash flow and allowing for moderate capital growth.

Chart – SCG

 

 

ASX Yield Sensitive Names Rally

Posted on | by Leon Hinde | Leave a Comment on ASX Yield Sensitive Names Rally

With bond yields moving lower in the US, we’ve seen strong buying interest in domestic yield sensitive names.

The rally is nearing the peak and taking profit  or selling tight covered calls is advised. History shows yields compressing below 4% will act as resistance for further share price advances.

Chart – TCL
Chart – SYD
Chart – WFD
Chart – SCG

 

REIT’s & Yield Sensitive Stocks Offer Value

Posted on | by Leon Hinde | Leave a Comment on REIT’s & Yield Sensitive Stocks Offer Value

Domestic yield sensitive stocks are looking well supported as global yields in G7 economies retreat from recent highs.  The bond  market seems to be losing some of the optimism in the”reflation” trade.

Evidence of the retreat in yields can be seen in the US 10-YR treasuries where the yields are now trading down from 2.61% to 2.31%.

The impact of this is:  money is now flowing back to REIT’s, infrastructure, consumer staples and telecommunication stocks.

We’ve been promoting the selling of resources and buying of defensive yield names, for the past few weeks. We continue to see defensive yield names complimented with tight covered call options as the best way to deliver 10-12% cash flow whilst protecting capital.

Chart – SCG

Chart – GPT
Chart – TCL

Update on the Yield Trade

Posted on | by Leon Hinde | Leave a Comment on Update on the Yield Trade

In late 2016 we began highlighting yield names which were oversold and were likely to bounce back coming into the year end. Our preferred names in the yield basket were WFD, SCG, GPT, SYD and TCL. On average, these names have rallied over 10% from their November low.

The consolidation of US yields, (bond prices no longer falling & yields no longer moving higher), along with the oversold condition in our domestic yield sensitive companies, were enough to generate the rally.

From here we feel  these names will remain supported, especially if volatility picks up in the broader market during the Jan – March period. With this in mind, we continue to hold our yield basket and overlay covered calls to boost the cash flow to 10%+ on an annualised basis.

Chart – SCG
Chart – WFD
Chart – TCL
Chart – TCL
Chart – GPT
Chart – US10YR

 

 

Scentre Group – Algo Engine Buy Signal

Posted on | by Leon Hinde | Leave a Comment on Scentre Group – Algo Engine Buy Signal

We’ve been tracking SCG and looking for the right entry point. With US bond yields running into resistance, we now feel money flow will continue to build in SCG, creating support and eventual price extension from the current $4.20 price point.

5.5% forward yield with 3% underlying EPS growth into FY17, makes SCG worth looking at, especially following our recent algo engine buy signal.

As the share price moves higher, at around $4.40, we look to sell the $4.50 covered calls with an April expiry. The April expiration date will allow us to collect the upcoming February dividend, as well. This strategy will boost the 6 month cash flow to over 5%, or 10%+ on an annualised basis. Plus allowing for capital growth of 7%.

 

Chart - SCG
Chart – SCG