Our Algo Engine triggered a buy signal in SHL near the recent low. We continue to see a buy-side opportunity here at $21.00
TAH has bounced from the $4.05 level highlighted in last weeks blog post and is now moving high, towards our $4.50 target.
AMC and SHL offer low risk entry points following the recent selling pressure.
On August 16th, shares of Sonic Health care posted an intra-day high of $23.76.
The next day the company announced that NPAT fell 5% to $427 million, which was the worst component of a reasonably good earnings report.
Our ALGO engine triggered a buy signal on SHL on Tuesday at $21.46.
We consider SHL a defensive stock, which has been oversold, and has now found good buying support in the $21.40 area.
Investors with a medium-term outlook can look to buy SHL with an initial target of $22.35 and a $21.20 stop.
Sonic Healthcare
Resmed formed a “higher low” at $8.94 and found buying interest within our “buy zone”, as advised on the blog.
Sonic Healthcare should find buying support at $21.55. Apply a stop loss below the $21.55. SHL – Ex-Div 8/9/2017 (Div 46c, Franking 20%)
Ramsey Healthcare – Strong reversal of yesterday’s low at $65.
CSL – Algo Engine buy signal at $125.00 CSL – Ex-Div 12/9/2017 (Div $0.91 Franking 0%)
Medibank – Now looks expensive. Take profit!
Following the recent Algo Engine buy signal, Sonic Healthcare looks like it is finding support at or near $22.50.
We continue to like RMD, SHL, CSL, MPL & RHC in the healthcare sector.
On 12th July, our Algo Engine triggered a buy signal in Sonic Healthcare, at or near $22.20.
We see this as a level of price support and our base case is that Sonic trades sideways, at or near the current price.
Sonic reports earnings on the 16th of August and we expect underlying EPS growth of 8%, which will support a forward dividend yield of 3.8%.
When combining a covered call option, we’re generating 10 – 12% cash-flow per year.
MPL, SHL & CSL are worth adding to your watch-list. We see the current price levels in these names, at or near new buying support.
Our Algo Engine triggered a buy signal in Sonic Healthcare, following the recent sell-off from $24.60 back down to $22.30.
We continue to see Sonic delivering 6 – 8% EPS growth and a 3.7% dividend yield. The stock is fair value at or near the current price and investors can consider SHL as a suitable buy-write for enhancing portfolio cash flow.
Recent price action in the local ASX market suggests we’ve entered a period of heightened volatility and potential for downside risk. Since posting the high for-the-year at 5945.00, the index for Australian shares has dropped almost 4%.
Looking across the spectrum of ASX top 100 stocks, we have found several names which can offer defensive value in a broadly sideways to lower share market.
These include: IPL, MPL, WOW, CTX, QBE, SHL, SYD, TCL, AMC, and IAG.
We consider these stocks to have the potential for moderate capital growth and, combined with a buy/write strategy, will offer 10 to 12% cash flow on an annualized basis.
ASX: XJO Index
SHL has strengthened its German footprint with the purchase of two laboratories from Medical Laboratory Bremen for A$90 million.
The deal is EPS accretive in the first year with margin expansion & synergy gains achievable in the near term. We expect Sonic to deliver 7 – 9% EPS growth in FY17 and FY18.
FY17 revenue $5.2b, on EBIT of $920m, Net Profit $$480m, EPS of $1.20 & DPS $0.78, places the stock on a forward yield of 3.6%.
We like Sonic as a core portfolio position, however the low yield and moderate EPS growth encourages the use of a covered call to enhance the cash flow and boost the overall investment return.
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