At this point in the market we prefer healthcare names as a sector allocation for new money. Here are the recent buy signals generated by our Algo Engine.
With SHL, CSL and ANN we’ve added covered calls to boost the annualised cash flow to over 10%, whilst still allowing for capital growth if exercised at the strike price of the sold call.
The below names are performing well, following the recent buy signals from our algo engine.
The following group of stocks are in either established uptrends or, in recent months they’ve broken downtrends to begin building the early stages of a bullish “higher low” formation.
Many of these names have been mentioned previously in the blog and/or the monthly strategy video report. It’s worth loading these codes into your watch list and considering rebalancing your portfolio to include allocations towards some, or all of these names:
JHX, LLC, MQG, SHL, TWE, ANN, ANZ, ASX, CCL, CIM, COH, QUB, TAH, WOW & WPL.
With the lower growth names within the above basket, such as WOW & CCL, we compliment the position now with tight covered calls to enhance the yield to 10%+ per annum. With some of the other names, we give a little more breathing space as we expect 5 to 10% price appreciation before selling the call option overlay.
Sonic Healthcare (SHL.ASX) announced that they’re acquiring German Staber Lab Group for €120m or approximately AUD$175m. The deal will be funded by debt and cash on hand.
Sonic indicated that Staber revenue is around €80m or AUD115m and will be 4% earnings accretive in FY17. The market should view this transaction positively.
FY17 growth consensus for Sonic is 5%+ with a forward yield into FY17 of 4.4%.
We have been recent buyers of SHL on the pullback as indicated by the algorithm signal posted on last week’s blog.
Watch LLC, SHL, ASX and AMC as stocks that are trading on support.
The following group of stocks offer above average earnings growth, structural uptrends and are currently trading back on support levels that warrant closer attention.
ASX, AMC, BXB, JHX RHC, SEK, SHL, SUN and TWE.
More detail on the Investor Signals portfolio allocations and derivative overlay strategy will be provided in the October ASX top 50 Video Market Report.
Sonic Healthcare (SHL.ASX)
Amcor (AMC.ASX)
James Hardie (JHX.ASX)
Lend Lease (LLC.ASX)
Newcrest (NCM.ASX)
Resmed (RMD.ASX)
For more analysis on our recent buy recommendations and market stratagey, please keep an eye out for tomorrow’s mid-week market update video report. It will be sent out tomorrow morning as a blog post.
Within the current sell-off Resmed, Sonic Healthcare & CSL look like reasonable opportunities in a back drop of increased volatility. Here are the entry levels to add to your watch list.
Resmed (RMD.ASX) – Buy at $8.50 – $8.70 range
Sonic Healthcare (SHL.ASX) Buy at $20.50 – $21.00 range
CSL (CSL.ASX) Buy at $96 – $102 range
SHL.ASX FY16 earnings per share growth of 21% was better than market expectations. FY17 the stock trades 22x on an expected yield of 3.4%
We own this name in the model from lower levels and see the stock price well supported and suitable for a buy write strategy.
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