Yield Names Get A Boost From Lower US Rates

Posted on | by Todd | Leave a Comment on Yield Names Get A Boost From Lower US Rates

As US 10-year bond yields pull back from recent highs, shares in local yield sensitive names have been lifted off their recent lows.

The inverse correlation between US interest rates and GPT, SYD and TCL  has been acute over the last 3-months.

Since January 1st, US 10-year yields have risen over 20%, climbing from 2.40% to reach a 4-year high of 2.95% last week.

During this same period, the share prices of GPT, SYD and TCL have all dropped by over 10%. However, both SYD and TCL gained over 2% on Friday.

It’s our base case that the US 10-yrs will find resistance at the 3% level and offer upside price action in the local yield names.

All three of the above names are included in our ASX Top 50 model portfolio.

We expect to see price appreciation in the 4% to 6% range over the near-term as US yields retrace lower.

 Sydney Airport

Transurban

 

The US Government Is Back Open………….Until February 8th

Posted on | by Todd | Leave a Comment on The US Government Is Back Open………….Until February 8th

The US Senate was able to agree on a short-term resolution to allow the Government to reopen until the 8th of February.

The US has not had a properly ratified budget since 2009 and these “stop-gap” agreements are now getting shorter in duration.

The DOW, S&P 500 and the NASDAQ all responded by making new all-time highs.

Interestingly, as illustrated in the charts below, not only are the 2-yr Treasury notes now yielding more than the SP 500 in the last 10 years, but the Index itself is the most overbought in history.

We suggest that the extreme valuations on Wall Street will soften US yields over the medium-term.

As such, we would expect to see buying interest in the ASX yield names such as TCL, SYD and WFD .

Our ALGO engine currently has flagged buy signals in TCL and SYD at $11.70 and $6.80, respectfully.

2-yr versus SP 500 yields

SP 500 Sentiment Oscillator

 

 

 

 

 

Potential Triple Bottom In Sydney Airport

Posted on | by Todd | Leave a Comment on Potential Triple Bottom In Sydney Airport

Since posting an intra-day high of $7.60 on November 29th, shares of SYD have slid over 12% lower and hit a 10-month low of $6.63 yesterday.

A combination of higher interest rates and questions about the company’s new leadership have kept buyers on the sidelines over the last month.

However, SYD’s new chief executive Geoff Culbert has signalled that he will focus on boosting tourism in NSW when he officially takes over at the end of the month.

From a technical perspective, yesterday’s low print in the share price sets up a potential “triple bottom” pattern dating back to April of last year.

The daily price chart illustrates that when shares of SYD traded in the low $6.60 handle in April and August of last year, those level preceded a 10 to 15% rally in share price in the following months.

SYD is scheduled to release their full-year traffic numbers in two weeks and we believe investors will benefit from holding shares from these levels in their portfolios.

Sydney Airport

 

 

 

 

Sydney Airport – Generating 10 – 12% cash flow

Posted on | by Leon Hinde | Leave a Comment on Sydney Airport – Generating 10 – 12% cash flow

With bond yields likely to stabilise and strong passenger growth numbers, (across Australia’s east coast), we see SYD as a buying opportunity.

We also recommend selling covered call options to enhance the yield.

SYD is expected to release full year traffic numbers in late January 2018.

Sydney Airport

ALGO Update: Buy The Dip In Sydney Airports

Posted on | by Todd | Leave a Comment on ALGO Update: Buy The Dip In Sydney Airports

Shares of Sydney Airport are down today as the company went ex-dividend and will pay shareholders 18 cents per share.

This pencils out to a yield of 4.8%.

SYD has been in our Top 50 model portfolio since July 3rd and our ALGO engine triggered a buy signal on July 31st at $6.70.

With the 52-week high at $7.75, we believe there is a solid argument for owning SYD at or around current levels.

Sydney Airports

 

 

Softer US Yields Could Lift Local Names

Posted on | by Todd | Leave a Comment on Softer US Yields Could Lift Local Names

The recent move higher in longer-dated US Treasuries has created a headwind for some of the yield sensitive names listed on the ASX.

Over the last 10 days, the US 10-year notes have risen from 2.28% to just under 2.50%.

This 10% move has also lifted the 2yr to 30yr spread from 85 basis points to a full 100 basis points.

The impact on local shares has been a 4.5% drop in TCL and a 3.3% fall in SYD.

Looking forward, it’s reasonable to expect the US yields to soften and the yield curve to flatten.

Given the current correlation to the local shares, we see the US flattening trade as potential positive for the local names such as TCL, SYD, WFD and GPT

US 2yr versus 30yr spread

 

ALGO Update: Stay Long Sydney Airport

Posted on | by Todd | Leave a Comment on ALGO Update: Stay Long Sydney Airport

Our ALGO engine triggered a buy signal in SYD on August 2nd at $6.85. Since then it’s traded as high as $7.60 and is currently in the $7.30 area.

We hold this stock in the model portfolio and feel the fundamentals of the business continue to point to higher prices.

Recent reports show that more than 43 million travellers will fly into Sydney this year. That’s almost double the 23 million per year when it was privatised in 2002.

We have a $8.25 price target on SYD and will look to write cover calls in that area to enhance portfolio returns.

Sydney Airport

 

Transurban – Preferred Holding

Posted on | by Leon Hinde | Leave a Comment on Transurban – Preferred Holding

TCL announced a $1.9bn fully underwritten renounceable entitlement offer to
fund WestConnex & West Gate Tunnel Project in Melbourne.

We continue to see high single digit growth in dividends with FY18 guidance at $0.55, placing TCL on a forward yield of 4.8%

TCL & SYD are current holdings in our ASX 50 model portfolio, following the recent Algo Engine buy signals.

 

 

Algo Update – TCL, SYD & AMC

Posted on | by Leon Hinde | Leave a Comment on Algo Update – TCL, SYD & AMC

Following recent Algo Engine buy signals, we’ve seen solid price performance in TCL, SYD & AMC.

At the time of the algo buy signal, we highlighted these stocks to members as preferred buying opportunities.

However, we now see the stocks as near full value. Yields have compressed relative to 12 month EPS growth and investors should look to take profit, or sell at the money covered call options.

AMC
SYD
TCL

 

 

 

 

SYD Nears Resistance At $7.30

Posted on | by Todd | Leave a Comment on SYD Nears Resistance At $7.30

Shares of Sydney Airports (SYD) are still well bid over $7.00 after the company announced 1H17 results, which included EBITDA of $577 million , cash flow of $383 million and an upgraded dividend guidance from 33.5 cents to 34.5 cents for calendar  year 2017.

This strength  in cash flow and increased dividend puts SYD on a dividend yield of 4.9%.

We expect strong price resistance in the $7.30 area and consider the stock expensive in the $7.30/50 area.

Considering the extended market conditions, in general, we prefer a at-the-money  buy/write strategy for SYD to enhance portfolio returns on a stock with modest upside potential.

 Sydney Airports