Australian Stock Market Report – Blackmores, Wesfarmers, Flight Centre shares & more
Market Commentary and Stock Tips - 2nd March 2018
Highlights --- or a Discombobulating week on the market
No doubt you’re reaching for your Wikipedia, Google or Oxford Dictionary to discover the meaning of the word ‘discombobulating’. I first discovered the word in the Economist magazine in 2003 at the beginning of the Iraq war when the statute of Saddam Hussein was toppled over. But what it means here is that you get an outcome which is the opposite of what you had expected. And so it was in the market this week, when we saw good reports followed by significant share price falls, while on the other hand we saw ordinary reports only to see substantial share price rises!. So that sets the scene.
Market Mayhem /discombobulation -what goes up goes down and the reverse.
The stand out example here is the vitamin pill maker Blackmores. Its report was pretty healthy (profit up 15%), but its future diagnosis was in need of an energy (profit) fix. The net result --its share price was slammed down by about 15% on the day of the announcements. Another such case was one that few of you have probably heard of and that is called Wisetech, an infrastructure and Technology Company – a reasonable result, but it even out did Blackmores with a subsequent share price fall of about 23%.
But on the other hand (there’s always another hand) we saw some pretty ordinary results delivered by the likes of Crown, Seek and Wesfarmers – only to see their share prices jump up nicely following their announcements – discombobulation here as well.
Market Truism /wise words from the old man
Now this is one that that I learnt when I was in “proverbial short pants” in the share market. The old man told me – “Never second guess the market”, or another way of putting it is that “the market generally gets it right”. In simple language, if we see a significant share market price reaction in a direction opposite (usually down) to what we expected, don’t be lured into buying the shares because you think the shares have become cheap. My general advice is don’t do it, don’t become a bottom fisher but rather wait until the stock recovers on a sustainable upward trajectory (stand out examples: TPG; and Vocus in the past; and maybe now Blackmores and Wisetech.)
It’s a **** Star Week
The reporting season is an exciting 2 and half week period in late February (and again in August) each year. It provides a window on the operation of the around 2,000 companies which are listed on the share market. And this week it’s a 4 star result week.
First, we have the company the gets milk from that part of the cow which doesn’t have the A1 protein and it’s called A2 Milk. Its report was simply stunning and its future is consistent with its recent performance. The Chinese love it and domestically it’s doing really well as well.
Second, we have the successor to the 70’s Big Red British double decker bus that trundled overland from London over to New Delhi. That bus business has now morphed into the company called Flight Centre. It too has been a stellar performer, since it joined the share market at 95 cents a share in 1995. Following its most impressive report this week, its share price has soared to a record high of $57. So now for Flight Centre its blue skies ahead. While still on the travel caravan, Webjet and Corporate Travel are also doing very well after a recent soft patch.
Third, there is that erstwhile upstart online retailer called Kogan, ---and like the JB ad “it’s done it again”. The question is how much longer can it keep doubling its profit growth? Fact is the online retail market place in Australia, has a penetration of only a reported 7% whereas in the US I understand it’s over 20%.
And the fourth leg of the quadrella is Qantas. While its report was not in the shining star galaxy of the 3 above its future profitability looks pretty good, as it revamps its international offering, and cuts back domestic capacity (i.e. fewer planes flying-so more passengers on the flights that remain- and probably higher prices too) – nice work if you can get it.
And so to the rest -
This is a list of a few results that have been quite ok and their future looks good and includes: BHP; Woolworths; Lend Lease; Sydney Airport; Link; Bapcor; Ooh Media; and Medibank.
Now we’re into the last few days of the reporting season and the only major companies left to report include; QBE; Caltex; Adelaide Brighton; Harvey Norman; and Ramsey Health Care- nothing of any great moment here but Harvey and Ramsay could surprise.
Stock Tips- Reserved for Michael Heffernan’s clients
- Thursday: Australian Industries Groups Manufacturing Survey and Private Capital Expenditure.
In the U.S.A:
A range of data, most importantly: Home sales; Manufacturing Data; Durable Goods Orders; GDP; Inflation; and the University of Michigan’s Consumer Confidence.
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