Australian Stock Market Report – CBA, Resmed, Macquarie shares & more

Australian Stock Market Report CBA Resmed Macquarie shares more

Market Brief and Stock Tips - 9th November 2018

Highlights

After the election, US share market comes up Trumps - CBA is contrite and weathers the storm - Reserve Bank more upbeat than it’s been for some time - Resmed is breathing easy – Travel stocks still flying in unfriendly skies.

US market comes up Trumps

The mid-term elections delivered pretty much what the pundits had expected. The Democratic Party wins the lower house but the Donald comes up Trumps in the Senate, actually increasing his majority. - Net result this will probably curb the more controversial of the President’s policies in relation to migration and possibly further tax cuts. Whatever you may think of this election outcome, one thing is crystal clear, the US market’s Dow Jones Index loved it, and recorded the best one day rise after their mid-term elections, since 1982!

The Banks

Still better to own the bank than make a deposit at the local branch. The four major banks rebounded nicely this week and pay dividends of around 5.5 -7.9% per year and they’re fully franked. ANZ, NAB, and WBC have generally weathered the Royal Commission storm and now look reasonable value. Macquarie also looks the best of all the banks at the moment and it pays an attractive dividend of about 4.4% partially franked.

Reserve Bank - Cannot see any interest rate rise on the horizon

The announcement by the Bank this week was probably the most positive announcement I have seen since the Western Bulldogs won the 2016 premiership. They said that their forecast for future economic growth has been revised up- they believe that the unemployment rate will decline further to 4.75%. They expect inflation to remain low, and if that’s not enough, no interest rate rises are on the horizon. If the Reserve Bank were doing the VCE or Higher School Certificate they would get a strong second class honour for this announcement!

CBA - they’re sorry, got their penance, now the market gives them absolution

CBA had its annual general meeting this week and both the chairman and the new CEO admitted again that they had let their customers down and the bank had grown complacent. But they have changed their ways and are now focused on their core business of retail and commercial banking businesses in Australia and New Zealand. They are selling their life insurance business, Colonial first state global asset management and demerging their mortgage and broking businesses. But their trading result for the first quarter of this year released on the same day as their AGM. The trading result was most workmanlike, and that’s not bad given all the remediation restructuring and compensation that they have paid out. Their share price has rebounded nicely this week also. All the banks are worth another look

Travel stocks still flying in stormy weather

Over recent months all travel stocks listed on the stock exchange including Qantas, Flight Centre, Corporate Travel and Webjet have done it tough. One culprit would be the increasing price of oil, and the weaker $A discouraging foreign travelers and the fact that  from a statistical point of view their share prices probably rose too far, too fast over the last twelve months. Webjet’s purchase of a company called Destinations of the World has helped stem the softness in the share price but time will tell if it is good enough to set it on a confirmed upward trajectory. Best to stay clear of travel stocks for the time being.

Stock Press

Cochlear - Hit with a large damages judgement in the US but Cochlear will appeal and, and the appeal “will take years to resolve.” Cochlear remains a sound investment.

Resmed - This breathing disorder company keeps breathing regularly following the expansion of their hospital software portfolio into the skilled nursing business. A quietly impressive performer and looks attractive with its heavy focus in the US and can benefit from the strong US dollar.

REA Group - Its first quarter result was much better than expected, but the outlook was a bit down-beat. Nevertheless, its share price jumped sharply at the announcement but its outlook statement may curb further strong growth.

Stock Tips- Please contact Michael on 03 8633 9925

australian stock market weekly report 

Next week

In Australia:

* Tuesday: National Bank Business confidence and conditions

* Wednesday: Westpac consumer confidence and Wage price index

* Thursday: Employment/Unemployment

In the U.S.A:

Important data will be released on Inflation, Average weekly earnings and Retail sales.

 

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About Michael Heffernan

+61 (3) 8633 9925 Email Profile

Michael Heffernan has over 30 years’ experience in the finance and securities industry and is currently a Senior Client Advisor and Economist with a leading Australian Sharebroker Phillip Capital after having been Chief Economist/Lawyer with the Australian Stock Exchange for 13 years, and an Economist with Commonwealth Department of Employment and Industrial Relations for 11 years.
Most recently Michael topped the poll of the Australian Newspaper's Criterion column of his expert tipsters for 2014 with an average increase of 26% over the year. Also Michael was named Stock Picker of the year 2013 and 2016 at the Australian Stockbrokers Foundation Annual Awards Charity Dinner.

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