Australian Stock Market Report – CSL, Dulux, Ramsay Health shares & more

Australian Stock Market Report CSL Dulux Ramsay Health shares more

Market Brief and Stock Tips - 16 November 2018

Highlights

Hold on tight in market turbulence - just because the Apple loses its US share market shine - that’s no reason why our share market fruit should be affected - Computershare – solid and reliable in volatile times - believe it or not, and in spite of the turbulence, our economy continues in fine fettle - unemployment trending lower and confidence is on the up and up for business and consumers   - sooner or later this good economic news will impact the market.

Our market is soft but why is it so? – What do the stats say?

In the US their market has risen substantially since the Donald won the presidency two years ago. At its high point this year their market (Dow Jones Index) was up 49% but with the recent volatility it is now up only 41%. However, as you are probably fully aware our market didn’t share in the rise so neither should we share in the fall.

You want a better reason – Well the Apple has gone soft - but its core is still firm

One of the reasons for the fall in the US market recently has been the drop in the so-called high technology stocks I.e. Apple, Amazon, Netflix and Google, all comprised within the NASDAQ share market index. Like the Dow Jones index these stocks have increased substantially over recent years, so now they are taking a breather. However that’s no reason for our market to retreat.

So hang onto your hats, fasten your seat belts and enjoy the ride

The facts are: - if our stocks are as fundamentally sound now as they were two months ago, then the sensible thing to do is hold on and wait for the inclement weather to pass us by. But of course if some stocks are not as fundamentally sound as they were (e.g. downbeat comments at recent AGMs and other announcements (for instance with Lend Lease and Pact Group) then there’s good reason to consider moving on, and put the funds into better alternatives. However, the sound stocks like CSL, Cochlear, BHP, RIO and Macquarie Group among the blue chips, are as sound now as they were before.

The curious case of oil and the share market

It’s uncanny really. Call it coincidence, causation or just an aberration. But in recent months the oil price and share prices have both dropped sharply. You’ve probably noticed it at the bowser with unleaded dropping from about $1.70 a litre to $1.44 a litre. Similarly our share market has also lost about the same percentage over the same time. Interestingly, a similar thing happened in 2015 - 2016. Oil prices dropped to a low in early 2016 then rose about 80% sharply to a new high in late 2016. Similarly our share market rose from a low of about 4800 in early 2016 to a high of almost 5700 later that year (not quite the growth of oil but very strong indeed). Clearly we are now in an “oil fired stockmarket.” So maybe – just maybe – higher prices at the bowser could be good for share prices over the medium term!

Computershare - from an Abbotsford apartment to a world leader in share market registry services

In 1978, Computershare started its business from a small premises in the Melbourne suburb of Abbotsford. Now it leads the world in registry and related services in many countries around the world. Not only that but at its recent AGM it advised that its future growth continues to be very strong, fuelled by its move into mortgage servicing in the US and the UK. In brief it looks good.

Dulux “keeps on keeping on”

Dulux delivered its recent report which was quietly impressive. Future profit growth is expected to be strong as its paints are largely concentrated on the renovation market. So, while new house construction may be tailing off, renovations certainly aren’t. And the renovation market constitutes about 75% of Dulux’s business.

Ramsay Healthcare

Ramsay seems to have loss its mantle as the favoured health/hospital stock in the market. Its recent announcements have underlined the fact that private hospitals are doing it a bit tougher these days than previously. Clearly, Government regulations are impacting preferences for people to take out private health insurance, or simply are not happy with attending private hospitals and having to pay increasing out of pocket expenses.

Economy ticking over nicely

The Labour market continues to be strong. The unemployment rate remained at 5 per cent, the best for ten years. Also surveys of business and consumer confidence continues to be robust. Sooner or later this pulsating economic heartbeat will translate to stronger share market performance.

Stop press

Medibank

Delivered ok comments at its AGM, but health funds’ futures remain somewhat uncertain.

Lend lease

Announced a substantial $350 million write down of its engineering assets – Move on to better alternatives.

Goodman Group

Continues to be a preferred stock in the property trust arena.

Wesfarmers

Impressive AGM comments. Also one Coles share will be allocated for each Wefarmers share on Monday. Both stocks look attractive.

Stock tips- For details please ring Michael on 03 8633 9925

australian stock market weekly report 

Next week

In Australia:

Tuesday: Reserve Bank Minutes

Wednesday: Westpac leading indicators, Skilled Vacancies

In the U.S.A:

Important data will be released on housing, durable goods and the University of Michigan confidence survey.

 

Disclaimer: This publication has been prepared solely for the information of the particular person to whom it was supplied by Phillip Capital Limited (“PhillipCapital”) AFSL 246827.  This publication contains general financial product advice.  In preparing the advice, PhillipCapital has not taken into account the investment objectives, financial situation and particular needs of any particular person.  Before making an investment decision on the basis of this advice, you need to consider, with or without the assistance of an adviser, whether the advice in this publication is appropriate in light of your particular investment needs, objectives and financial situation.  PhillipCapital and its associates within the meaning of the Corporations Act may hold securities in the companies referred to in this publication.  PhillipCapital believes that the advice and information herein is accurate and reliable, but no warranties of accuracy, reliability or completeness are given (except insofar as liability under any statute cannot be excluded). No responsibility for any errors or omissions or any negligence is accepted by PhillipCapital or any of its directors, employees or agents. This publication must not to be distributed to retail investors outside of Australia. 

 

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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