Australian Stock Market Report – Kogan, A2 Milk, Wisetech stocks & more

Australian Stock Market Report - Kogan, A2, Milk, Wisetech stocks & more

Market Commentary and Stock Tips

Highlights

Believe it or not-is Trump’s best mate now seems to be Kim Jon-Un – But the US economy roars – Resources stocks flick the switch the Resurgence – Agricultural stocks thirsting for sustenance – the shooting stars of this year’s market lose their twinkle.

But first – a dose of basic economics and the Trump conundrum

When I left school I wanted to be a medical doctor, but I ended up enrolling in economics and law at Monash University.  Before that I knew precious little of economics, but after a couple of months I loved it.  Why you ask?  Well it is fairly simple – economics is all about everyone and every business doing what they do best i.e. allocating your energy / resources / money to where it can best be used.  If everyone dose this, everyone benefits. That’s why I mow lawns and don’t cook.

Put simply if China makes iPhones better than anyone else and America makes Boeing planes better than anyone else, both China and the US are better off concentrating on what they do best, and so it goes on.  But for some unknown reason, Trump believes differently.

And so we have - The curious case of “Trumpian” economics

Trump’s curious economic mantra seems to be “You should make everyone worse off, while making some people better off”.  There would appear to be little other reason as to why the Donald puts tariffs on steel imports(among other things), which make all Americans pay more for anything made of steel, while he protects a few steel workers’ jobs. In short, free trade (i.e., no tariff’s) in the end, makes many more people better off than any number of tariffs ever will.

The revenge of resources stocks

In the last two weeks, we have seen the share prices of BHP; RIO; and Woodside in particular roar back to life - Up by around 10% in two weeks.  This is partly due to the increasing prices of oil and iron ore in addition to these 3 companies really good recent results.  And the future for each other of them still looks good, and their respective share prices are still lower than they were earlier this year. 

Could it be a case of fallen share market angels?

So far this year, we have needed a Parkes telescope to see the stratospheric share prices of the likes of Wisetech; Altium; A2 Milk; Kogan; After Pay Touch; Xero; Near Map; and Bellamy’s (the new G8).  All of them at their respective high points this year were up substantially compared to a year ago. In fact, After Pay Touch at one stage was up over 450% over the year!

But as Galileo taught us, what goes up must come down.  So until this G8 group of stocks start making consistent profits they will remain speculative

What’s wrong with Agriculture?

Nothing really, it’s just the weather.  The drought in Morocco adversely affected berry producer Costa Group, and crop protection maker Nufarm. In brief, I believe that investing in Agriculture related stocks always has that measure of risk.  And so I prefer non-agricultural stocks.  While Costa is less directly affected due to its use of greenhouses, its share price has still fallen through my selling rule.

My view: - I believe there are better options than Costa and Nufarm. 

The banking imbroglio

What else could go wrong for the 4 major banks?  It’s not just the flak from the daily headlines of the Royal Commission, it’s also its imminent interim recommendations, the government’s reaction to the recommendations and the increasing activities by the Regulators.  One way forward that could be considered, is to look at trimming some bank holdings if they are a large percentage of your portfolio and substitute them with good dividend payers, which are roughly similar to the banks, but with less uncertain outlooks. 

Stock Tips--- Please contact Michael on 038633 9925 if you wish to discuss.

Next Week in Australia

Reserve Bank decision on interest rates; Australian Industry Groups surveys of manufacturing and services sectors and building approvals.

In the USA

Manufacturing data; motor vehicle sales and Employment/Unemployment Data.

 

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. 

 

Australian Stock Market Report – Kogan, A2 Milk, Wisetech stocks & more

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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