Australian Stock Market Report – Qantas, AMP, WorleyParsons shares & more

Australian Stock Market Report Qantas AMP WorleyParsons shares more

Brief Market Brief and Stock Tips

Highlights

This is October after all – the US share market infection is becoming contagious – travel stocks hit by high oil prices – Qantas tries to hide behind the oil hedge but it’s a bit porous – JB valiantly fights off the Amazon tide – will Halloween signal a watershed?

It’s the Ides of October-- beware already

Recently, the US share market was “in thrall’ with the Donald, as the DOW soared by 49% since Trump’s election in November 2016 to August this year. But what goes up must come down. As cooler heads have prevailed the US Share market has now retreated 13% from its August high, but it’s still 37% above his election in November 2016.

Indeed it needed to come down over there, but there is absolutely no reason for us to follow in like manner.

But October is a bewildering month for share market investors

I personally remember that October day in 1987, the 20th to be precise, when the Australian market fell 25% in just one day. And then again, in October 2 years later, down by 9% after the United Airlines bankruptcy, and then down 13% at the outbreak of the Asian Crisis 1997

And then, of course, we had the mother of all share market crashes which started it all, with a 25% drop in October 1929. So, there you go-we should not get “our toga in a knot” at what has happened this October.

So what do investors do in this market?

Simply put, investors need to look carefully at their own portfolio. If there are stocks there that are just as fundamentally sound as they were when you bought them, and their future is just as strong as it was then, “Stick with them” don’t be too concerned about day to day movements. So the message is-Just hold tight through the current turbulence. 

However, for those stocks in your portfolio that have fallen 15% more than what the index has you need to tread carefully. In such situations I believe investors should give close consideration to moving on and moving into those which have much better outlooks.

Qantas might be the flying kangaroo but it looks like a bit wounded right now

Qantas delivered a pretty reasonable set of numbers this week. Certainly they look good on the surface with strong passenger numbers and revenue up nicely. The only problem was that its fuel bill is now expected to be $4.09 billion in this financial year compared to $3.23 billion last year. In other words, $860 million worse off even if it is tax deductible, and that’s twice last year’s profit!

I believe that there are better options than Qantas available in BHP Rio even Woolworths and TABCORP.

Stop press

Worley Parsons– a major oil services company may well have bitten off a bit more than it can chew with a takeover of internationally based Jacobs Engineering for $4.9 billion. And that is bigger than the total market value of Worley Parsons itself!

Super Retail Group – but not so super says the share market! The problem with its trading update were the words it said about the future i.e., “the retail customer is being more cautious”. Expressions like that go down like a lead balloon in this environment.

AMP –a pretty diabolical update – Nothing seems to be going right for AMP. Simply put there are lots of better stocks on offer.

Healthscope – just what the doctor ordered. This hospital stock has received a very attractive takeover offer a consortium of financial investors. It looks very attractive at $2.36 per share- a full one third higher than its previous share price! - Almost too good to be true. I would be inclined to look seriously at accepting the offer or just selling – More broadly however, I am not favourably disposed to hospital stocks (including Ramsay healthcare) as there is uncertainty with health funds generally /government subsidy/private hospital charges and out of pocket expenses for private patients. 

ANZ and NABreport on Wednesday and Thursday next week and if their reports are half decent and dividends retained or only down slightly this could well be the watershed for the market as we head into the so called “Santa Rally” – Actually banks at current prices are worth a second look anyway with dividend yields at 6-7% even without franking!

Stock Tips

So where do you go in this environment?

Please contact Michael on 03 8633 9925 for details

australian stock market weekly report 

             

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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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