Australian Stock Market Report – Wesfarmers, Macquarie, A2 Milk shares & more

Australian Stock Market Report Wesfarmers Macquarie A2 Milk shares more

Market Brief and Stock Tips - 23 November 2018


Markets under pressure – but for how long – Australian banks, are banking on our trust – Wesfarmers – stripping off excess weight – A2 Milk – milking the profit - Macquarie Group – up, up and away.

The FAANGS sink into the U.S. sharemarket

Since October, US indices have declined between 10 to 14 percent---And you don’t have to be Sherlock Homes to find the culprits –they were the high flying stars in the sharemarket stratosphere for most of this year--- in the vernacular they are called the FAANG’S- Facebook, Apple, Amazon, Netflix and Google---But as you might have guessed, and just like Pavlov’s Dog our market slides by 9 per cent over the same period.

But can Santa save us from the FAANGS bite

With the end of November in sight, there is light at the end of the tunnel. Traditionally speaking, the month of December is generally a good one. Over the past ten years, since 2008 there has only been two Decembers where the index had finished in the red. This was in December 2008 and 2011. Although history is no indicator of the future, from a probability standpoint, the cards are tilted to a positive finish next month. Time will tell.

Reserve Bank – Economy a go, go – but whoa for our Banks

The minutes from the latest RBA November meeting echoed the strength of our Australian economy. --GDP growth continues to tick north, along with employment-- inflation contained around the 2 percent cent region and unemployment trickling southward.

But the Reserve Bank head-teller (Phillip Lowe) in the annual Bank Governor’s address to the Committee for the Economic Development of Australia (I used to go to these meetings when Bernie Fraser was Governor--- and he sent me to sleep every time, but Phillip is much less soporific). Specifically, Mr. Lowe said that trust is front and centre for the financial sector. He added that the major Banks current (or should that now be previous) incentive systems which promoted a sales culture at the expense of a service culture, - with emphasis on employees being rewarded on short-term objectives,- was not the way to go. The banks are now shifting focus. Indeed the CBA in their boss’s testimony to the Royal Commission admitted past failures but that under his control the bank has shifted focus 180 degrees (my words). And so with “regime change” I believe that CBA is worth considering. We will see how the other 3 banks go next week.  

Wesfarmers – slims down and Coles is off the leash

Coles disembarked from the Wesfarmers ship with an opening share price of around $12.75, and Wesfarmers were about $31.00 with the share prices of the two almost equivalent to the share price of the former fatter Wesfarmers. I believe that now that the two businesses are more focused and in control of their destinies each of them are likely to perform better. Both stocks look like fairly safe harbours in this volatile environment.

The a2 Milk Company – a tastier drop

At its 2018 Annual Meeting, A2 Milk delivered an impressive result--Profit up 116 per cent on the prior year. Looking ahead, as consumer demand is likely to remain strong, and Chinese regulatory uncertainty likely to become clearer, A2 looks sound. Furthermore A2 Milk has outperformed the S&P/ASX 200 index by 23.65% over the past year.

The Big Mac – an even tastier morsel

Macquarie Group recently lifted its full-year profit guidance to reflect the sale of Quadrant Energy to Santos - 17 per cent higher than last year. Coupled with a strong management team, balance sheet, surplus capital and a healthy forecast dividend yield of 5.2 per cent it looks good, Macquarie invariably “under promises and over delivers”.

Stop press

Link Administration

Delivered healthy results at its AGM, is the lowest cost provider in administrative services.

Sydney Airport

Traffic report for the month of October saw increases across the board. In particular, international passenger traffic increased 6 per cent compared to the previous corresponding period – and it pays a nice dividend of 5.5 per cent partially franked.

Macquarie Group

The Australian Competition and Consumer Commission approves the sale of Quadrant Energy to Santos. 


Last year’s results were soft, and its outlook uncertain with legacy issues relating to mis-priced insurance products and Brexit remains a key risk.

Stock tips- Please phone Michael for details on 03 8633 9925

australian stock market weekly report 

Next week

In Australia:

Wednesday: Construction Work Done.

Thursday: Private Capital Expenditure.

In the U.S.A:

Important data will be released on Consumer Confidence, GDP and Central Bank Minutes of November meeting.

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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