Australian Stock Market Report – Xero, A2Millk, Kogan, Santos Shares & more

Australian Stock Market Report

Market Commentary and Stock Tips - 6 April 2018

 

Highlights

Back to the future part 2 – Trade wars – Tariff wars – Cold wars – Fake wars – My money’s on the Fake wars because it’s a Donald invention – Nevertheless the share market suffered a flesh wound in the initial skirmishes – Oil’s ain't Oils but for Santos its liquid gold – Reserve Bank not perturbed by the so called noise – Manufacturing remains ‘in the pink of condition”.

 

Come inside and have a cold shower

I find it hard to get myself into a tizzy over all this tariff war business.  Despite all the headlines about what the Donald has proposed to do, ie. Slap tariffs on US$60billion (or even $100b more) of Chinese products, to put it bluntly its bagatelle compared with US gross domestic product of about US$17,000 billion! In other words the effect on US consumers is minimal.  So is this really all about staking out future negotiating positions? I think so.

 

Share market and Pavlov’s Dog

It’s almost a market axiom that when the US market falls - for whatever reason (its tariffs now) - the Australian market will generally do a bit worse -  almost automatically.  But after we’ve had that cold shower, reality sinks in and we realise that the companies that are listed on our share market are actually as fundamentally sound now as what they were, before the alleged tariff war drama.  But nevertheless the Pavlov’s Dog effect strikes and share prices of some of our sound blue chip shares get hit and hit hard,  as a short term reflex action - Declines of about 7%-8% for shares including CSL; Macquarie Group; CBA; and the other 3 banks; as well as BHP and RIO

The bottom line – they all look good value buying at current prices.

 

The tale of the Royal Commission and the Banks

Since the threat of a bank Royal Commission emerged about a year ago our major bank share prices have fallen by between about 14%-18.  These share price declines, are equivalent to about $53 billion being wiped from their collective share market value.  An astonishing amount, and in my view would more than account for the worst outcome that one could contemplate from the Royal Commission. 

 

But there is always a silver lining

In all the tariff brouhaha, there are always a few resolute performers. In this case stocks such as Costa Group; Qantas; Bellamy’s; A2milk and smaller stocks such as Kogan, Ooh Media and Xero have increased sharply over the last two weeks. All these stocks are worth considering if you don’t mind some non- Right Royal Blue Chips.

 

Santos has its Alan Bond moment

Kerry Packer famously said in 1986 (after he sold Channel 9 to Alan Bond for $1billion and the bought it back for a fraction of the price a couple of years later)  “You only get one Alan Bond in your life and I’ve had mine”.  So it seems Santos has had its AB moment. It got a takeover offer from US company Harbour Energy this week for about A$6.50 per share - almost 50% more than Harbour’s initial offer of $4.55 per share in August last year – Almost too good to be true? My view – Yes

While conventional wisdom is to wait until the last minute before accepting a takeover offer----for those shareholders who are looking at a profit on the their Santos share holdings, I believe that seriously considering selling and taking your profit seems a sound strategy in the prevailing set of circumstances.

Stock Tips –reserved for clients buy if you would like to chat with Michael he would welcome your call on 023 8633 9925

australian stock market weekly report 

Next Week

In Australia:

  • Tuesday: NAB Business Conditions and Confidence Survey
  • Wednesday: Westpac Consumer Confidence
  • Thursday: Home Loans

In the U.S.A:

A range of data scheduled --- most importantly there are: - Inflation data; Minutes of the last meeting of the Central Bank (which lifted rates by 0.25%) and the Premier Consumer Confidence Survey - probably in the world is from the University of Michigan.

 

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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