Australian Stock Market Report – Xero, A2Millk, Kogan, Santos Shares & more
Market Commentary and Stock Tips - 6 April 2018
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
- 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.
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