News
Stanley Druckenmiller loads up on Alphabet and tech darlings
Wed 15 Nov 23, 3:38pm (AEST)
Market Wraps
Evening Wrap: One of those days where just about everything went up
Wed 15 Nov 23, 6:25pm (AEDT)
The S&P/ASX 200 closed 99 points higher, up 1.42%.
Markets love lower rates, and a handy beat in US inflation data facilitates exactly this kind of environment. Today's winners were very much skewed to those who do best in a low interest rate environment.
Let's dive in.
Today in Review
Wed 15 Nov 23, 4:46pm (AEST)
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Markets
ASX 200 Session Chart
A very good day for the Aussie share market indeed (Source: Market Index)
Every dog has its day. Today's dog's day: Property!
Most interesting for me today was the resurgent property sector which relished a big drop in US long-term bond yields. This is a sector which relies heavily on debt funding, so it's one the sectors which has suffered the most over the past 18-months of rising interest rates. Today, a welcome reprieve as US 10-year bond yields plunged 0.19% to 4.45% overnight.
Company | Last Price | Change $ | Change % | 1-month Perf % | 1-year Perf % |
Centuria Capital Group (CNI) | $1.41 | +0.145 | +11.5% | +7.2% | -21.7% |
Charter Hall Group (CHC) | $11 | +1.030 | +10.3% | +17.6% | -21.0% |
HMC Capital (HMC) | $5.12 | +0.410 | +8.7% | +9.2% | +8.0% |
Cromwell Property Group (CMW) | $0.405 | +0.030 | +8.0% | +2.5% | -44.5% |
Dexus (DXC) | $2.54 | +0.180 | +7.6% | +11.4% | -13.9% |
GPT Group (GPT) | $4.19 | +0.270 | +6.9% | +9.1% | -6.3% |
Unibail-Rodamco-Westfield (URW) | $4.43 | 0.270 | +6.5% | +16.3% | +10.8% |
Stockland (SGP) | $4.03 | +0.230 | +6.1% | +6.9% | +8.3% |
Long duration loves lower yields
Tech is another major beneficiary of any drop in long-term yields. Tech stocks are typically growth-oriented, and therefore tend to have a higher reliance on debt funding. Lower rates equals lower costs, and greater profits.
Also, tech company profits tend to be skewed to the future (i.e., long duration), which means their values discounted heavily under higher interest rates. Lower rates, on the other hand, allows higher valuations.
Company | Last Price | Change $ | Change % | 1-month Perf % | 1-year Perf % |
Block Inc. (SQ2) | 85.74 | +4.060 | +5.0% | +21.3% | -15.0% |
Wisetech Global (WTC) | 66.83 | +3.730 | +5.9% | +6.7% | +15.5% |
Xero (XRO) | 101.95 | +2.190 | +2.2% | -12.3% | 45.5% |
Altium (ALU) | 44.5 | +0.960 | +2.2% | +4.7% | ++22.9% |
ASX lithium stocks catch a miracle!
A major bounce in US lithium companies overnight flowed through to local lithium plays. No news on the reason for the US bounce, but globally, lithium stocks were potentially extremely oversold and due for a short-covering bounce.
Company | Last Price | Change $ | Change % | 1-month Perf % | 1-year Perf % |
Galan Lithium (GLN) | 0.695 | +0.100 | +16.8% | -3.5% | -59.9% |
Jindalee Resources (JRL) | 1.08 | +0.080 | +8.0% | -20.3% | -55.9% |
Argosy Minerals (AGY) | 0.155 | +0.010 | +6.9% | -20.5% | -75.6% |
Piedmont Lithium Inc. CDI 100:1 (PLL) | 0.44 | +0.025 | +6.0% | -18.5% | -52.4% |
Allkem (AKE) | 9.12 | +0.500 | +5.8% | -21.7% | -43.6% |
Vulcan Energy Resources (VUL) | 2.58 | +0.130 | +5.3% | -1.1% | -65.9% |
Mineral Resources (MIN) | 62.8 | +2.980 | +5.0% | -1.1% | -23.2% |
Pilbara Minerals (PLS) | 3.67 | +0.160 | +4.6% | -9.8% | -31.7% |
Global Lithium Resources (GL1) | 1.335 | +0.050 | +3.9% | -6.0% | -46.4% |
IGO (IGO) | 9.25 | +0.280 | +3.1% | -20.9% | -43.5% |
Economy
China data dump shows modest improvement
Today we got the monthly Chinese "Data Dump" as it's commonly known. There was gradual improvement in industrial production (+4.6% vs +4.5% previous vs +4.5% forecast), and a healthy bounce in retail sales (+7.6% vs +5.5% previous vs +7.1% forecast).
Fixed asset investment disappointed, however, up 2.9% versus 3.1% previous and forecast. The unemployment rate was steady at 5%.
Watch out for...
US wholesale prices in the form of the Producer Price Index (PPI) to back up yesterday's Consumer Price Index (CPI). The CPI beat triggered a massive global risk on rally, hopefully further good news on wholesale prices can keep the good times rolling.
Latest news
Broker notes
Barrenjoey:
Rio Tinto (RIO) upgraded to overweight from neutral; price target to $130 from $120
Fortescue Metals Group (FMG) upgraded to neutral from underweight; price target to $23 from $20.50
Coronado Global Resources (CRN) downgraded to underweight from neutral; price target $1.40 from $1.70
ALS (ALQ) upgraded to overweight from neutral; price target $13.15 from $12.05
Various Brokers:
Calidus Resources (CAI) Canaccord Genuity upgrades to speculative buy from hold; price target $0.30 from $0.15
Aussie Broadband (ABB) Wilsons upgrades to overweight from market-weight; price target $4.20 from $3.76
CSL (CSL) Goldman Sachs upgrades to buy from neutral; price target $309 from $296
Scans
New 52 Week High
MMA Offshore (ASX: MRM) +13.2%
Event: AGM and trading update today. EBITDA for H1 FY24 is expected to be $55-$60 million (vs $32.1 million H1FY23 and $69.3 million for all of FY23). Management notes "strong start to the financial year".
Technical view: I note solid short and long term uptrends accompanied by higher peaks and higher troughs. Candles since the 7 Nov low have been predominantly white, which indicates excess demand. The massive gap up today is indicative of major demand-side control, although the close could have been better. Still, I can't see any reason to sell this one.
Goodman Group (ASX: GMG) +3.6%
Event: Part of a resurgent property sector as global long-term bond yields continue to decline. GMG is the sector leader, outperforming all other major ASX property stocks through the sector's 18-month downturn. Tip: Always follow leader!
Technical view: I note solid short and long term uptrends accompanied by higher peaks and higher troughs. Candles since the 30 Oct low are generally demand-side in nature, and today's gap and high close tells me there's no reason to sell this one.
Fortescue Metals Group (ASX: FMG) +3.3%
Event: Seasonal factors helped push the iron ore price past US$130/t. We warned you about the potential for this move! Apart from plenty of Chinese Government support for its vital steel industry, there's plenty of seasonal stuff going on here including restocking ahead of Lunar New Year holidays in February.
Technical view: Just magic short and long term uptrends, price action, and candles! The FMG chart is a picture of excess demand, and therefore I see no reason to sell.
Pro Medicus (ASX: PME) +2.3%
Event: High PE stocks were boosted today by a massive rally in US technology stocks (which in-turn got a boost from those falling bond yields). Also potentially at play for Pro Medicus, is its 13 Nov news announcement: PME Signs A$20M, 8-year contract with OHSU.
Technical view: Another with excellent short and long term uptrends, price action, and candles. This chart is another picture of excess demand, so again, I see no reason to sell.
Global X Fang+ ETF (ASX: FANG) +0.5%
Event: Tuesday's US stocks rally was powered by the "Magnificent 7" which are main components of this ETF (i.e., Facebook/Meta, Apple, Amazon, Netflix, Alphabet/Google etc.).
Technical view: Excellent short and long term uptrends, price action, and candles. Another picture of excess demand equals no reason to sell.
Gain on Elevated Turnover:
Errawarra Resources (ASX: ERW) +12.5%
Event: On 14 Nov, 2 x change in substantial shareholder notices, plus released an Investor Presentation.
Technical view: A couple of days excitement doesn't make an uptrend. Today's flame out is disappointing, and it leads me to feel there's nothing to see here for a few days as some of the hot money washes out. I could get interested if the price can steady above $0.22, and over time, build a base there with white candles, and higher peaks and higher troughs.
Life 360 (ASX: 360) +5.5%
Event: Q3 FY23 results today: Annualized Monthly Revenue US$259.1 million, up 41% year on year. Net quarterly subscriber additions of 118 thousand, Life360’s largest ever Q3 growth.
Technical view: A tidy chart overall with very solid short and long term uptrends. Today's gap and run is welcome, but the close could have been substantially better. You can clearly see there is some residual supply niggling around the Aug-Sep highs. I'd be a very happy holder here if you've got it. I could tilt towards a buy if it can beat $9.50.
Domino's Pizza Enterprises (ASX: DMP) +3.8%
Event: No news! Interesting! 🤔
Technical view: Is it worth trying to pick the bottom here? I don't think we're far away with the short term trend trying to burst above a stubbornly resisting long term trend. I like the way the DMP price is consolidating just under $55, and today's very attractive long white candle on substantial volume makes me happy to call a spec-buy here.
Gap Up & Gain:
Nufarm (ASX: NUF) +8.2%
Event: FY23 Results today: EBITDA $438 million, down 2% vs FY22 vs FactSet consensus $435.3 million. Outlook statement suggests trading to remain challenging in H1 as commodity prices moderate, return to growth in H2, on track to meet FY26 revenue target.
Technical view: Today's gap and run bucks clearly defined short and long term downtrends. But, this is exactly how reversals start - with short covering and speculative buying. Judging by today's candle, there was only a modest push back against the buying, which is encouraging. Too early for me, but today's pop gets me back to a "hold it if you've got it" view.
Seek (ASX: SEK) +5.8%
Event: AGM and trading update today: Reaffirmed EBITDA guidance $520-$560 million vs FY23 $546 million vs FactSet consensus $542.5 million. Yield growth is offsetting moderation in job ad volumes as economy slows. Platform unification on track, and is helping on costs.
Technical view: Flat trends with plenty of vibration around what appears to be a $23 balance point. Price action is higher peaks and troughs, and along with some very decent demand-side candles since the 30 Oct low, are enough to put me in the "hold it if you've got it" camp.
Big Black Candle:
Karoon Energy (ASX: KAR) -10.4%
Event: AFR report suggests a capital raising on the way. Shares were suspended at 10:30am AEDT.
Technical view: Today's candle pretty much kills this uptrend for me. We'll have to wait and see where the placement is, but I struggle to see any reason from a technical perspective to have any risk on this one.
Other Scans
Carl has over 30-years investing experience, helping investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl has a passion for technical analysis and has taught his unique brand of price-action trend following to thousands of Aussie investors.
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