Anyone who has been in broking will tell you that the Morning Meeting is how all brokers start the day. The format is to have a quick look at the overnight markets, consider what's coming up in the day ahead, hear from the analysts, share ideas and get set up for the day's stock market activity.
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Anyone who has been in broking will tell you that the Morning Meeting is how all brokers start the day. The format is to have a quick look at the overnight markets, consider what's coming up in the day ahead, hear from the analysts, share ideas and get set up for the day's stock market activity.
Why not sign up for a free trial? Get access to expert insights and independent research and become a better investor.
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*PLEASE NOTE: Transcripts are autogenerated and may contain errors, especially Stock Codes and Names.
SPEAKERS
Henry Jennings, Tom Wegner, Chris Conway, Layton Membrey, Marcus Padley, Ben O'Leary
Ben O'Leary 00:00
Good morning everyone Friday May the 20th Henry you've got the overnight wrap for us?
Henry Jennings 00:19
I have indeed Thanks Ben. Overnight it was almost felt like an update on the Dow we had only a 550 on trading range in the Dow it did close though and a bit of a late sell off down 237 points or point seven five of a percent NASDAQ doing better though down only point two six of a percent and s&p 500 down point six but overnight in commodities that was the really the big story. I guess for Australia on the cusp of an election we did see some big big moves in commodity prices, or we saw copper up two and a half percent nickel was up 9% That was a big bounce for nickel and even tin was up four and a half percent so that is feeding through into our mining sector today. BHP doing well iron ore was up point eight even gold managed at 1.4% Rise and oil and gas doing well on the back of Brent crude up 2.7%. So it does feel like there's some stability creeping and of course, it's very early days, but a 550 point range on the Dow certainly a little less queasy and a little bit noisiest or not nauseas as opposed to the 1,000th point or days that we've seen. So maybe we're starting to see a little bit of stability creeping in and market responding. Well, I'm sure you'll get onto that in a minute, Tom, but we're up around 1% At the moment miners leading the charge on the back of those higher commodity prices. So good news for our market as we're on the cusp of that election.
Ben O'Leary 01:38
Very good. Thank you, Henry. It is nice to say a day with a little bit less volatility than what we've had over the last couple of weeks. Tom, what's happening locally?
Tom Wegner 01:45
Thank you been a good day for the ASX 200. We are pushing into positive territory for the week. Energy is the only sector in negative territory despite oil improving overnight tech and miners are the most improved sectors IG O is up 4.4% said it has successfully produced battery grade lithium API group up near 2% understood to be receiving takeover interest and Jon's Ling group down 7% has responded to direct selling and they reaffirmed guidance although that didn't seem to help the share price Woolworths is up 0.1% They said they will acquire an 80% stake in my deal. The code for my deal is mid which is up 56% On the back of that news. Nothing on the economic front today. We do have some news from China. They are expected to cut their benchmark lending rates at its monthly fixing which would mark the second reduction this year. We have the Australian election tomorrow it is Labour's to lose going off the betting odds there and signposting some action for next week. Not too much to get excited about on the local economic front. There are a couple of RBA speeches and some second tier data slated the US has FOMC minutes from its May for meeting preliminary GDP and the Feds preferred measure of inflation, the core PCE index there are also some Fed officials speaking as well and that is about it Ben.
Ben O'Leary 03:08
Great stuff. Tom, thank you very much Layton what's happening in the burkas land?
Layton Membrey 03:12
Thank you Ben just having a look at Aristocrat leisure this morning are up 6.7% on their results yesterday and they're up another 3% earlier this morning. Broker recommendations are bullish with buyers and outperforms but most of the brokers have lowered their target prices average target price is still $44.13 Which implies a 31% upside and also looking at nufarm Down 4.1% this morning after it was down around 8% yesterday on the back of their results and UBS has said that they believed the sell off yesterday provides an attractive entry point to gain leverage to the agriculture cycle and they've got a buy recommendation there. Some of the other recommendations coming through this morning and mixed those a downgrade at Morgan's to a whole new target price comes down to $6.65 from $7.20. Macquarie is saying outperform with a slightly lower target price average target there is $7 implying a 15 cent upside. Thank you, Ben.
Ben O'Leary 04:08
Very nice. Thank you. Layton. Christopher, what's happening in technical trades today?
Chris Conway 04:12
I think he'd Benjamin's just addressing an email that a client sent me asking for what I would look for if I was looking for stocks that are turning around. And I've written a little Article I Section this morning basically explaining that that's generally not how I look at markets. I'm a Trend Trader. So I like to see things moving in the right direction and then buy into that momentum as opposed to looking for things that are potentially turning down after a big slide. But I have done my best to address the question and the example that I use as a risk to credit of course as late was just talking about their had their results yesterday and that move higher that 6% move higher. So aristocrat break its downtrend resistance line, and then I've given a little bit of an example a bit of a market map, if you will, of what I would be looking for from here, and there's a couple of different ways you can play it. So that addresses that question. It was from a gentleman named John I think it was a very pertinent Question and hopefully go some way to answering it for him and also letting other members know of the types of evidence that I would be looking for at least from a technical perspective, if I were to be looking for stocks that are turning around as for my chart of the day today it is Grange resources very nice looking chart. They are in the iron ore game there was a neckline just above $1.40 that has been broken today. So moved I was looking for and I was talking about with regard to grey and has come to fruition for anyone who's taken the trade or taking the idea on board. Hopefully it continues to gallop away but that was the chart of the day.
Ben O'Leary 05:35
Nice. Thank you Chris Henry, whatever you got in Henry's take for us today?
Henry Jennings 05:39
Just today just looking at bhp and Woodside which is obviously pretty much on investors minds at the moment we've got the merger going through the vote was yesterday on Woodside and just the potential for a big block trade there coming out. The AFR highlighted it today where there are 250 odd 1000 Small shareholders in bhp with under 500 shares and they have set up a facility whereby shareholders can sell those shares under the small parcel facility. So there is potential also for some South African domiciled shareholders to be wanting out but it's certainly an interesting on June the second I've been asked again this morning on an email about this, the idea being that the bhp will be giving you Woodside shares 914 million Woodside shares, there is a ratio there and the shares that you get in the distribution will be effectively the idea being that the ATO agrees there'll be a fully franked dividend in species distribution, they will so they will count as a dividend for your accounting purposes, but you need to check with that and I don't think the ATO has actually ruled finally on that yet, but that's obviously very pertinent. The other one that I've written about today is Chalice mining one for your watch list. Unfortunately, it seems I wasn't the only one looking at Chalice, they're up 6% They have been up 12% Today, but chalice is involved in a very, very large polymetallic project in WA called Julie MA and they were looking to extend that project with drilling in the state forest. Now the problem that chalice had got the 70 odd case from Perth. So that does mean that there are more environmental challenges the closer you are to major population and that is one of the challenges they have had getting approvals. They got approvals yesterday. That is why the stock has bounced. So it has been a former market darling Julia Ma is a serious, serious world class deposit and getting bigger. Cory has a price target of 10 bucks on that they're six bucks at the moment. And obviously they've come under pressure because of the whole risk of sentiment but certainly one for your watchlist if they come back a little bit in those dark horrible days. And yesterday I added a stock to the small cap portfolio AQ Zed Alliance aviation which is undertaken over from cuantas who own 20% $4.75 You'll get in cuantas shares depending on the pricing period, how many shares you will get. But that is an interesting one there. The stock picks up at $3.95. Yesterday and all the carnage there back to 405 today, that's it.
Ben O'Leary 07:58
Very nice, very winding the clock back with a bit of takeover. It's money for jam most of the time. So I like it a lot. Marcus, welcome back from your little trip up north. How you going today?
Marcus Padley 08:09
Yes, thank you, Ben, I have to say every time I go away the market does its thing doesn't that I was going to the airport with Wall Street has its biggest single day drop since 2020. Back so hopefully it'll bounce anyway, today, I would implore members to have a read of the strategy piece today because it's a bit of truth about what we need to focus on. And the only question at the moment because the market is sinking all ships is when will this us sell off bottom out because even though we're outperforming we are 90% correlated, and until that turns around, we're not going to turn around and calling the bottom is probably the only thing that matters. If you listen to someone something like CNBC or read Bloomberg, you'll be forgiven for thinking that this is some sort of macro cocktail that only a stock market genius could decipher which involves interconnected spaghetti, a mess of themes, including growth, inflation, interest rates, with a bit of complication from China, COVID and Russia. So everyone's talking about the same thing at the moment. And I just have the old Marcus today adage, which is let's just admit it to each other. We don't know how long this sell off will last. And clearly we thought we had a bottom last week or beginning this week, which has faded away again, no one knows when it's going to happen. And let's not try and predict it only going to be able to call the bottom after it happens. It's question of how quickly you do that. And I think what's going to happen is that one day there will be a big day on Wall Street and there'll be a three to 5% bounce that could be tomorrow that could be a month away. It could be a year away. But on that day depending on where you are on the willingness to bet spectrum some of you will get involved and others will wait a week others will wait a month and others will turn their computer on for the first time in months. Those Have the long term investors who didn't sell anything anyway and so aren't going to be buying anything. So it's all a question of when that bottoming happens, it's clearly not today. And what you do when it does, I can tell you what we will do when we get that three to 5%. Bounce on Wall Street, we will be as usual producing a list of stocks that have fallen the most and in time stocks that are good value that are now an opportunity to buy after the fall. But the initial thing will be the gamblers the betters and there's nothing wrong with gambling in the stock market will be the betters betting on day one or day two, and then waking up in the middle of the night to wonder if Wall Street's up and they're gonna get a pivot point or whether it's all just a dead cat bounce. It's all a function of where you are on the spectrum. And the day even for the high risk gamblers, we call them traders, even for the traders is not here yet. So there's not much to do, I could produce today, for instance, a list of the stocks that have fallen the most. But until this moment comes, there's really little point doing it clearly, the first thing to do will be by for the recovery, it'll be by recovery situations by ETFs may be that a gear to the US market, it'll be trying to make money in a trade, it'll take a bit longer for us to realise that there's some value around and which stocks are valuable and which stocks are offering an opportunity to buy them at Pease that we haven't seen in some while. So let's just wait for the day. For now, I think you can spend your weekend without worrying about the bottom being here yet, obviously, our markets having a good day. But it's going to take more than this to convince people so waiting for the bottom. And the best job we can do is keep talking about whether it's here yet, and it doesn't look like it's here. I've also put in the strategy piece today, some quick charts, one is of the s&p 500 P E, I would just point out this has come back from 34 times to 20 times so we have accepted this value bubble mania that's averaging a lot of stocks and obviously a lot of that to tech stocks in the US but there's a big drop in the P E if you believe that chart PE is on market. So calculation basis changes depending on who you talk to. So it's a bit rubbery, but clearly market off the top bit of value appearing the PE on the all lords if you believe the data string PE is 16 times now it's down from almost 30 times where it only got there briefly, but it is now at the same level it was it hasn't been down here since 2016 or so. So there is value appearing and but the timing is probably not yet. The other thing I picked up on which I realised listening to you guys you've all picked up on was I must resurrect the ideas portfolio. And maybe I'll do that now and put aristocratic leisure in but I can see the wave of research of emails I'm getting with aristocratic all over it because of their results. The buy signal on the chart, the broker upgrades, the average target price 25% above the current share price, a good broker response and a quality stock with high return on equity that's come off from what was that $46. Now down to 34. It looks like a bigger stock opportunity and a piece of good news like that sort of derisk sit for a few months or so. So might have a look at aristocratic leisure but as far as the market is concerned Waiting for Godot waiting for the bottom and doesn't appear to be here today.
Ben O'Leary 13:18
Thank you, Marcus. Lots of good stuff, as always. And our question of the day today to finish is will we see a post election bounce? Thomas?
Tom Wegner 13:27
No, I don't think we will. I think a lot of information and policy promises announced prior so market sort of has digested that you could argue Thank you, Tom. Layton?
Layton Membrey 13:35
No author, I think we might just say a little bit less volatility.
Ben O'Leary 13:38
Thank you Layton. Christopher?
Chris Conway 13:40
Thanks, Ben. In collating the headlines this morning, I came across one that said Australian stocks sectorized no matter who wins election history suggests so I think that's telling us what we all know that doesn't really matter who's in power, the market tends to dance to the beat of its own drums. But in terms of do we get a bounce? No, probably not. And that's just because the prevailing macro conditions will be stronger than any reaction from whichever party wins the election tomorrow night.
Ben O'Leary 14:03
Thank you, Chris Henry?
Henry Jennings 14:04
I think if as long as we get some certainty one way or the other doesn't really matter for the market who wins whether it's labour or the coalition as long as we don't get weeks of protracted negotiation of minority governments with the the uncertainty that that brings, but I think the market is more beholden to the Fed and the US markets than it is to the Australian election which has been a bit of a yawn fest apart from I think the highlight of the whole election has been Scott Morrison's football antics are taking out that young seven year old I think that was an absolute classic.
Ben O'Leary 14:35
Yeah, I don't think that's any that no one had that on their election bingo card.
Henry Jennings 14:38
No, you're supposed to kiss the babies not not people over play football.
Ben O'Leary 14:43
Very good. Marcus
Marcus Padley 14:43
You're all right. It's not gonna have much impact, I don't think but just remember the last election we were going in with some significant stock market issues, particularly regarding a labour trying to get rid of franking or the cash refund of franking. We don't have any of those issues. So this This is fairly benign, I think for the stock market.
Ben O'Leary 15:02
Very good. And I'll I'll mix it up a little bit. I'll say we'll say a one day bounce on clarity of an outcome. And I'm not gonna make any prediction beyond that.
Marcus Padley 15:11
Just another thing I've been I'm talking at the Australian shareholders Association gala dinner on Monday, and in the weekend email I'm just putting together last week we did your worst financial decisions this week, we have a piece of Smarter advice for other members. So we've got 640 of those that.
Ben O'Leary 15:31
good look forward to that and should mention as well, Henry will be on Ask analysis at 530. Tonight enter Is that correct?
Henry Jennings 15:38
I will and that will be available for those that didn't watch it live on course, as a recording as well. So forward to that and I think and everything very good.
Ben O'Leary 15:47
Thank you, Henry. And we'll leave that there. Thanks, guys. Have a good weekend. I'll see you guys.