• Christopher Hall

MONTHLY SUMMARY - Equities Desk


Economy and Indices

The AU market has fallen back from highs after three of the Big Four Banks paid out their dividends (traded ex-dividend).

Leading Sectors

1. Healthcare + 7.9%

2. Consumer discretionary (Retail) + 5.5%

3. Metals and Mining +4.7%

4. Energy +10.5%

For yet another month, healthcare is the leader in the Australian Market. With CSL, Resmed (RMD), Cochlear (COH) as three of the largest in the sector, there is little wonder why this sector has been Australia’s top performer.

Mining and Energy companies are the other clear leaders, and generally more volatile. As mentioned in Talking Stock, these companies are price-takers that ride the rollercoaster of the global commodity markets. The downside of the global rollercoaster is that profitability and dividend sustainability are often beyond the influence of their management teams.

Interestingly, within the Gold Mining companies, the producers are performing well, but the smaller-cap explorers (yet to actually sell any gold) are providing stronger percentage returns.

Bottom Sectors

1. Telcos -12%

2. Utilities -4.6%

3. Financials -3.1%

The same theme continues as these groups were the dominant forces of the Australian market from 2012 to 2015 when the Domestic Dividend Dash was the prime driver of share market returns. Banks, Utilities (gas, energy, toll roads etc) and Telstra went up alike in the pursuit of yield.

As we’ve mentioned for years, this theme culminated when three of the Big 4 Banks didn’t recover with the market after their dividends in 2015. We’ve been actively avoiding the dividend-centric shares since this divergence.

As mentioned last month “This month’s performance numbers indicate that the trend is not yet over and growth is the critical component of portfolios”.

Telstra is back to the price levels of 2011 when I agreed with Charlie Aitken. I could not get one single client to buy a blue-chip company that was paying 10% dividends plus franking credits that subsequently confirmed their dividend for the next two years ($0.145 each dividend).

Today Telstra is paying 8.3% plus franking, but management have stated that the current dividends will be reduced.

See The Unfair Advantage for further discussion on growth in portfolios and the traps of holding on to shares just for dividends.

Segments

Industrial companies have out-performed Resources for the first month in a long time.

Notably Small caps (Industrials, Tech companies, and smaller gold miners) were up +3.5%.

The rest of the market segments were on par with each other.

Market Trends and Leaders

The leaders this month are showing to be companies that are in these distinct groups:

- Agriculture, (GCG, SHV) and protein related (CLV, TGR, FNP, WBA)

- Coal miners (look at WHC or AKM)

- Smaller Gold Explorers

- Healthcare Large Caps

- Professional Services, including Technology and Software as a Service (SaaS)

For discussion of these leaders see the latest episode of Talking Stock.

Podcasts

I regularly interview industry exports on numerous topics available in the Podcast playlist here

  1. For a dissecting view of JB Hifi and to watch the Torpedo Tuesday interviews Hugh Dive;

  2. Will property prices fall? – insights from ASX Listed Property Analysts

  3. For timing and trading points for the AU market and trading shares see the slides and audio with Gary Glover and his charts.

  4. Have Blue-Chips become complacent? Listen to the discussion with Rudi Filapek-Vandyk

  5. The popular videos The Unfair Advantage covering Income vs Growth with Rudi Filapek-Vandyk


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