ASX200 +1.0%; REITs +2.1%
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The US Equity Risk Premium
By Marcus Tuck
The 12 month forward PE ratio for the US S&P 500 is 21.3. That is high in historical terms but is it high in the current environment?
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12 companies from the ASX 300 that pass our filters!
By Marcus Tuck
Using Bloomberg’s screening tool, we screened the ASX 300 universe for stocks that have the following characteristics:
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Temple & Webster (TPW)
Temple & Webster (ASX:TPW) is a major player in the $14.6 billion Australian furniture and homewares market. While the sector is not known as a high growth sector, TPW has been one of the strongest performers on the ASX over the last three years due to the increasing pace of the shift to online sales, which is being accelerated by COVID-19.
Online sales represented only 5% of the Australian furniture and homewares market in 2019, and are likely to be 8-9% of the total in 2020 thanks COVID-19. However, Australian online adoption levels are still only half the levels seen in the UK and the US, as shown below.
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Integral Diagnostics (IDX)
IDX is benefiting from a trend towards the greater use of high-end scans such as MRIs and high speed cardiac in preventative medicine. The information provided by diagnostic imaging is hard to replicate by other methods, so solid long term sector growth looks certain, particularly in Australia where MRI use is well below that of the US and Canada. In addition, the return on MRI investment is particularly attractive as it often avoids the need for surgery or additional visits to a specialist. So, what’s ahead for IDX in 2021?
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Rare Earths and Copper
With over 300% growth expected by 2040, renewables will become a far larger portion of the global energy mix. This renewables boom will lead to significant demand growth for certain raw materials over the coming two decades. As briefly covered in our introduction to green energy, the raw materials most needed to meet growing renewables demand are copper and the rare earth minerals.
In this report we take a deeper look at these commodities and examine the ASX companies producing them.
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Director Transactions
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US Earnings Outlook
By Marcus Tuck
Based on the latest US consensus earnings forecasts from FactSet, it is likely that the June quarter of 2020 was the bottom of the US earnings cycle. With all companies in the S&P 500 index having reported their results for the June quarter, 84% of them reported a positive EPS surprise and 65% reported a positive revenue surprise.
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Biggest EPS Revisions In Our Top 30
By Marcus Tuck
Our quant screens include an EPS revision factor. What it measures is the percentage change in the consensus analyst forecast for FY21 EPS, over the last 3 months for each stock. We can then rank the stocks by the biggest EPS upgrades or downgrades over the last 3 months.
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FEATURES
The Best Value Stocks From Our Top 30
A 10% correction in the Nasdaq Composite Index was overdue and is a healthy development.
Are the Buy now, Pay later valuations extreme or justified?
In this review of the Buy now, Pay later (BNPL) sector we look at Afterpay (APT), OpenPay (OPY), Splitit (SPT), Sezzle (SZL) and Zip (Z1P).
David Boyle
Four Key Digital Themes
Simon Turner
Senior Equity Analyst
7.00 am 30 September 2020
COVID-19 has been accelerating a structural shift to the digital delivery of many services. Businesses that are digitally advanced have fared better than those with less advanced digital strategies. Some companies have even benefited from the crisis by virtue of having a digital presence that allows for more robust and flexible business practices, strong market positioning and better cost control. A two-speed global economy has emerged around digital positioning.
The investment world is more focused than ever on companies with the best digital strategies.
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The US Election And What To Expect
David Boyle
Senior Equity Analyst
7.00 am 28 September 2020
Do markets care as much as the media?
The 2020 US presidential election will be held on the 3rd of November, which is only about five weeks away. In the lead up comes an almost endless stream of commentary from experts about what it might mean for international relations, social policies, the economy and, of course, the stock market.
The election of Donald Trump in 2016 was a disruptive event for markets, with initial concern soon giving way to almost boundless optimism and strong returns in the following months and years.
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Battery Technology
David Boyle
Senior Equity Analyst
6.00 am 25 September 2020
Powering the shift to elecric vehicles
As demand for electric vehicles (EVs) grows over coming decades, one area that a number of Australian companies can take advantage of is the supply of necessary raw materials. Australia has operating mines, or commercial deposits, for all ten of the most widely used elements used to make batteries.
The battery technology that is by far the most popular at the moment is the lithium-ion battery. The materials required vary slightly depending on the desired end use, but the key commodities that make up the bulk of the cost are lithium, nickel, cobalt and graphite.
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The Top 30 – Best Momentum Stocks
Marcus Tuck
Head of Research
8 am 25 September 2020
Half of the stocks in our Top 30 universe of Australian growth stocks are currently trading above their 50, 100 and 200 day moving averages. They can be seen in the table below, ranked in descending order of 50 day price change.
Top 30 stocks above 50, 100 and 200 day MAs
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16 Rules for Investment Success
Marcus Tuck
Head of Research
9 am 24 September 2020
The late and great Sir John Templeton was a man who pulled himself up by the bootstraps and never forgot where he came from. He had a strong concept of thrift and calmly tackled obstacles and adversity.
Whether he was confronted with the possibility of having to drop out of college after his father’s unfortunate bet on cotton futures, or whether he was grappling with uncertain markets, or criticism about the choices he made in his investments or his philanthropy, he faced life with a can-do attitude and a calm, clear head. As part of his daily exercise routine he would walk a mile in waist-deep water along his favourite beach in the Bahamas.
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Electric Vehicles
David Boyle
Senior Equity Analyst
6.00 am 24 September 2020
The shift to Electric Vehicles
The shift towards Electric Vehicles (EVs) is still very much in its infancy. According to the International Energy Agency (IEA), EVs accounted for only 2.6% of global car sales in 2019, and make up 1% of the vehicle fleet.
To hit existing policy goals stated by governments around the world, the IEA estimates that sales will need to grow by 36% annually over the next decade, to achieve a market share of 20% of the total vehicle fleet by 2030.
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The Best Momentum Stocks
Marcus Tuck
Head of Research
9 am 23 September 2020
Last week we looked at best momentum in our Top 30 universe of Australian growth stocks. In this report we identify stocks with the best momentum in the ASX 100, 200 and 300 indexes.
Specifically, we identify stocks currently trading above their 50, 100 and 200 day moving averages, with the biggest 50 day share price gains.
On that basis, the top 10 stocks from each index are shown in the tables below, ranked in descending order of 50 day share price percentage change.
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Renewable Energy Opportunities
Simon Turner
Senior Equity Analyst
9.00 am 21 September 2020
As we discussed in our green energy report yesterday, the growth opportunity in the renewable energy sector is a compelling long term investment theme. As shown below, renewable energy is expected to increase from 28% of Australia’s electricity generation currently to 51% by 2030, with a commensurate reduction in coal’s contribution.
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COMPANIES
Corporate Travel (CTD)
Simon Turner
Senior Equity Analyst
8 am October 1 2020
Prior close: $17.23
Strategic acquisition EPS accretive
Corporate Travel Management (ASX:CTD) has made a large strategic acquisition in the US with an enterprise value transaction cost of A$274.5 million, which will be funded by a rights issue. The company is acquiring the Omaha-based, employee-owned Travel & Transport Inc (T&T), a major global player in the corporate travel booking sector.
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Jumbo Interactive (JIN)
David Boyle
Senior Equity Analyst
8 am 1 October 2020
Prior close: $12.50
The start of someting big?
After the market closed on Monday, Jumbo announced that a binding term sheet had been signed with the WA lotteries manager, Lotterywest, to enter into an agreement for Jumbo to provide its online software platform and services. The initial term is for three years, with an option to extend to ten years.
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A2 Milk (A2M)
Simon Turner
Senior Equity Analyst
8 am 29 September 2020
Prior close: $15.20
How serious is the downgrade?
Yesterday, the a2 Milk Company (ASX:A2M) disclosed a more subdued outlook for the 2021 financial year, equivalent to about an 11% EPS downgrade. The company had faced the issue of pantry overstocking reversing in the June quarter of 2020, and now faces the issue of lower daigou sales in Australia and New Zealand in the first half of the 2021 financial year. Daigous are Chinese buyers in Australia, often international students or tourists, who buy Australian products on behalf of Chinese nationals.
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Pointsbet (PBH)
David Boyle
Senior Equity Analyst
8 am 29 September 2020
Prior close: $10.98
Winner Takes All?
PointsBet (ASX:PBH) is an online bookmaker building a position in the recently liberalised US sports betting market.
After operating in the Australian market for a number of years, the company pivoted to the US in an attempt to capture a share of a market that Morgan Stanley estimates could generate $US8 billion in revenue by 2025.
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Mach7 Technologies (M7T)
Simon Turner
Senior Equity Analyst
8 am 23 September 2020
Prior close: $1.10
An emerging medical imaging software company
Mach7 Technologies (ASX:M7T) provides medical imaging software globally. The market research firm Mordor Intelligence expects the medical imaging software market to grow from US$3.2 billion in 2019 to US$4.9 billion by 2025, representing a 9% p.a. growth rate driven largely by an ageing population. Given Pro Medicus’s (ASX:PME) track record of strong outperformance in this defensive market segment, how does Mach7 compare?
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Jumbo Interactive (JIN)
David Boyle
Senior Equity Analyst
8 am 29 September 2020
Prior close: $12.55
Is the Tabcorp selldown a problem?
After the market closed on Monday, Tabcorp (ASX:TAH) announced that it had entered into an agreement to sell its 11.6% interest in Jumbo Interactive (ASX:JIN). The block trade will complete at $13.52 per share, a 6.1% discount to the previous closing price, and will net proceeds of $98 million.
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Electro Optic Systems (EOS)
David Boyle
Senior Equity Analyst
9 am 22 September 2020
Prior close: $5.40
Back on track
Over the last couple of weeks EOS has released three announcements that individually aren’t material but looked at together paint a picture of business returning to normal, putting EOS back on the growth path.
The company announced the release of a new counter-drone system, the resumption of deliveries on a major overseas contract, and a small contract win for their remote weapons systems.
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Lynas (LYC)
Simon Turner
Senior Equity Analyst
6.40 am 22 September 2020
Prior close: $2.48
Top pick in rare earths
Lynas Corporation (ASX:LYC) is a rare earths miner that owns one of the world’s highest grade resources at Mount Weld in Western Australia [with a mine life of over 25 years]. Lynas also owns a large rare earths separation plant in Malaysia. The company recently raised $425 million of equity to fund an ambitious expansion program that will provide a long runway of revenue and earnings growth.
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PORTFOLIO
The Top 10 Companies From The ASX 100
By Paul Nojin
The Super Investor
6 am October 1, 2020
The Top 10 at October 1
There is one change … Appen (APX) replaces Woolworths (WOW).
NXT NextDC last: $12.28
APX Appen last: $34.08
OZL Oz Minerals last: $14.01
NST Northern Star last: $13.64
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The Top 10 Performance Since August 2014
By Paul Nojin
The Super Investor
7 am September 6, 2020
In the 6 years and 1 month from August 2014 to August 2020 The Top 10 has achieved an average annual return of 14.3%.
In the same period the All Ords [including dividends] returned 6.5%.
Since inception in August 2014 The Super Investor has gained 120.9% compared to a 43.2% gain in the index.
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Stock Market Strategies That Work In Australia
Stock Market Strategies That Work In Australia
By Paul Nojin
The Super Investor
9 am September 6, 2020
By Paul Nojin & Matthew Brooks
Chapter 1: The Ultimate Investment Strategy
Whether you are a seasoned professional or an optimistic beginner, the global financial crisis will have no doubt made you a more cautious investor than before.
With tens or even hundreds of thousands being wiped off share portfolios and super funds it’s understandable that you might be asking yourself …
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How Much To Invest In Each Company In Your Portfolio
By Paul Nojin
The Super Investor
9 am September 6, 2020
If you wish to be a successful investor there are various things you really need to know.
The first important thing you need to know is how much to invest in each company you add to your portfolio.
There is a correct answer, one based on science.
The answer is, in general, you should not invest any more than 6% in a single stock.
Why?
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MARKETS
Market Wrap September 26
By Paul Nojin
The Super Investor
Saturday September 26, 2020
Global Equities … The US S&P 500 index [last 3298.4] fell 0.6% this past week [after falling 0.6% the week before] and is now 6.0% above the 200 day moving average [3110]. The Shanghai Composite Index fell 3.5% to 3219.4 this past week and is now 5.7% above the 200 day moving average [3050]. The UK FTSE, French CAC and German DAX fell this past week. The DAX is still above the 200 day moving average [but only just] while the CAC and FTSE are still below.
Australian Equities … The ASX 200 [last 5964.9] rose 1.7% this week after rising 0.1% the week before.
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Market Wrap September 19
By Paul Nojin
The Super Investor
Saturday September 19, 2020
Global Equities … The US S&P 500 index [last 3319.4] fell 0.6% this past week [after falling 2.5% the week before] and is now 6.7% above the 200 day moving average [3110]. The Shanghai Composite Index rose 2.4% to 3338.0 this past week and is now 9.4% above the 200 day moving average [3050]. The UK FTSE, French CAC and German DAX all fell this past week [but not by much]. The DAX is above the 200 day moving average while the CAC and FTSE are still below.
Australian Equities … The ASX 200 [last 5864.5] rose 0.1% this week after falling 1.1% the week before.
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Market Wrap September 12
By Paul Nojin
The Super Investor
Saturday September 12, 2020
Global Equities … The US S&P 500 index [last 3340.9] fell 2.5% this past week [after falling 2.3% the week before] and is now 7.7% above the 200 day moving average [3100]. The Shanghai Composite Index fell 2.8% to 3260.3 this past week and is now 7.4% above the 200 day moving average [3035]. The UK FTSE, French CAC and German DAX all rose this past week [but not by much]. The DAX is above the 200 day moving average while the CAC and FTSE are still below.
Australian Equities … The ASX 200 [last 5859.4] fell 1.1% this week after falling 2.5% the week before.
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Market Wrap September 5
By Paul Nojin
The Super Investor
Saturday September 5, 2020
Global Equities … The US S&P 500 index [last 3426.9] fell 2.3% this past week [after rising 3.3% the week before] and is now 10.7% above the 200 day moving average [3095]. The Shanghai Composite Index fell 1.4% to 3355.3 this past week and is now 10.0% above the 200 day moving average [3025]. The UK FTSE, French CAC and German DAX all fell this past week. The DAX is above the 200 day moving average [but only just] while the CAC and FTSE are still below.
Australian Equities … The ASX 200 [last 5925.5] fell 2.5% this week after falling 0.6% the week before.