THE MARCUS TODAY MORNING MEETING - Thursday 21st July

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 research and become a better investor.

Transcript

DISCLAIMER:

Marcus Today offers information that is only general in nature. It does not take into account your personal financial situation, needs or objectives. Nor does it take into account the financial needs of any specific person. You should consider your own personal financial situation and needs or seek financial advice before making any decisions based on this information. For more information please see our Financial Services Guide.

*PLEASE NOTE: Transcripts are autogenerated and may contain errors, especially Stock Codes and Names.

SPEAKERS

Tom Wegner, Chris Conway, Ben O'Leary, Layton Membrey, Marcus Padley

Ben O'Leary  

Good morning everyone it is Thursday the 21st of July Chris Conway. You're on overnight, what have you got?

Chris Conway  

Good morning, Ben. Thank you. The Dow was up 48 points overnight as a pretty wobbly session also fairly tight range. At best it was up 117 At worst down 180. So about a 300 point range there i futures reporting down 33 points this morning. I'll leave it at Sunday give an update on what the market is doing upbeat US corporate earnings provided the boost overnight. This was off the back of Netflix's earnings, which came out at the end of the prior session. So we got them yesterday morning. But the first reaction was last night the stock closed up more than 7% because they didn't lose as many subscribers as the market was thinking and they also pointed to growth of 1 million subscribers in the next quarter. So potentially Netflix calling the bottom there in terms of their subscriber numbers turning around more broadly, about 12% of s&p 500 companies have reported so far and 68% of those have been expectations. So it is only early doors. But I think the market and the results so far are running ahead of what analysts were expecting hence why we've seen some positivity in the market on that front. The s&p and the Nasdaq are both now trading above their 50 day moving averages. It's a dinky little technical thing, but it's the first time in nearly three months that that has happened could be another sign that the downtrend which saw the s&p tumbled more than 20% this year has halted and is no longer we're no longer moving lower are the headlines overnight. Putin has signalled that the gas pipeline will restart whilst Ukraine and Russia are said to be close to a deal that will ensure safe passage of grain through the Black Sea and of course both of those outcomes would help reduce concerns about inflation and for the punters Macau will reopen its casinos on Saturday and Bitcoin topped 24,000 US dollars for the first time in a month so like I said a host of all positive leaning headlines overnight seeing the Dow up another 48 points backing up the began sending the session prior.

Ben O'Leary  

Thank you Chris. Tom, what's happening today?

Tom Wegner  

Thank you Ben. The bear market is doing better than what the futures had indicated. Although we are still in negative territory down eight points quarterly production updates from the Oilers and miners are colouring the session tech and healthcare names outperforming energy and utilities weighing on the market Woodside down 2% Santos down 1% both have quarterly updates gold names also sliding as Boolean has sunk to march 2020. Lows Northern Star down 1% Evolution down 1% new crest bucking the trend up 0.2% They met four year production guidance so well done to new crest ZIP Code sliding 2.3% on their quarterly numbers and link ln k has agreed to a new deal with dye and Durham at 481 cents and Zed has completed their $1.7 billion institutional raising. And tonight we have ECB and Bank of Japan handing down the interest rate decisions. And I think the expectation is for a more hawkish rate hike from the ECB Ben.

Ben O'Leary  

Very niice.Thank you Tom. Layton, what have you got out of Broker land? 

Layton Membrey  

Thank you Ben. Looking at Chris's chart of the day yesterday all can brokers commenting this morning UBS said that the production report more or less evened out in the wash with high realised spa Jemaine prices, but lower production numbers. There's a little bit of variation in the target prices this morning. Credit Suisse has the lowest one there with $10.40, which implies a 5% upside but other than that, pretty much all of the other target prices are around 50 to 60% above the current market price and also looking at 29 metals. That's true nine M is the ticker for that one. Brokers are varying a bit on the production numbers this morning, Credit Suisse returned its underperform recommendation and a total price of $1.15 implying a 19% downside, Morgan Stanley says equal weight with a target price of $2.75 implying a 94% upside and Macquarie has an outperform recommendation with a target price of $3, which implies a 111% upside. So a fair bit of variation there. But the comments were all fairly positive on those production numbers. Thank you Ben.

Ben O'Leary  

Good stuff. Thank you Layton. Couple of fresh ideas today. Chris, you've got one for us?

Chris Conway  

Thank you, Ben. Just looking at a headline here and backing on too late and talking about the brokers. I've just seen Goldman Sachs as Hi Josh Frydenberg for an Asia Pacific role. So that's a live news headline that's coming out. I am taking a look at what happened call. I covered this one not so long ago on the 14th when I suggested buying on a move through $5.55. The morning that I wrote up that analysis some whispers went around the market that the Chinese were considering lifting their ban on Ozzy coal imports and that lit a fire under the stock and it is as of this morning was trading around $6.43. In the Question begging now is is still worth buying. They did have an update as well on their fourth quarter performance. It was particularly strong they generated 1.4 billion in cash in the final quarter alone. And there is now a very real expectation that they will return some of that capital to shareholders. They report on August 23, I am still a buyer of this one, I've got an upside target towards $7.65. That's relatively conservative. The highest target is from ordinary net, they have an $8 or 800 cent price target on the stock. But as I said, I would still be buying this one upside targets to 765. So for anyone who missed that first move, there's still an opportunity to get on now. And for those who did capture that first move, well done.

Ben O'Leary  

Great work. Thank you, Chris. Tom, you've got a fresh out of here as well?

Tom Wegner  

I do Ben Well, maybe not so fresh. I wrote challenger up as a buy hold sell back in May. And I'm revisiting this quiet achiever which is up more than 26% in the last year and that's first the market down 7.5%. So quite significant outperformance there. It upgraded guidance at the start of the year that was reaffirmed in May. It's got results on August 16. The main tailwind for the business is as interest rates go up so does the attractiveness of its annuity products and its margins so for some examples, their three year term annuity will earn customers of 4.5% and that's guaranteed today that compares to 1.4% a year ago and 3.75% in May so it's quite a big and a steep incline and that's making their products more attractive broker said fairly priced difficult to argue against where it is at the moment. So I'm saying hold.

Ben O'Leary  

Nice one. Thank you, Tom. We've also got our long term investor section in there today with our portfolio check in on the Forever portfolio good week, they're up one and a half percent as the market took a little bounce. Still a little bit of extra cash and fairly low risk profile in the grand scheme of things there which has held us back a little bit competitive market but can't complain with a one and a half percent rise in a week. Still main concerns are around inflation verse growth upcoming reporting season and the market as a whole whether it's bottoming quite our calendar there full of activity reports due next week. As we ramp things up towards results season we'll have plenty of coverage leading up to any results season for stocks held in this portfolio. And of course, the same in the income investors section with the dividend portfolio. And we've got the portfolio X ray in there as well. Little check in Henry is not with us today. He has got his stuff in already. He's presenting at the AASA doing a talk on the brave new world and how to navigate the new investment landscape. So I'm sure we'll hear about that tomorrow. And in Henry's talk today, he's got a piece on an alternative way to play the growth in data and data centres and I look at Julie Bishop stepping out for mineral resources. So check Henry's take out there, Marcus onto your strategy.

Marcus Padley  

Good morning. Then actually I've got a couple of ideas. We've changed the name of fresh ideas to the ideas section by the way today just didn't seem to sit quite right with me but there you go. I have put a comment in the ideas section about the building sector. If you have a look in there, there's a bit of value appearing in the building sector all the building stocks are well off the top the US housing market has been disappearing into a hole you probably saw the fifth existing home sales decline in the US last night down 5.4%. As interest rates rise, and over the last six months, the monthly repayment for a new mortgagee or mortgage or mortgagee in the US is up 50% In the last six months, so housing getting more expensive over there activity dropping in our building stocks, some of them have us exposure, but it's the same picture here as well. The housing market has been peaking on the back of that just on sentiment alone. You've seen some fairly sharp balls in the likes of James Hardy Reese LendLease Fletcher building, they're all down 30% 37% 27% 24% 18% 17% 22% as we get down to borrow bricks works and CSR in the last six months or so. So sector on the nose there has been a little bit of a bounce in the last week and month maybe there is a bit of value appearing in the sector as well you've got CSR and I think Tom wrote it up as a buy hold sell not so long ago CSR and 10 and a half times with 10% yield at the moment 100% franked as well and you've got Adelaide Brighton or add Briars it's called 7.3% yield and RW holding 6.7% yield G wa 8.5% yield so there has been a value around in the sector now I can't see with interest rates still cracking up in the housing market coming off the top that there's going to be a lot of enthusiasm for the sector but clearly if the stock market is about finding sentiment peaks and troughs, the sector is in a bit of a trough at the moment we timed it rather nicely didn't we the building sector getting out of the building sector months ago and there is obviously an opportunity to get back in at some point the market needs to behave as well if this is the sentiment bottom on the market then maybe a sector is worth a look again the other thing that I've put in the ideas section with one word as a headline plus the chart is tempting exclamation mark oz minerals has had a bye I signal it is one of the lead stocks that will lead the resources sector back up. There is no great macro reason to be buying resources yet we still have recession fears around. But if sentiment is going to turn that has turned the share price already in the last couple of days, it's obviously way too early to be getting investors involved in the market. Yet there's no technical excuse on a longer term chart. But clearly there is a bit of a sentiment improvement in the last couple of days.

Ben O'Leary  

And oz minerals have their second quarter update due at the start of next week. So if you're getting interested in might be worth waiting and making sure there's no great disasters in that.

Marcus Padley  

Otherwise, on the strategy section, I am itching to buy something but this is a long term sleep at night. Don't worry too much don't do too much section. But maybe I'm being too short term getting sucked in by the last couple of good days. It's sort of cooled down a little bit last night. But there is no doubt the risk on sectors consumer discretionary and technology. Were at the top of the performance tables in the US last night Topping our tables today as well. And maybe there is a bit of a low going on in those sectors. Not enough for me to go and buy an ASX 300 or NASDAQ or an s&p ETF but definitely thinking about it. Otherwise, I'll just note in the strategy piece, there are a few hot stocks having a bounce and we're going to have a question of the day about that. Yes, we are and you're going to drive that right. So remember all those hot stocks that had not necessarily any fundamentals, but everybody loved them and thought they were bulletproof on the way out, name me one of your hot stocks. And I'll give you one which is can you remember this one true materials. It was Henry's one stock portfolio stock it started to bounce in the last couple of days. It's up about 10% namely a hot stock that we forgot Oh that we forgot that we need to remember again, Thomas...

Tom Wegner  

I was I was gonna go with zip having the bounce. But I said that yesterday.

Marcus Padley  

Very bored of the Z1P thing because it is trashy stock anyway,

Ben O'Leary  

it's up 40% In the last month...

Marcus Padley  

Can't argue with that.

Ben O'Leary  

I know one that I've covered a bit and we used to quite alike got absolutely hammered because it was all on story, no fundamentals. And that was BetMakers BET.

Marcus Padley  

BET, OK. Christopher?

Chris Conway  

Accent Group, which is a retailer, the shoe retailer and they were eating a bit for a moment there. Wouldn't be surprised if they've been hammered stock code AX1.

Marcus Padley  

Some of those consumer discretionary stocks going off again, short term stuff. Layton?

Layton Membrey  

Ben did actually take my first option. Domino's I feel like flu during the pandemic that's come off the top a fair bit.

Marcus Padley  

Along with JB Hi Fi Harvey Norman. All of those returns Thomas

Tom Wegner  

One that I got into and I quite liked at the start was air Tasker. And it was a business that was focused on the gig economy a bit like hi pages but could do anything and they got absolutely trashed and what surprises me they always had really good updates. They always be guidance and the share price kept going down to the tiniest bottom. I think it's about 30 cents at the moment but maybe there's value in it at 30 cents not $1.50 when I bought it.

Marcus Padley  

And what's the code for more sensible members that have never gotten there? 

Marcus Padley  

ART

Marcus Padley  

ART. Thank you Thomas and I will give you a couple Nana Sonics is going off again EGL environmental group which is the X TOC solutions management trying to do it again that suddenly looking a little bit better.

Tom Wegner  

I do have another one Australian ethical AF and did really well ran up really high on the ESG everyone's going to more sustainable funds and it got trashed. I remember Henry was talking about how when you compare it the the funds under management versus share price. It just does not stack up compared to even Magellan and a bunch of other fund managers and you're paying a massive premium for the word ethical.

Marcus Padley  

And I'll give you a couple more Vulcan Wii U L and lion town with you. And that'll probably do it as a

Ben O'Leary  

rule of thumb for that Marcus. Very interesting. Thanks, everyone, see you tomorrow.

Marcus Padley  

So I was playing golf at the weekend with one of my friends who has been listening to our morning meeting podcasts for free for the past year and he was looking a bit sad and the reason he was looking a bit sad is because from the first of August the Marcus today morning meeting podcast is going dark. We are putting it behind the paywall it will be for members only anyone who wants to continue listening to the Marcus day morning meeting podcasts should do themselves a favour and us a favour and subscribe and just a tickle you along if you send an email to info at Marcus today.com.au and be very nice to will Chi Chi and charisma. They may just give you a bit of a promo code give it a go.