THE MARCUS TODAY MORNING MEETING - Friday 22nd 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

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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

Chris Conway, Ben O'Leary, Henry Jennings, Layton Membrey, Marcus Padley

Ben O'Leary  

Good morning everyone, it is Friday the 22nd of July and have another busy week morning Henry, you've got overnight for us. What have you got?

Henry Jennings  

Morning Ben, I guess a slightly volatile session on the US market results dominating and the ECB moved to 50 basis point rise was also the big feature of the market especially in Europe as was the resignation second time around this time accepted from Mario whatever it takes Draghi as pm of Italy we did see the Dow Jones close up 162 points or around half a percent NASDAQ at 1.4% as well 10 year yields came off the boil slightly so that was good base metals not doing an awful lot oil was down 2.9% We did see Nord Stream come back online and it looks as if it's all okay at the moment and all those thoughts and fears that Vladimir Putin would hold Germany to ransom with no gas coming down the pipe I seem to have evaporated at least for the time being so that put a dampener on the oil price and the gold price popped higher as the US dollar came off a little bit some weak US data just taking the froth off the inflation story so not too bad as spy futures were pointing to an up 12 But don't forget yesterday was spy expiry. So that changed over from the July contract which was the front month to the September I was rather the August contract which is now the month so that will have affected the fair value of the front month contract. I'm not sure what the fair value is but our market not doing an awful lot this morning on the back of that. So just something to bear in mind.

Ben O'Leary  

Thank you Henry note on this morning. So I'll take over the market today. As you said not a whole lot happening. We are down 20 points or just under 0.3% 26775 Not quite the 12 point gain that future is worth pointing to and that 6800 market is proving too hard to climb today hit of a pivot point there energy is the worst performer down more than 2% followed by utilities and communication services down 1% materials and consumer discretionary is down half a percent ah healthcare and real estate of the bright spots up 0.4% financials are flat on the corporate front this morning. We've got ayeni up 8% After signing an offtake agreement with Ford zero resources is up three and a half percent after ending a non binding MOU with Ford to discuss the possibilities of gnostic agreement essentially RefWorks is up 3% After upgrading guidance Woodside down one and a half after clarifying their guidance. IAG is down 2% on their four year preliminary numbers. Chris, you said there was a big missing there?

Chris Conway  

Yeah, they missed on their margins. They had stated themselves they were looking for margins of 10 to 12%. McQuarrie had it pegged at 9%. And they were thinking they weren't going to hit it and they came in at 7.4. So that's the big reason why they're down today. They missed their own margin guidance by a country mile.

Ben O'Leary  

Yep and there's a couple going out in sympathy there. I think Cuvier was down 3% And Coronado global is down 7% on their second quarter production numbers on the calendar today. locally we've got the global manufacturing and services PMI for July those also coming out today and tonight in Japan Europe, UK and US tonight we've got UK consumer confidence and retail sales for July not much else happening around on the corporate front today outside of what I've already said and Luca has a shareholder meeting and you W L is ex dividend Chris you've been on as biz and that was going to normal McStay action today, your ISP segment will be up somewhere in the feed, let it say. Alright, thank you for that. And that that's where we've got. Layton, what's happening with the brokers.

Layton Membrey  

Thank you, Ben. Just looking at Woodside Energy today following those numbers that they put out yesterday. They've been reasonably well received by the brokers so far. Morgan says the results show strong free cash flows and estimates that around 2 billion US of free cash flows will be generated in 2022. They've got an add recommendation there and a target price of $35.40 which implies about a 14% upside and an interesting note from Morgan Stanley on their dividend the total dividend they're estimating to come in at $1.20. US which includes that 50 cents special dividend never got an overweight recommendation at a target price of $40 which implies a 28% upside and also looking at line town resources. Cory says this morning that the award of the AP CME contract is an important step to ensuring infrastructure remains on schedule and I've got an outperform recommendation there at a total price of $1.85 which is 49% above the current market price...

Marcus Padley  

Also in broke stuff interesting UBS has got to sell and zip target price 41% below the current share price. And after the production numbers yesterday from new crest you've got to outperforms and target prices 34 and 44% both current share price and I just noticed on the scans this morning, new crest and AVN, both in the gold sector and the gold ETF have had a little buy signals, there's very little reason to get excited about gold as far as I can see, unless the US dollar comes directly off the top. You might see it rally a bit, but there are some mild signs of bottoming in the SEC.

Ben O'Leary  

Very good info there. Thank you, Marcus. Thank you for that. Layton. Henry, what have you got for us in Henry's Take?

Henry Jennings  

I'm glad you're seeing some mild signs of bottoming markets because I added some gold stocks to small cap portfolio in DCN and grey recently, which are going pretty well. And also just a bit of an update on some of the other recommendations this week, IG L which we wrote up on Monday as a speculative buys now 20% from that level, and one of their main competitors avato, which was a weak competitor. So the least went bust yesterday. So that's good. That is good news. When your competitors go bust, it takes out that part of the market and they should pick up a lot of that business. So that one's going well. I also wrote up yesterday. GDC is global data as a way to play the data side of things. They are kind of like an investor in data centres rather than running them themselves. They had a big discount to NTA that one was up 14% yesterday as well. This morning, I did suggest that investors look at thorny tech, which is a fund manager and we played this game before with thorny, you're buying basically tech stocks at a discount to the NTA which at the end of June was around 32 cents. So it was around a 30 odd percent discount to NTA. And of course June was pretty much the low point Tech's and in the month of July Tech's have rallied 15% in our market. So our all tech index up 15% Unfortunately, I had my price this morning to buy tech at 22 and a half cents, they're now up 9%. And they didn't trade anywhere near that. So that's a bit annoying. Apart from that just writing up to date some of the what's going on in the economy. Of course, we did see the ECB raise rates last night by 50 basis points, but you know, it's just to zero. So it's not a massive thing. And of course, they've now brought in the anti fragmentation tool, which is in called the TPI or to protect Italy as Mario Draghi has resigned for the second time as we talked about. And also just having given a presentation yesterday to the AASA, which was an interesting forum and was quite well attended. Just put that out there on the newsletter that if anybody's interested in a copy of the presentation, more than happy to send it, I have had about 25 people asked for that presentation, which is good. And if I had time next week, I'd probably turn it into a webinar, but might be a little bit too stretched for time, given the Melbourne education day on Monday.

Ben O'Leary  

Nice. Thank you, Henry. And I touch again on that education day in just a moment or the session today, Chris, kick this off?

Chris Conway  

Thank you, Ben, I'm taking a look at resumes this morning. In August this year, they launched their new AirSense 11 device, the early reports are that device, it's increasing the lifetime value of patients so people are taking them up earlier. And then over the journey, of course, they will place them more often. So that means more masks sales for the company. Ship shortages that had been a headwind are starting to ease so that's supportive for the outlook. There are some troubles at their major competitive Phillips, they're going through a recall and some brokers up and down the street are anticipating that they will be out of the market until fy 23. And there's a backlog of 1.6 million patients currently waiting for devices and with Philips out of the way that could swell to 2.8 million in FY 23. So some things lining up nicely for resume the brokers like it some research out recently with target prices, about 15% above the current market price, I'm going a little bit more aggressive than that I would be a buyer at current levels with a target up towards $40. So that is a buy for me in the ideas section this morning. 

Ben O'Leary  

Very nice, thank you Chris. Marcus, you've got an idea?

Marcus Padley  

I just mentioned in the ideas section that we have the CBA results coming up in the dividend coming up and saying that the sector's or the charter of CBA and the bank sector is looking a little bit more stable. But having said that the last RBA meeting, obviously not 10% off the banks and CBA after they raised rates aggressively. And all the chatter this week was that they are going to do that again may raise rates 75 basis points, the next RBA meeting is weak on Tuesday. So you would probably at least wait until that risk is out of the way. And if you are trying to strip dividends a safe way to do it is to wait for the results to come out. So you might wait for the CVA results before you actually went in did anything if you were trying to strip a dividend they have results on August 10. They go ex dividend on September the sixth. So it's just an obvious mention for income investors that heads up on a few of the big income stocks coming up and we've got real results next week as well. 

Henry Jennings  

Just on the banks before you move on bear in mind people out there members out there that ANZ done that three and a half billion dollar entitlement raise and as I said REITs are now trading which is obviously a good way to play banking sector. So the currently the REITs are up 20% $3.50 They were at 14% When we started this meeting, so if you're looking to speculate in banking stocks and Zedd REITs is a leveraged way to play the banking sector.

Marcus Padley  

What Henry's saying there is that the rights to participate in the capital raising are trading separately. So the code is a and said our least is on my screen, I don't know what the other platforms got it a and Zed are and so the point is a and Zed is up 57 cents today. And if that is a 20% move in the rights because you're not paying the bulk of the money that has to be paid through the rights issues. So it's as Henry says, a good way to play a N Zed and the banks at the moment, of course, if it falls 57%, it will be down 20% as well. So just be careful.

Ben O'Leary  

Very good stuff there. Thank you guys. As you mentioned, Marcus, I have a look at Rio ahead of their results out next Wednesday, we're going to deal with this a little bit over the next couple of weeks ahead of as we approach and enter results season a little bit of what to expect. So various results are obviously very highly anticipated for exactly what you were just talking about the markets that income the big yield and income investors need to be getting that into their portfolios as a double digit dividend expected by most of the brokers. The numbers look great at the moment brokers are positive despite the shaky iron ore outlook over the coming years long story short, which, if you're interested in long story, do check it out on the newsletter, but the smart play looks to be to collect the dividend and reassess, we might even see a trading opportunity over the back end of the year as Chinese growth picks up marks, you've been on lookout for that a little bit, particularly if the stock becomes oversold. As it goes back. Steve does have the view that everyone's holding on to that dividend. So we might see a bit of a rush to the exit in the short term, I'd be a bit of an opportunity in long term and then the future does look a bit shaky over the coming years. But we don't necessarily need to worry about that today. So that's really check that out. If you want some more information. We got a few charts in there. They're quite interesting. And Marcus, are you got your strategy today?

Marcus Padley  

Well, I have basically called the top I think because I've put every hot idea that you could possibly put in to participate in this relief rally, which means it's almost certainly going to die. And it seems to have done that this morning seems to have hit the wall. I don't think it's losing momentum. But it's certainly losing upside momentum at the moment. So I have listed if you want to buy something, there are a host of ideas. I've listed the ETFs. I've listed the stocks as well that are having a relief rally. But as I say it seems to be the moment you do that the market runs into a wall and it seems to have done so one of the sectors that does seem to be picking up on its own momentum is the lithium space. And you probably saw several resources ionair mentioned by Ford mi n and pls both have quarterly production numbers next Thursday, and look to be bottoming on the charts as well. So that might be a sector that will rally as the electric vehicle hype pipes up again, and might be a little bit immune to the market if the market does go quiet again. Otherwise, on the strategy front, the ASX 200 charts at the moment, yes shows a relief rally. But it is certainly not a major market pivot point on the charts just yet. And the risk is we have a lot of macro influences over the next week, which could Fill or Kill the rally. So we've got an FOMC meeting, we've got a US second quarter GDP number we've got Australian inflation numbers, European inflation numbers, a European GDP number and a host of big US tech results, which I would say are probably more risk than reward depending of course when they're better or worse than expectations. But a lot of these companies have been cutting their headcount and guiding towards a more difficult Outlook. So that appears to be more risk than reward. So best we hold off calling the bottom on the market at the moment in the strategy section. It is supposed to be long term, yes, there's a relief rally but don't think it's the big one yet. Otherwise, in the strategy section I've written about what's coming up next week. You can have a look at that. I'll repeat that, I think in the weekend email tomorrow. And I've also written up a bit of a preview without realising that Ben had done it on the Rio results next week and the Macquarie AGM next week, which I've also written up even though that's had a bit of a relief rally as a stock market stock and the average brokers got a 15% higher target price than the current share price. The one broker who is a little bit possibly ahead of the curve is Credit Suisse who've got an underperform on Macquarie with a target price 14% below the current share price warning that they should see earnings descending the AGM but it might include first quarter guidance that they should see earning 17% down this year and whilst the P E has come off the top if you look at the chart Pease down from about 22 times to 16 times it's still above the long term average so not expensive, but not got cheap yet either. Yield is a rather uninspiring 4.4 per sent including franking, but there's only 40% franking. So I think the message is, AGM on Thursday usually they're very conservative. It can cut both ways, but Macquarie's AGM, probably more risk than reward at the moment, certainly judging from what's happened at the investment banks in the US which they will see a similar drying up of the m&a pipeline, the capital raisings, the IPOs. And with the financial markets is down it means they're pushing water uphill. So some risk on Macquarie AGM next week. And that's me.

Ben O'Leary  

Very nice thank you, Marcus. A Question of the day to day in light of what Henry mentioned just before our education events coming up over the next week or so. But Melbourne on Monday and then Sydney The following week, is if you're talking to a beginner that was entering the stock market, where would you advise them to start their journey? Layton?

Layton Membrey  

I think a really important thing is learning your way around. So the concept or wherever you actually purchase your shares, just to get your head around that because I know him with my mom, she had a bit of trouble with just sort of learning the software side of things. And that's Yeah...

Marcus Padley  

I think the point about that is, is that people will quickly form a habit on whatever platform they've got, you have to do some work to realise just what comes EQ offers and just what NAB trade offers, they offer a heck of a lot of stuff. And they offer emails every day and updates and all sorts of signals you can put in and charts unless you bother to have a look, you will spend the rest of your life thinking the only thing they're offering you is the page you always go to. So yes, worth putting a bit of time in on your platform. 

Ben O'Leary  

Good point there. Thank you Layton. And Chris?

Chris Conway  

If I was building markets, one on one, it would be how to look at charts and when there's a lot more technicals and how to read a balance sheet and an income statement. So if you did those two slash three themes, I think you'd be well on your way. 

Chris Conway  

Very nice, thank you Chris. Henry?

Henry Jennings  

I think understand Einsteins law of compound interest and just start just do something. Don't think about it too much. Just start investing and see how you go you'll learn an awful lot more by your mistake, just make them in small amounts, and rather than big amounts, but Marcus is right learn your platform as well learn what it has to offer. Once you've got one stick to it. I've been using ours for 30 odd years. It's been great.

Ben O'Leary  

Very nice. Thank you Henry Marcus?

Marcus Padley  

So what Henry's saying there is he's using one of the most archaic platform Cyrus's pretty basic. But once you get used to it, any platform, they're all a lot better than they appear, I would say challenge or you can't really learn that. Can you subscribe to Marcus today and challenge a lot of the assumptions which flow through the stock market, in particular, the marketing lines, the idea that you all have to be Warren Buffett and the intrinsic value is important. And the average return is x, you really need to learn how the stock market really works. And the best way to do that, I suppose is turn up to one of our education seminars where I do a talk on the things that the stock market doesn't want you to know. But there are plenty of them. This industry is 90% marketing and 10%. Good advice. 

Ben O'Leary  

Very nice. Thank you Marcus, I was gonna say the compound over Henry stole my thunder. So I'll talk my book as well from the education Chris and I are going to be talking about portfolio construction portfolio theory. So I think figuring out what the reason you're investing for is what your target is, the point of doing it is you want to be a trader, you're doing it for long term, and then looking into how you're going to construct your portfolio based on those assumptions. so...

Marcus Padley  

This is assuming Ben, you are a portfolio style investor, when of course you could just trade shares or you could just hold an ETF and not build a portfolio.

Ben O'Leary  

What tab of your trading platform do you hold the shares on though even if you're a trader, my portfolio. Thank you very much and we'll see you guys all next week. Guys.

Marcus Padley  

I was playing golf at the weekend with one of my friends who has been listening to our morning meeting podcast 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 podcast should do themselves a favour and us a favour and subscribe and just to 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