THE MARCUS TODAY MORNING MEETING - Tuesday 26th 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

Tom Wegner, Chichi Nwokocha, Layton Membrey, Marcus Padley

Chichi Nwokocha  

Good morning everyone. Tuesday 26th of July Marcus, you are fresh off the back of your education event seminar yesterday. How did that go?

Marcus Padley  

Chichi, thanks for hosting today. Chichiand Ben's episode. It's Ben's birthday today. Oh, the education seminar went well, although I have had a rat test this morning because I woke up with a sore throat I'm not used to talking for so long. Turns out I'm not a rat. But it went very well. I've had one email from one of the attendees today said Great Day of Frank information no get rich quick scheme. No, trust me, I understand the market and your needs better than you do. No, you are smarter than the market is easy. You are providing and this is three and that I mean, I could have written this myself, you are providing a marvellous service to the investment community, which is appreciated. The newsletter in this seminar is the best stock market investment I have made in 20 years. I think 20 years would be a bit short, but that's okay. So we'll take that. Thank you very much, Paul for that. And today I'll do overnight today. Overnight. We have Dow Jones up at 91. Bit of a late rally futures this morning. We're up 24. I don't think we were up at quite at that much this morning. But the NASDAQ was down point four 3%. So you've got technology at the bottom of the pile. And it just takes the momentum out of this recent relief rally we've had because that's been led by tech and consumer spending. And those sectors at the bottom of the performance table today. And late after hours. Walmart has announced results the share price is down 9% in after hours, and Amazon is down 4% targets down 4% And most of the other big retailers have dropped as well. So we might not start the night tonight terribly well in the US on the back of consumer stocks dropping on the back of the Walmart result Walmart are complaining about inflation, hurting consumer spending and mortgage rates going up and having to discount because they've built up inventories for the pandemic or post pandemic boom, and now they've got to offload them. Interestingly, I think Tom will tell you about Meyers sales numbers or update today to stocks up 12% It's good and JB Hi Fi had a good set of preliminary results last week seems our retailers are still basking in the cash from the pandemic boom. And the US seems to be ahead of the curve on us seeing the retail spending coming down the other side. So we'll see how our results but you would say we've had a bit of results risk in retail but doesn't seem to be turning up yet. Otherwise, oil price up 2.1% iron ore price up half a percent BHP and Rio leading the market a little bit today. As the US dollar goes down commodity prices go up bond yield off the top a little bit which suggests recession fears are creeping back in a bit. And part of that might well be the Russian Gazprom utility telling Europeans that they are going to be harming the supply down the Nord Stream one gas pipeline from Wednesday. And there are some suggestions that are pending on what happens with sanctions, Putin could cut supply altogether in the middle of winter just to grind Europe down anyway bit of a risk on the energy front from that otherwise, things coming up. We've got the FOMC meeting on Thursday morning, our time there is a 78% chance of a 75 basis point rise still at 22 and a half percent chance of 100 basis point rise. We'll see what they do but it doesn't seem the markets going to do much ahead of that we've got lots of us results. We've got US GDP on Thursday. We've got European GDP on Friday. We've got Macquarie's AGM on Thursday, Rios results tomorrow and a bunch of production numbers as well. So plenty going on this week, which just keeps everybody backed off a little bit from doing anything to break. 

Chichi Nwokocha  

Thank you very much, Marcus and Tom. How's that affecting our market? Thanks, Cheech.

Tom Wegner  

Well, as Mark has pointed out, not doing as well as what the futures had indicated, were up 10 points caution sitting in the head of the Fed decision in those big US tech earnings. We have energy and miners outperforming most sectors. in negative territory, though, weighed down by consumer stocks and technology, gold miners reduce resources and Perseus mining down between one and 2% on quarterly updates. Meyer the standout today they are up around 15% said they expect profit around 11% higher this year compared to last year Woolworths group is down 2% on their chair Gordon cans retiring and the banking regulator has had their chairman step down as well. So new chairman for APRA on the cards weekly consumer confidence was up last week and that follows another improvement the week before so to put was three weeks on the truck. And the best headline this morning was the White House has adjusted its definition of a recession. And that's coincidentally just in time for the GDP reading which is expected to reveal a 1.6% fall over the quarter. So good timing from the White House there. Thank you. Cheech. 

Chichi Nwokocha  

Thank you very much Tom and Layton. Anything from the brokers?

Layton Membrey  

Yes, thank you Chichi. I've got a couple to go through this morning. Aigars automotive that's a P e is upgraded to outperform at Credit Suisse. And this comes after some macro economic changes to the global automotive markets. The broker believes that the company is in a good position to benefit from improvements in the global automotive supply chains. And that's the Eagles didn't over earn during COVID, but rather experience high margins. So the idea that they've got there's strong demand and the ability to maintain strong margins will assist in earnings growth, and the broker has increased earnings forecasts for FY 22 and 23 by around 8% For both of them, and the target prices increased to $14.50, which implies around a 17% upside and South 32. That's s 32 had results yesterday that were considered by Credit Suisse to be solid weather impacted production that sales were boosted by inventory sell downs, Credit Suisse has retained its outperform recommendation but lowered its target price slightly to $5.30, which implies a 49% upside and Morgan says that they see a good buying opportunity on an attractive forecast FY 22 dividend yield which I had a look before which is just under 5% For the final dividend and the brokers returned its add recommendation and lowered its target price slightly to $6. Which implies a 69% upside. Thank you Chichi.

Chichi Nwokocha  

Thank you very much later and and we have a no Henry today as he's travelling back to Sydney from the education event magazine.

Marcus Padley  

Yes, just to say Henry has written Henry's take in the airport today. So you can have a look at that he's written about zip and where to from here. Zip of course has gone up something like 50% in this relief rally. And as Henry says he's got a long way to go to win back investor faith. Rome wasn't built in a day and you can't buy buy now pay later. Unless you're an aggressive investor. At this point. I'm not sure I'd be buying Zed IP. I'm not sure I'd be buying xiP at this point. Henry also has a bit of a write up of our education day yesterday and was obviously particularly taken with Stuart fees presentation, we might see more of Stuart McPhee and Marcus today. I think he was very impressive. He uses Mehta stock has done for over 20 years. Stewart's ex army by the way, so very disciplined, and a very good presentation. And Henry was obviously clearly impressed by it. He says he hasn't quite been converted to the dark side technical analysis. But it was very interesting to watch what Stuart has set up on meta stock and how he uses it. And one of the things that I was particularly taken by was disagreed with someone that I played golf with the other day, who was a Westpac fixed interest derivatives trader taking huge positions. He'd been at Westpac for over 20 years, taking huge positions. And he was saying that one of the ways they trade fixed interest was to look at volatility and there were times when volatility ripped up and you just had to exit positions or make positions smaller because of volatility. So volatility was really the focus of Westpac big derivatives trading in fixed interest, and Stuart picked up on the same thing and had the average true range of the say all ordinaries index and showed that every time it's spiked, the market fell over. And it only ever spikes in hindsight, but it's a bit like watching the VIX volatility index. It's a gauge of fear and greed and there are times when you should probably exit the market and times when volatility does peak and starts to come off that you should think about buying the market. So you've got to buy when others are fearful and he had the chart of the average true range of the all ordinaries index and how it had spiked recently and was now coming off the top so it was an interesting look at how to gauge how much risk there is in the market. And I think we might adopt that. I might write some formulas on meta stock for us or maybe even get Stuart to do it for us and we will see but very interesting look at technical stuff. Look out for Stuart McPhee and Marcus today you can already buy one of his courses in our back end on technical analysis and there is I think a free one as well and that was Henry's Take.

Chichi Nwokocha  

Thank you very much for that Marcus. Tom your with the ideas section.

Tom Wegner  

I am I'll just say Chris isn't able to join us but he's looking at as x limited in his chart of the day the stock pushing up to a major resistance point at $87. So one to look out for there and I am looking at brick works and my headline is Brick works building into results. They upgraded guidance on Friday. results do you on September 22. The share price has bottomed brokers like it inquiry, notably lifting EPS forecasts by 18%. For this financial year results likely to be buoyed by their industrial joint venture trust developments. They sold a 50% interest to Goodman group and high earnings from its building product segment in Australia, which is its biggest revenue contributor. And interestingly, jumped on to the ABS website, which showed building activity data is actually quite strong and almost unchanged from March 2020 levels. And if margins have been maintained, the one issue in the update was that they didn't talk about passing on costs. They did talk about higher cost, but they didn't talk about passing on costs, which I imagine they are, but it would have been a nice bit of confidence in the company if they commented on that. And if margins have been maintained, there's some more upside risk heading into results there. Chichi,

Chichi Nwokocha  

Thank you very much for that. And Marcus, back to you for strategy.

Marcus Padley  

No, I had a couple of ideas as well. One of them I've already mentioned, just be aware that Rio and Macquarie both have announcements this week, Rio results tomorrow, Macquarie's AGN coming up on Thursday, and you always got to watch the odd broker who stands out from the crowd and has a different opinion and running into that set of results from reo and the AGM from Macquarie one broker on each as suddenly gone negative just ahead of those announcements, one of them suggesting that the iron ore price has been coming off Rios cash flow has taken a dive and the outlook isn't great for the other ones suggesting that Macquarie seen the pipeline of m&a placements, IPOs corporate deals dry up and that will be reflected in their guidance as well. So a would need to get over both those hurdles I think before buying too enthusiastically. The other mention is in the education piece in the middle of one of the breaks Yesterday, I asked members who were at the education seminar if anyone had a favourite stock so we could have a look at it on Thomson Reuters or refinitiv is now called and I got shouted out the code N EU which is neuron I imagine I've mispronounced that neuron pharmaceuticals, which interestingly on the stock box is going from making a loss to a PE of 200 Odd next year, and then a PE of can you believe it about six times. So the forecasts are for a huge increase in transformation from loss to profit over the next couple of years. And the share price when we looked at it was 430. It closed the day at 490. And I don't think there's any news. So you got to be careful what you're talking about in markets today, especially if it's completely illiquid, I imagine one of our members was sitting there with his super fund millions tapping away on his phone. Bring the price up anyway, interesting. Any you might be worth a look. For some of you, it's sort of held the game today. And I'm sure there was something other than us talking about it going on in the background, no real strategy today, more observations, more recognition that we've got a lot of macro signposts coming up in the next few days. And we might just wait for those to get out of the way before getting to convicted about buying or selling anything. At the moment, we are in cash happy to remain that way, we'll see what comes along. One of the things I thought that would lift the market would be this Nord Stream, one gas pipeline opening up the oil price is 18% Off the top now and the natural gas price at one point was down 30% off the top, they've just started going up again, as Russia looks like it might just as Europe or European politicians describe it, they might just be an open energy war with Europe and may really turn the screws in winter. So suddenly, we're worrying about the energy prices going up, in which case inflation isn't going to come down, in which case we may not have seen the peak yet, in which case, we might have to worry about higher rates and recession for a bit longer. But we will see but that energy complex, clearly very important to the whole market or macro assessment at the moment... 

Tom Wegner  

It is a dicey game for Russia to play that energy war because they also need the income for their purposes, so they can't go too hard.

Marcus Padley  

Absolutely. At this point is Putin his rhetoric we will see, and I don't know whether you realise that a third of the world's grain comes from Russia and Ukraine. And when the war started, Ukraine mined its own ports so that Russian ships couldn't get in and the Black Sea fleet of Russia is sitting outside Ukrainian ports, stopping any ships coming out. And this week, the first grain shipment or the first ship out of Ukraine will supposedly be guided through the minefields and past the Black Sea Fleet and allowed to come out but you can see why that is an inflation pressure as well. The whole war is a pivotal issue for the equity markets at the moment because if that was to suddenly evaporate, you would see a peak on inflation and markets lift and recession fears go away, but no sign of that yet.

Chichi Nwokocha  

Thank you very much. Thanks cheers for that. Marcus, back to you for the question of the day. 

Marcus Padley  

Chichi, the question of the day today was the question they had on the ABC radio this morning when I was talking to Virginia tree Ali, who was asking what is the most famous name in the world. And her suggestion was that it was bond James Bond and she was talking about watching a documentary about people called James Bond and how it had affected their lives and and she's a very intelligent woman. She said she was absolutely engrossed in what had happened to people called James Bond. So forget James Bond, what other name would be the most famous name in the world that you probably wouldn't want to be cool?

Tom Wegner  

I think the most I did hear this a couple years ago, the most recognised name in the world is Cristiano Ronaldo, of course is the famous soccer player

Marcus Padley  

Right so if your parents were the Ronaldo is you really wouldn't want to be christened Christianna I'm not sure he would know. Chichi?

Chichi Nwokocha  

Something like a Barack Obama I think would be quite recognisable, but you wouldn't not want to be called for backup and oh my god, I say I'm gonna know Barack Obama...

Marcus Padley  

Very you good? 

Layton Membrey  

Another sporting one for me? I can Michael Jordan or LeBron James. Something like that is definitely could not get away from it...

Marcus Padley  

No. You've all missed it. What you don't want to be called is Jesus. And on that note, we will leave it there. Thanks very much in a reduced team today. I think we've done okay, normal service will be resumed tomorrow. Thank you. Thank you. 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 podcast 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.