Top ASX Stocks to Watch

Mantra Group has had a huge weekly gain, and is also a major beneficiary of a weaker Aussie dollar on the hope that more tourists will choose to come to Australia.

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Source: Bloomberg

Asaleo Care’s lowered guidance on Friday caused a shock drop in what has been a crowd favourite stock last week. CIMIC’s disappointing 1H results also its stock crater last week.

As the ASX continues to trade at almost twelve-month highs, the 5450 level begins to solidify as a key technical support where one would look for it to drop. The ASX is now up over 15% since it bottomed in February, but it would have to rally up to 5710 for it to have gained 20%, which would qualify as a technical bull market. If the ASX returns to 5710, it would also see a full recovery of the China devaluation-driven August selloff, making the level doubly significant. Although it is difficult to see that happening without the announcement of some major fiscal stimulus packages worldwide and with the DXY US dollar index continuing to hover near the 98 level.

NAME

5 Day

1 Month

YTD

NAME

5 Day

1 month

YTD

MANTRA GROUP LTD

16.6

-4.2

-27.7

FORTESCUE METALS

-4.3

25.8

116.6

PROGRAMMED MAINT

8.0

-3.8

-29.0

RIO TINTO LTD

-4.4

9.7

8.1

ARISTOCRAT LEISU

7.8

12.5

45.1

SIMS METAL MANAG

-4.4

6.3

20.9

SIRTEX MEDICAL

6.8

12.1

-21.4

WESTERN AREAS LT

-5.2

19.7

22.3

LENDLEASE GROUP

6.6

-3.3

-8.3

BHP BILLITON LTD

-5.3

2.7

8.1

IPH LTD

6.5

-1.2

-24.5

SARACEN MIN HLDG

-5.3

17.8

165.6

AUSTRALIAN AGRIC

6.5

9.3

53.2

SOUTH32 LTD

-5.4

12.0

71.4

TECHNOLOGY ONE

6.4

4.7

13.5

OZ MINERALS LTD

-7.0

17.5

60.7

GREENCROSS LTD

6.4

-2.6

6.4

ALUMINA LTD

-7.2

-5.6

16.9

FAIRFAX MEDIA LT

6.3

13.3

10.9

SANDFIRE RESOURC

-8.6

11.7

8.2

MACQUARIE ATLAS

6.2

6.2

38.1

ST BARBARA LTD

-10.2

-1.6

123.2

ISENTIA GROUP LT

6.2

-11.1

-29.0

SYRAH RESOURCES

-12.2

-24.1

26.9

RAMSAY HEALTH

6.2

6.0

14.0

NORTHERN STAR RE

-12.6

1.1

72.3

ALTIUM LTD

6.0

15.3

54.6

CIMIC GROUP LTD

-17.0

-25.1

13.3

SYDNEY AIRPORT

5.7

4.9

17.3

ASALEO CARE LTD

-34.3

-26.9

-5.6

 

Market Internals

One particularly concerning trend in the ASX market internals is the percentage of companies trading above their 20-day moving average. 92% of companies are trading above their 20-day moving average, which is a level not seen since December 2013. And it did precede an eventual 5.5% decline in the market over the next two months.

ASX Sectors

The US dollar rally has been a huge driver of the best and worst performances over the past week. Healthcare stocks gained 4.4% over the past week, given that many of the stocks that dominate the sector have significant US dollar earnings and are benefitting from the massive US dollar rally. The other side of this is the 3.5% loss for materials stocks who have seen commodity spot prices impacted by the US dollar rally.

Sector

5 day

1 Month Return

YTD Return

IT

3.1

3.9

-1.2

Utilities

3.4

9.5

15.2

Healthcare

4.4

10.7

14.4

Industrials

2.1

6.6

12.8

Financials

1.6

6.6

-3.9

Consumer Staples

2.2

7.0

-2.0

Telecoms

0.8

7.9

5.2

Materials

-3.5

9.5

21.2

Consumer Disc.

3.2

8.0

9.1

Energy

2.6

7.2

7.4

ASX Index

1.3

7.5

3.8

 

This can also be seen in the US dollar earners index versus the ASX. This is just an equal-weighted index of the top 16 companies on the ASX with the highest percentage of US dollar earnings. Over the past week, this US dollar earners index has gained 4.3% against 2% for the ASX index as a whole.

Short Positions

Despite the rally in the healthcare space, short positions in Blackmores have begun to climb again over the past week. Some investors may be speculating that China’s introduction of much stricter regulations on foreign imports could affect earnings or guidance at BKL’s upcoming earnings release.

Name

Short Interest Ratio

Week on Week % Increase in Short Positions

BLACKMORES LTD

5.7

13.5

FLEXIGROUP LTD

2.9

9.9

CHARTER HALL GRO

2.4

9.0

APN NEWS & MEDIA

4.3

6.9

SOUTH32 LTD

2.8

5.0

GRAINCORP LTD-A

17.2

4.5

BRAMBLES LTD

2.6

4.5

PLATINUM ASSET

10.6

4.2

CROMWELL PROPERT

2.1

4.1

AMCOR LTD

3.7

3.7

After bottoming t about A$1.56 in early July, investors appear to have been enticed back into National Storage REIT and this has helped drive the major decline in short positions over the past week. Whitehaven Coal’s irrepressible rise has seen short positions in the stock continue to melt away as well.

Name

Short Interest Ratio

Week on Week % Decrease in Short Positions

NATIONAL STORAGE

4.9

-33.8

WHITEHAVEN COAL

2.6

-13.6

COCHLEAR LTD

4.4

-13.5

MESOBLAST LTD

24.3

-5.3

STOCKLAND

2.0

-4.9

SYDNEY AIRPORT

5.2

-4.8

MAYNE PHARMA GRO

5.1

-4.2

GUD HLDGS LTD

8.6

-4.0

MONADELPHOUS GRP

18.9

-3.5

JAPARA HEALTHCAR

7.7

-3.5

 

Insider Buying

Noticeable insider buying volumes in Sky City and Air New Zealand over the past month bode well for their upcoming earnings season.

TICKER

NAME

1 Month Volume Insider Buys

SKC NZ Equity

SKYCITY ENTERTAI

0.17

AIR NZ Equity

AIR NEW ZEALAND

0.07

MYO AU Equity

MYOB GROUP LTD

0.05

BTT AU Equity

BT INVESTMENT

0.04

FXJ AU Equity

FAIRFAX MEDIA LT

0.03

NAB AU Equity

NATL AUST BANK

0.02

RYM NZ Equity

RYMAN HEALTHCARE

0.02

TAH AU Equity

TABCORP HLDGS

0.01

 

Price v. Consensus Targets

Qantas and Estia Health do stand out as two interesting names trading well below consensus price targets. Both stocks have some of the highest free cash flow yields in the entire index. EHE’s FCF yield is 20.3%, while QAN’s is 18.6%, although EHE doesn’t pay dividends and QAN has only recently dipped its toes back into paying one off dividends. Austal also looks very compelling in enterprise value-to-EBITDA terms.

Stock Ticker

Name

Percentage Below Consensus Target Price

MSB AU

MESOBLAST LTD

-55.5

SYR AU

SYRAH RESOURCES

-31.2

GMA AU

GENWORTH MORTGAG

-30.4

QAN AU

QANTAS AIRWAYS

-25.6

ASB AU

AUSTAL LTD

-24.8

CVO AU

COVER-MORE GROUP

-24.1

EHE AU

ESTIA HEALTH LTD

-21.7

ISD AU

ISENTIA GROUP LT

-20.0

IPL AU

INCITEC PIVOT LT

-18.4

VRL AU

VILLAGE ROADSHOW

-18.1

 

The analyst community and the market are still at odds at the appropriate prices for many resources stocks. Monadelphous and Fortescue are trading way above their consensus price targets.

Stock Ticker

Name

Percentage Above Consensus Target Price

MND AU

MONADELPHOUS GRP

41.2

FMG AU

FORTESCUE METALS

33.0

BWP AU

BWP TRUST

32.7

WOR AU

WORLEYPARSONS

28.4

IGO AU

INDEPENDENCE GRP

25.3

RRL AU

REGIS RESOURCES

20.6

SHV AU

SELECT HARVESTS

20.4

WHC AU

WHITEHAVEN COAL

20.3

TME NZ

TRADE ME GROUP L

19.9

NVT AU

NAVITAS LTD

18.7

 

Momentum Stock Picks

Note: These momentum stock recommendations are based off backtested results looking at a 3-5 day holding period with a 5% stop loss on every trade.

SKI – (Buy)

Spark Infrastructure continues to make new highs, and as the heady rally in healthcare and technology stocks slows down rotation back into utilities may be a good bet.

CAR – (Buy)

Carsales.com has broken out above the Ichimoku cloud, and looks like it may be keen to retest some of the resistance around A$13.00.

MTR – (Buy)

Mantra Group has broken through technical resistance around A$3.65, and in a week where weak 2Q Australian CPI could see market pricing for an RBA rate cut pick up substantially, I like the idea of being long a stock that would be a key beneficiary of a lower Aussie dollar.

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