Trade call: Shorting AMP

My macro outlook is for yield to be bid at almost any price as return of capital remains king in the market.

Source: Bloomberg

However, with some concern around increased banking regulation and the falling oil price impacting yield growth, I am looking for plays with little- to-no exposure to these spaces.

AMP clearly covers these criteria - dividend growth at their upcoming earnings release is forecast to be strong as its wealth management and transaction income is bolstered by the state of the markets. In the current market conditions, AMP is a prime candidate for investment fund flows.

The key stats:

12-month forward P/E estimate: 15.4x

Estimated earnings per share in FY15: A$0.345

Underlying net profit estimates: A$1.0 billion

Yield growth 13.3% to A$0.28 for a net yield of 4.8%

12-month high $5.96 – 12-month low $4.11

Potential trade:

AMP has broken first resistance at $5.68. Momentum is strong and, coupled with the key stats, I believe it is likely to test and break through the next resistance level at $5.93. Buy at current prices putting a stop loss as $5.60 to mitigate a disappoint earnings read. I would look to trail my stops as the earnings read approaches. I see AMP moving through resistance and would look to exit at $6.50 – the 2010 resistance levels – as the yield trade added strong support to the share price.

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