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Top ASX Stocks to Watch

The early results from earnings season are unsurprisingly having a big influence on stocks returns.

bg_australia 03
Source: Bloomberg

Credit Corp (CCP) and Downer EDI (DOW) both had upside earnings surprises, which helped them see the best two weekly performances. Seven West Media’s full-year results saw the opposite reaction, with the stock crashing after SWM warned of a 15-20% fall in FY2017 earnings. DOW’s better-than-expected earnings also helped see buying in its competitor Monadelphous Group, which continues to rally despite being the eighth most shorted stock in the index.

NAME

5 Day

1 Month

YTD

NAME

5 Day

1 month

YTD

CREDIT CORP GRP

18.4

33.0

55.1

BWP TRUST

-4.4

0.5

18.6

DOWNER EDI LTD

13.9

27.7

37.0

BLUESCOPE STEEL

-4.6

25.5

82.9

BELLAMY'S AUSTRA

12.6

29.4

-2.0

APA GROUP

-4.6

6.3

9.4

SEVEN GROUP HOLD

11.5

37.7

43.1

HEALTHSCOPE LTD

-4.7

3.7

7.5

COVER-MORE GROUP

10.2

23.8

-30.8

G8 EDUCATION LTD

-4.9

-1.4

5.5

WHITEHAVEN COAL

10.1

73.4

165.0

LINK ADMINISTRAT

-5.2

5.8

9.9

MONADELPHOUS GRP

9.1

52.8

81.2

SAI GLOBAL LTD

-5.3

-7.2

-17.9

ST BARBARA LTD

9.0

6.8

130.2

SPARK NEW ZEALAN

-5.6

10.3

18.0

GENWORTH MORTGAG

8.5

20.8

23.3

PROGRAMMED MAINT

-7.3

6.1

-18.2

WESTERN AREAS LT

8.4

43.7

32.1

IPH LTD

-7.5

-4.5

-28.9

INDEPENDENCE GRP

7.5

35.0

70.1

REA GROUP LTD

-7.8

1.9

10.0

SARACEN MIN HLDG

6.4

25.9

199.2

NAVITAS LTD

-7.9

2.4

19.5

SANTOS LTD

6.2

-0.4

28.7

IRON MOUNTAI-CDI

-8.6

-0.1

#N/A N/A

EVOLUTION MINING

5.7

21.1

115.6

NINE ENTERTAINME

-10.0

-6.2

-45.5

FLEXIGROUP LTD

4.5

18.1

-28.6

SEVEN WEST MEDIA

-21.7

-25.0

8.6


Market Internals

Market internals have reversed their downward course just as the ASX began to catch some buying again after it dropped below the 5500 level. The percentage of companies above the 50-day moving average continues at an elevated 77.5%.

Sector Performance

Only the energy and materials sectors ended in positive territory for the week. The spot oil price looks like it may have corrected last week after seeing a 20% decline from its recent highs. With the outlook improving for the spot oil price, investors were keen to jump back in and start picking up energy names again.

Sector

5 day

1 Month Return

YTD Return

IT

-1.8

1.3

-4.2

Utilities

-2.1

3.2

13.9

Healthcare

-2.7

4.9

11.9

Industrials

-1.9

3.9

12.5

Financials

-1.6

6.1

-4.3

Consumer Staples

-0.8

6.8

-0.1

Telecoms

-2.1

1.6

3.1

Materials

1.4

4.1

24.8

Consumer Disc.

-1.9

7.8

10.6

Energy

2.0

1.4

4.8

ASX Index

-1.2

5.1

3.8

 

Factor Performance

Small Caps continue to dominate the comparative factor performance for listed Australian firms. And the factor rotation continues apace with comparatively poor performances in both infrastructure and high yield, which have previously performed quite well.

Factor

5 day

1 Month Return

YTD Return

Value

-0.8

6.5

8.7

Risk Weighted

-1.3

5.2

15.5

ESG

-1.5

6.0

5.4

Momentum

-1.3

3.3

22.0

Quality

-1.1

4.8

13.7

High Yield

-0.9

2.5

4.8

Minimum Volatility

-1.4

5.1

14.6

Small Caps

-0.3

6.6

22.1

Infrastructure

-2.0

3.2

17.4

MSCI Australia

-1.1

5.8

9.6

 

Short Positions

Flight Centre and MYOB both have more than 23% of their entire free float of shares taken up by short positions. Even though a number of commodities-related stocks have been rallying of late, investor sentiment in WorleyParsons, Monadelphous, and Western Areas is still very negative, as shown by the still large short positions in these stocks.

Name

Percentage of Float

Short Interest Ratio

FLIGHT CENTRE TR

23.8

44.8

MYOB GROUP LTD

23.1

49.0

WORLEYPARSONS

19.1

18.5

MYER HOLDINGS

16.4

27.3

METCASH LTD

13.8

26.8

COVER-MORE GROUP

12.9

33.6

TPG TELECOM LTD

12.8

20.8

MONADELPHOUS GRP

11.9

13.6

WESTERN AREAS LT

11.8

17.0

BELLAMY'S AUSTRA

11.5

12.5

 

Price Target Premiums

The materials and energy sector dominates the stocks trading at large premiums to their consensus price targets. Popular shorts, MND, WSA and WOR all make appearances in the top ten.

Stock Ticker

Name

Percentage Above Consensus Target Price

MND AU

MONADELPHOUS GRP

80.4

RRL AU

REGIS RESOURCES

29.4

WSA AU

WESTERN AREAS LT

24.9

WHC AU

WHITEHAVEN COAL

24.4

SAR AU

SARACEN MIN HLDG

24.1

IGO AU

INDEPENDENCE GRP

23.8

FMG AU

FORTESCUE METALS

22.5

SPK NZ

SPARK NEW ZEALAN

22.1

BWP AU

BWP TRUST

21.6

WOR AU

WORLEYPARSONS

19.6

 

Value Screens

Tobias Carlisle’s Acquirer’s Multiple, which is a firm’s enterprise value divided by EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) minus capital expenditure. While familiar disliked names in the index show up, such as MND, FLT, DOW, Seven West Media (SVM) is now showing up as the third most compelling stock in this valuation metric. When a stock has a massive earnings-driven selloff and begins screening up in the valuation screens, then that is often a strong signal that a 10% rebound in the price could be imminently on the way.

Stock Ticker

EV

EBITDA-Capex

Acquirer's Multiple Score

MONADELPHOUS GROUP LTD

894.0

164.5

5.4

AUSTAL LTD

371.8

67.9

5.5

SEVEN WEST MEDIA LTD

1937.5

319.7

6.1

FLIGHT CENTRE TRAVEL GROUP L

2071.4

340.4

6.1

DOWNER EDI LTD

2276.9

332.2

6.9

METCASH LTD

2339.4

330.0

7.1

OZ MINERALS LTD

1384.4

187.3

7.4

SANDFIRE RESOURCES NL

942.4

126.2

7.5

MCMILLAN SHAKESPEARE LTD

1416.0

184.8

7.7

SIMS METAL MANAGEMENT LTD

1267.9

157.4

8.1

 

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.

DOW – (Buy)

The very low expectations for Downer EDI’s FY2016 earnings were surpassed last week, and given the still very low valuation metrics on the stock, it looks like it can almost only move higher over the next twelve months.

Angus_chart_080816_1

SWM – (Buy)

After a dramatic earnings related selloff, Seven West Media looks to have found support and bounced off the A$0.76 handle. The stock has also begun to show up on the valuation screens, and from these levels the risk-reward for the stock looks very compelling.

Angus_chart_080816_2

Denne informasjonen er utarbeidet av IG, forretningsnavnet til IG Markets Limited. I tillegg til disclaimeren nedenfor, inneholder ikke denne siden oversikt over kurser, eller tilbud om, eller oppfordring til, en transaksjon i noe finansielt instrument. IG påtar seg intet ansvar for handlinger basert på disse kommentarene og for eventuelle konsekvenser som et resultat av dette. Ingen garanti gis for nøyaktigheten eller fullstendigheten av denne informasjonen. Personer som handler ut i fra denne informasjonen gjør det på egen risiko. Forskning gitt her tar ikke hensyn til spesifikke investeringsmål, finansiell situasjon og behov som angår den enkelte person som mottar dette. Denne informasjonen er ikke utarbeidet i samsvar med regelverket for investeringsanalyser, så derfor er denne informasjonen ansett å være markedsføringsmateriale. Selv om vi ikke er hindret i å handle i forkant av våre anbefalinger, ønsker vi ikke å dra nytte av dem før de blir levert til våre kunder. Se fullstendig disclaimer og kvartalsvis oppsummering.

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Denne informasjonen er utarbeidet av IG, forretningsnavnet til IG Markets Limited. I tillegg til disclaimeren nedenfor, inneholder ikke denne siden oversikt over kurser, eller tilbud om, eller oppfordring til, en transaksjon i noe finansielt instrument. IG påtar seg intet ansvar for handlinger basert på disse kommentarene og for eventuelle konsekvenser som et resultat av dette. Ingen garanti gis for nøyaktigheten eller fullstendigheten av denne informasjonen. Personer som handler ut i fra denne informasjonen gjør det på egen risiko. Forskning gitt her tar ikke hensyn til spesifikke investeringsmål, finansiell situasjon og behov som angår den enkelte person som mottar dette. Det er ikke utarbeidet i samsvar med lovens krav for å fremme uavhengighet av investeringsanalyse og som sådan er ansett av å være markedsføringskommunikasjon. Selv om vi ikke er hindret i å handle i forkant av våre anbefalinger, ønsker vi ikke å dra nytte av dem før de blir levert til våre kunder.