Expectations of a rate cut pushed out to September (ORE, JHG, MFG, CPU)

James Gerrish

Market Matters

A fairly disappointing performance from the market today given the positive leads we saw overnight while Asian markets were also in the green for the day. It seemed to be the markets interpretation of the RBA commentary yesterday as traders pushed out expectations for further rate cuts – now a full cut is not expected until September. That supported the currency (AUD @ 67.36) which ultimately put some pressure on stocks. The IT sector keyed off the strong leads from the Nasdaq overnight which traded to new all-time highs while the more interest rate sensitive utilities provided most drag.

Good to see the materials find some form with our Platinum Portfolio performing well today after a period of weak relative performance given our overweight skew towards the miners. Mining services company NWH won a nice contract and rallied +5% while Costa Group (CGC) has benefitted from more clouds on the longer distant forecast putting on nearly 6% - a good move.

Reporting season kicking up local with a reporting schedule available: CLICK HERE

Tomorrow we have reports from DXS, NCK & SSM. We hold SSM in the Platinum Portfolio.

Overall, the ASX 200 added +27pts / +0.39% today to close at 6976. Dow Futures are trading lower by -48pts/-0.18%

ASX 200 Chart

ASX 200 Chart


Lithium Stocks; were roaring today, with Orocobre (ORE) adding 18.95% closely followed by Pilbara (PLS) up 11.29% topping the leader board for the ASX. They have caught a bid post the Tesla result which shows somewhat of an electric vehicle buying trend kicking off. Today, however, the good news came from the UK with Boris Johnson announcing plans to bring forward petrol car sale bans from 2040 into 2035. While the ban has may years before its planned to start, it does highlight a shift in policy from all leaders globally in a push to lower carbon footprint. Certainly, lithium will be a key resource in the changes in cars, and general battery demand, however we have seen lithium run ahead of demand in the past we would be keen to buy on the backfoot.

Orocobre (ORE) Chart

Janus Henderson (JHG) -0.26%: Reported Q4 numbers overnight (and FY19) and the stock fell overseas however it was more resilient locally, closing only marginally down. Fourth quarter 2019 operating income was US$154.3 million compared to US$143.6 million in the third quarter 2019 and US$150.0 million in the fourth quarter 2018. Adjusted operating income, adjusted for one-time, acquisition and transaction related costs, of US$171.0 million increased 7% compared to US$160.2 million in the third quarter 2019 and increased 3% compared to US$145.3 million in the fourth quarter 2018. In terms of FUM, they did see outflows however it was largely confined to one big mandate loss of US$5bn following the change of a portfolio manager. Mandates like this are lower margin. Elsewhere, the business held up reasonably well relative to its current trading multiple of ~10x. The performance of their funds has also improved, and this should translate into better performance fees for 2020. All in all, a reasonable result.

Janus Henderson (JHG)

Magellan (MFG) +1.38%; traded to a new all-time high today after announcing total FUM for the group had gone through $100b for the first time. As at the end of January, Magellan had a total of $104b, up nearly 7% in the month as a result of both inflows and positive market moves. The bulk of the FUM growth came from institutional investors in the period. The beast continues to grow with little sign of slowing down. If the market can continue to catch a bid, MFG will be dragged higher with it as the stock looks set to breakout.

Magellan (MFG) Chart

Computershare (CPU) +1.06%; announced the acquisition of small US based registered agent business Corporate Creations as it looks to further its offering in the US. The CEO trumpeted the move, saying it would allow Computershare “to deliver an enhanced and integrated product suite and improved service proposition” to potential US clients. Corporate Creates current service over 14k entities in the US with revenues of $US35m. Computershare will pay around $US143m in the deal, with the acquisition expected to be EPS accretive from the first year of integration. We like Computershare and own it in the Platinum Portfolio.

Computershare (CPU) Chart

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James Gerrish
Portfolio Manager
Market Matters

James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

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