Flight Centre lands in a heap

James Gerrish

Market Matters

I felt like I was one of only a handful in the city today with the Easter School Holidays overlapping ANZAC Day and creating the perfect excuse to take or extend holidays. The market reflected it with the index closing flat. Gold stocks did well today on the back of a positive gold price overnight + they’d all been hit fairly hard in recent months. Evolution (EVN) +3.13% Saracens (SAR) +5.47% now looking bullish while Newcrest (NCM) +2.42% has bounced higher without pulling back into our ~$24 target. We’ll take a deeper dive into Gold in a note soon…

Resources have now pulled back from recently frothy highs – BHP -1.57% today to $37.60 while Fortescue (FMG) -5.39% to $7.19, the heat really coming out with the index being flat - banks doing some of the lifting. Quarterly reporting is currently underway in the US and overnight there were some interesting / bullish comments from US Iron Ore miner Cleveland Cliffs (CLF.US) as they beat 1Q19 earnings expectations…the CEO saying there is a massive shortage of iron ore and pellets in the international markets, also with winter out of the way, "we enter the three strong quarters of a 2019 that is shaping up to be another multi-year high in adjusted EBITDA," says Chairman, President and CEO Lourenco Goncalves, citing "robust manufacturing activity in the U.S., stimulated by a still under-appreciated tax reform and a massive shortage of iron ore and pellets in the international markets." A bullish update which implies the pullback in the Iron Ore stocks in the last week or so will ultimately present a buying opportunity…certainly an area to keep a close handle on.

Overall today, the ASX 200 added +3pts or +0.05% to 6385. Dow Futures are trading flat…

ASX 200 Chart

ASX 200 Chart


Flight Centre (FLT) –11.70% to close the day at $39.00 down about the same quantum as its earnings downgrade so the market giving them the benefit of the doubt and not-rerating the P/E lower as well. The corporate business still doing well however the retail operation is struggling. The stock traded between a low of $38.22 and a $39.87 high before closing mid-range. The decline in earnings shows how tough the Aussie consumer is doing which is why we’re now talking about interest rate cuts locally. We think it gets worse before it gets better for FLT and have no interest here.

Flight Centre (FLT) Chart

Stocks we own on the move; Healius (HLS) +1.67% closed at $3.05 and has now broken out – the stock trading like it’s got some positive news bubbling away in the background while on the flipside, PactGroup (PGH) is trading poorly, down -1.54% and near the lows of the day. As we suggested this AM, we remain keen on Resmed (RMD) for new highs and it was up again today +1.25% while our other health related exposure NiB (NHF) also had a decent session adding +1.21%.

On the Income side, Perpetual (PPT) was weak after a downgrade from Bell Potter to sell, the stock off -2.81% however after trimming our weighting here recently, we remain comfortable – not a lot else happening in that portfolio today.

Sectors this week;

Stocks this week;

Broker Moves;

• Perpetual Downgraded to Sell at Bell Potter; PT A$35.17

• Netwealth Downgraded to Hold at Bell Potter; PT A$9.91

• CYBG GDRs Downgraded to Hold at Bell Potter; PT A$4.35


No changes today

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James Gerrish
Portfolio Manager
Market Matters

James is the Lead Portfolio Manager & primary author at Market Matters, a digital advice & investment platform with over 2500 members that offers real market intel & portfolios open for investment. He is also a Senior Portfolio Manager at Shaw and...

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