Market stages impressive recovery (BHP, NWH)

James Gerrish

Market Matters

The market staged a huge recovery today, aggressive across the board especially from the morning lows where stocks turned up and went on with it. What a difference a day makes - CBA had a low of $65.75 before closing on the high at $73.37, Macquarie (MQG) opened $115.83 before closing at $126.55 while Costa (CGC) was probably the most impressive hitting a low of $2.37 early before closing up +12.13% at $3.05 – lots of other examples across the market as some pent up buying was unleashed.

SPI Futures were painting a bleak open for the ASX after the Dow Jones fell ~2000pts overnight, local futures traded down to a 5345 low overnight before rallying +620 points / 11.5% to close out at 5965, simply a massive move on the upside from the overnight trough.

News across Bloomberg this morning just before open that Trump was holding a press conference today on ‘ very substantial’ economic stimulus to counteract the virus, talks of cuts to payroll tax amongst other things while in China we saw President Xi Jinping tour Wuhan, a major vote of confidence in the region that added just 19 new cases overnight.

Locally there’s growing talk that our own Govt is also finalizing a fiscal package that is likely to be big and used to offset the financial impacts of the drought, the fires, and the virus. More on this to come. Oil stocks bounced back today after being taken to the cleaners yesterday with one fundie today calling the sector the ‘buy of the year’- I’m not in that camp but gee views / sentiment change on a dime. Markets were oversold and bounced hard, we could easily revert back tomorrow, however we’ll take a day like today and hopefully a few more.

One of the things that always amazes me in the market is how bearish we all can become but in a heartbeat, switch the other way…hard to see how things change so dramatically in either direction by such a quantum, but they do, and we need to live with it.

Asian markets were all higher today although less so than our own.

Based on the peak in SPI FUTURES just 13 trading days ago at 7148, the mkt dropped 1803 points / 25.22% to the overnight low of 5345, before closing today at 5965

At a sector level today, the financials saw the love followed by the other higher beta IT and Materials stocks. The defensives lagged

Overall, the ASX 200 added +179pts / 3.11% today to close at 5939 - Dow Futures are trading up +860pts/+3.60%

ASX 200 Chart

ASX 200 Chart


NRW Holdings (NWH) +12.57%: the contractor presented at the Euroz conference today combining with the broad based risk-on attitude helping the stock rip higher from its early session lows. The presentation reiterated why we like the stock – good cash conversion helping pay down debt, strong recurring revenue with growth and cost out measures as acquisitions come through.

The company talked up their current year’s outlook with the bulk of their $2b expected revenue secured, while FY21 has $1.8b already on board alongside a longer term pipeline of $10b. Recently we have seen Rio Tinto hint at increasing maintenance spend as their assets age and it appears to be a trend across the mining industry with NWH noting further demand in WA and Queensland in particular. We remain positive NRW, - a bit shaken from their recent volatility but like it none-the-less.

NRW Holdings (NWH) Chart

BHP Group (BHP) +6.17%: chairman Ken McKenzie was vocal at today’s AFR Business Summit, talking up the company’s ability to withstand shocks while capturing upside in recoveries. Particularly interesting was his attention to potential acquisitions as the miner looks to flex its balance sheet to leverage a rebound in growth.

SolGold appears to be a key target as BHP not so quietly builds a stake as attention turns to “future facing” assets – nickel in particular a key element in batteries among other things. BHP currently has around $US2b more in cash than it holds in debt, with plenty of headroom in terms of target leverage levels. It’s low cost position across the commodity deck puts it in a unique position to sustain profits in weakness. We recently added to our BHP position.

BHP Group (BHP) Chart


  • Mirvac Group Raised to Buy at UBS; PT A$3.49
  • Domain Holdings Raised to Buy at UBS; PT A$3.60
  • Raised to Neutral at UBS; PT A$15.65
  • REA Group Raised to Buy at UBS; PT A$110
  • Seven West Cut to Neutral at UBS; PT 12 Australian cents
  • Beach Energy Raised to Outperform at Macquarie; PT A$2.10
  • ARB Raised to Hold at Morningstar
  • Caltex Australia Raised to Buy at Morningstar
  • Credit Corp Raised to Buy at Morningstar
  • Breville Raised to Hold at Morningstar
  • Incitec Raised to Buy at Morningstar
  • Challenger Raised to Buy at Morningstar
  • Metcash Raised to Hold at Morningstar
  • Orica Raised to Hold at Morningstar
  • Origin Energy Raised to Buy at Morningstar
  • Cromwell Property Raised to Hold at Morningstar
  • Suncorp Raised to Buy at Morningstar
  • Sims Raised to Buy at Morningstar
  • Worley Raised to Buy at Morningstar
  • Seven Group Raised to Buy at Morningstar
  • Mineral Resources Raised to Buy at Morningstar
  • Technology One Raised to Hold at Morningstar
  • Orora Raised to Buy at Morningstar
  • Raised to Buy at Morningstar
  • Netwealth Raised to Hold at Morningstar
  • Afterpay Raised to Hold at Morningstar
  • Stockland Raised to Neutral at UBS; PT A$4.80
  • Altium Raised to Buy at Bell Potter; PT A$35
  • Caltex Australia Cut to Sell at Shaw and Partners; PT A$23.50

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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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