Market rallies into the weekend

James Gerrish

Market Matters

The market was strong early putting on a quick +30pts between 11-12 despite the overnight weakness across international markets – as we often say, the market can’t go down when the banks are being bought and that was the case again today – the early gains were held for the rest of the session.  

One of the key themes that has been obvious during reporting season to date has the been the performance of the ‘dogs’ – companies that have been having a tough 12 months from a share price perspective are being bought aggressively into weakness as the market searches for ‘perceived value’ – Pact Group (ASX::PGH). A stocks on our radar an example today adding more than 7% while Nine (ASX:NEC) was also up a similar amount. Fund managers are clearly leveraged plays on equity markets and we’re seeing money flow into this area of the market – Perpetual (ASX:PPT) one of the main beneficiaries here during the week adding more than 10% and is now closing in on the ~$40 handle.

Reporting continues next week, although at a slower pace - QBE which is in in the Platinum Portfolio reports on Monday – they never seem to report well however they’re in a turnaround phase so we’re giving them the benefit of the doubt for now.  IVE Group (ASX:IGL) which sits in the income portfolio is also out with results, and while we don’t own it, Bluescope (ASX:BSL) is a stock worth watching – it’s clearly been on the nose for the past 12 months.

Overall today, the index closed up  +28pts or +0.46% to 6167. Dow Futures are trading down -15 points / -0.06%.

ASX 200 Chart

ASX 200 Chart

Reporting;  Another solid week of reporting with two massive days thrown in on Wednesday & Thursday – a slower docket today however we still saw some big moves play out from companies where the market was positioned on the pessimistic side of the ledger.

Funeral operator Invocare (ASX:IVC) +12% a case in point here rallying  hard as shorts scramble to exit. Nearly 13% of IVC was short sold, making it the 5th most shorted stock on the ASX. They had (before today) 14.5m shares sold short and to put that number into context, around 2.2m shares traded today.

InvoCare (ASX:IVC) Chart

Other stocks to do ‘less bad’ today were Automotive Holdings (ASX:AHG) +8.83% after reporting an underlying profit today that missed expectations while they also failed to declare a dividend – which is a prudent decision in my view. They had some big write downs however that had already been announced to the market, so not new news.  They also downgraded FY19  guidance for profit of $52-$56m down from $56-$59m however the market was already at $56m beforehand. Simply another example of a beaten down company finding some love after not reporting a disastrous result.

Automotive Holdings (ASX:AHG) Chart

Sectors this week

Stocks this week; Huge moves under the hood

Some of the stock specific events we covered during the week…

Is Wisetech (ASX: WTC) a wise investment after today’s slump?. Click here

IOOF jumps on a reasonable half year.  Click here

Market turns down the volume on Cochlear. Click here

Woolies doesn’t live up to the hype. Click here

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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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