The Match Out: ASX consolidates recent gains, Video update covering portfolio performance

James Gerrish

Market Matters

A day of consolidation following a 2.5 day bounce that saw the ASX up an impressive ~6%. Energy the standout sector today with OPEC production cuts supporting prices while Utilities bounced back 1.08% after having been the weakest sector in September, down a whopping 13.8%.

  • The ASX 200 finished up +2pts/ +0.03% at 6817
  • The Energy sector was best on ground (+2.21%) while Utilities (+1.08%) & Materials (+0.49%) were also strong.
  • Real-Estate (-0.87%) and Consumer Discretionary (-0.77%) the weakest links.
  • Appen (ASX: APX) -11.71% hit on yet another downgrade – why do they bother issuing guidance, they have no idea where earnings are going to land.
  • Magellan (ASX: MFG) -8.43% fell as FUM dropped to $50.9bn at the end of September, less than half of what it was (~$118bn) in its heyday.
  • Interesting to think about respective performances here, a year ago, Whitehaven Coal (WHC) was around $2.50 while Magellan (ASX: MFG) was ~$38 – today they closed within 29c of each other in the mid $10’s…
  • Lithium stocks on a tear again – Pilbara (ASX: PLS) + 5.68% to new all-time highs, ditto for IGO that added 1% and closed at $15.18.
  • Megaport (ASX: MP1) +2.35% is a stock we’ve recently bought, higher risk, not profitable however we think the $10-11 is very achievable into Christmas if the market holds together and US inflation data behaves come 13th of October.
  • Harry & James provided an update on portfolio performance for September – a tough month however transparency in good and bad times is very important to MM – Watch Here
  • Coal stocks trade to new highs – Whitehaven (ASX: WHC) at $10.49 – astonishing – Coal prices however have started to pull back, November Futures now $US405 down from US$450
  • Iron Ore was flat in Asia – resilient however we’re more cautious around current prices.
  • Gold was down overnight then bounced US$7 in Asian trade today, settled $US1724 at our close.
  • Asian stocks were okay Hong Kong flat & Japan +1%.
  • US Futures are all up, around +0.60%

ASX 200 Chart

Weekly Video Update – Portfolio Performance for September

Equities struggled in September on the back of global recession fears and an increasingly hawkish US central bank. The MSCI Developed Markets Index fell 8.3% while the US S&P 500 was worse, dropping 9.2% in local currency terms. Australian stocks were down but outperformed global peers. The S&P/ASX 200 fell 6.2% over the course of the month, as investors priced in the most aggressive RBA rate hiking cycle since the 1990s. There was carnage in bond markets as they reflected an increasingly hawkish outlook, the Australian 10-year yield hitting 4.10%.

Over the pond, US yields rose 67bps to 3.80%, driven by better-than-expected economic data firming expectations around future interest rate hikes.

Commodity prices fell in September, Brent Oil prices declined US$9 to US$88/bbl amid concerns of slower global growth. Iron Ore prices held up relatively well, off just US$1 to US$98/Mt while gold prices were hit by continued strength in the US dollar, bullion down US$44 to US$1,672.

Locally, the material sector was the top relative performer down by ‘only’ 2.3% for the month, while Energy -3.8%, Healthcare -4.4%, Consumer Staples -5.4% & Communication Services -6.1% did better than the broader market. The underperforming sectors included Financials -6.5%, Consumer Discretionary -9.1%, Industrials -9.8%, IT -10.6%, Property -13.6% and Utilities -13.8%.

Discussing performance in this type of environment is never nice, however, we base our service on transparency through the ups and the downs, and today we cover the outcomes achieved by our published portfolios in September:

  • Flagship Growth Portfolio: -5.37%
  • Active Income Portfolio: -3.22%
  • Emerging Companies Portfolio: -9.21%
  • International Equities Portfolio: -2.14%

NB: Flagship Growth Portfolio has recouped the Sep decline sitting +6.28% for October to date.

Appen (ASX: APX) $2.94

APX -11.71%: the digital marketing AI company fell below $3/sh for the first time since 2017 today following a downgrade to guidance. Just 6 weeks ago the company was talking to a stronger second half, though revenue was still expected to fall short of FY21 levels. Today, the company said conditions had failed to improve as expected and further uncertainty remains into the end of the year, providing guidance of $US375-395m for revenue, ~14% below FY21 and 5% below consensus. Margins have also been impacted with a lower portion of sales coming from high-margin work. It’s been a challenging period for Appen with EBITDA now expected to fall 80% in a year and digital ad revenue going backwards.

Broker Moves

  • HomeCo Daily Rated New Buy at Moelis & Company; PT A$1.48
  • Link Administration Raised to Buy at CLSA; PT A$4.02
  • Resource Development Group Rated New Buy at Bell Potter
  • Medical Developments Reinstated Speculative Buy at Bell Potter

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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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