The Match Out: ASX down a touch, Commodity stocks rally, Retail & Tech drag, CS upgrades AGL - stock rallies

James Gerrish

Market Matters

It was actually an interesting trading session today at the stock level despite the index finishing little changed. The high value (tech & others) were sold off fairly hard this morning before most bounced while there was also some aggressive buying in some of the ‘dogs’ of 2021, a strategy that often pays dividends – commonly called the ‘Dogs of the Dow’ where investors buy the underperformers of the past 12 months.

  • The ASX 200 fell ~6points / -0.08% to 7447.
  • Materials (+1.36%) and Energy (+1.11%) the main positive driver today offset by weakness in the retailers (-1.27%) & IT stocks (-0.96%) although the latter improved during the session.
  • On the economic front, the ABS said residential building approvals dropped 7.7% in November from a year earlier while private-sector homes declined an annual 8.1%. Labour shortages biting through the period.
  • AGL Energy (AGL) +8.6% rallied after Credit Suisse upgraded to a buy equivalent and $8.50 PT – we own AGL in the Income Portfolio with the position now up nearly 30%.
  • Magellan (MFG) +6.74% also rallied although this is a stock we bought at higher levels and at ~$20.60 we still have some way to go, but the mkt has turned too bearish we think and we’ll continue to hold our nerve here. I was told many moons ago to back intelligence and despite Hamish Douglas having his back to the wall I still think this is in tact.
  • Whitehaven (WHC) +5.09% was up on coal price strength – Indonesia cutting coal exports due to domestic shortfalls. Front month coal futures (Jan 22) now $US196/tonne up from $US157/tonne a week ago. Last time coal prices were there (and on the up) was at the end of Sep21 with WHC ~$3.10 versus todays close of $2.89.
  • Uranium is also starting to move higher + ditto for Crude. We like the energy sector here and for those without exposure, we would advocate getting some.
  • The large cap miners continue to perform, BHP +2.4% & Fortescue (FMG) +1.33% although that did come off earlier highs above $21. We remain long both in our Growth Portfolio however as highlighted this AM, Iron ore has rallied over 40% from its panic November low and we are now approaching our target area for the bulk commodity making us adopt a more conservative stance. We are more bullish BHP than FMG at current levels – BHP having been depressed artificially from the looming unification of listing structure.
  • Iron Ore was down 2% in Asia today.
  • Gold was also a touch lower but nothing significant – trading US$1792 at our close.
  • Asian markets a mixed bunch, Nikkei in Japan a shade lower (-0.14%) while Hong Kong & China were both up – the Hang Seng in HK the star up +0.75%.
  • US Futures are muted – Dow Futures down a touch, S&P + Nasdaq trading higher.

ASX 200 chart

Broker Moves

  • AGL Energy Raised to Outperform at Credit Suisse; PT A$8.50

Major Movers Today

Enjoy your night
The Market Matters Team

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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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