What Mattered Today; Have the Telco's bottomed?

James Gerrish

The market regained its mojo today thanks to a more upbeat move in global equities overnight – fewer tweets / headlines from Trump and what seemed to be more sensible rhetoric from the House Speaker Paul Ryan… “We are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan. The new tax reform law has boosted the economy and we certainly don’t want to jeopardize those gains,” said AshLee Strong, a spokeswoman for Ryan, the top Republican in the House.

As we wrote this AM, it seems the market is betting against Trumps tariffs and that theme was obvious in the market today. The other obvious thematic playing out was around sector strength / rotation even through all sectors ended the day higher. Resources were bid up strongly on open yet sellers emerged into strength and they closed well off the daily highs, while the beaten up Telco’s led the charge for a second straight session showing rare form on down days + when the buyers are about. Perhaps the TLS low post dividend under $3.30 is now in place?

On the data front today we had a weaker than expected Retail Sales number out in the morning, while the RBA kept rates unchanged at 2.30pm this afternoon. That led to a choppy day for the currency

Aussie Dollar Chart

Overall, the S&P/ASX 200 Index finished 67 points higher to 5962 points - a rally of 1.14% - green right across the sector landscape today.

ASX 200 Chart

ASX 200 Chart

CATHCING OUR EYE

1.Vocus (VOC) $2.40 / +6.19%; A rare day in the sun for the struggling Telco with news that the current Deputy Chairman Bob Mansfield would step up into the Chairman’s roll replacing Vaughan Bowen. This comes in the same week they chopped CEO Geoff Horth to round out the ‘ridding’ of the M2 management that floated to the top after Vocus bought them. There was a lot of criticism in the market around Geoff at the time he emerged in the top job – basically M2 was a marketing company whereas Vocus was the network. Vocus took them over but M2 was ultimately a bigger business. The Vocus side (in our humble opinion) where the intelligent ones but the M2 side floated to the top and unfortunately the share price floated to the bottom. Now, the M2 side is largely out which would (our view only) open the door for a re-emergence by James Spenceley…We’ve had a poor history with VOC however could this be the tipping point (low) for the stock? Keep it on the radar. We do not own VOC.

Vocus (VOC) Chart

2.IOOF (IFL) $10.78 / +2.57%; A stock we own in the Platinum Portfolio has been written up as Credit Suisse’ top pick amongst diversified financials….they reckon that exposure to growth in independent advice market through its advice and platform offering and increased penetration in the Australia and New Zealand customer base via the ANZ Wealth acquisition make IOOF their pick. They have a target of $12.10 for the stock. We’re slightly less optimistic targeting a move back up to the top of its trading range - just shy of $12.

IOOF (IFL) Chart

Have a great night

James & the Market Matters Team

The above is an extract from the Market Matters Weekend Report. For a free 14 day trial of our service CLICK HERE

Disclaimer


James Gerrish

James is a Portfolio Manager within Shaw and Partners heading up a team that manages direct equity and option portfolios. He is also the Primary Contributor to Market Matters, a daily investment report that offers real market insight.

Expertise

ASX;VOC ASX;TLS

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