Weak leads from overseas markets this morning saw our market open softer however as is often the case in the second part of December, the buyers stepped up and pushed the market into the black, with a close near the highs. As we wrote this morning, historically buying any early intra-day weakness in the last 2 weeks of December has usually paid dividends for aggressive traders.
So far this December the ASX200 has traded in a 142-point range from 5938 to 6080 and has now rallied closed up 105-points / 1.76% for the month, let’s compare this to relevant statistics:
- Since the GFC the average range for December is 335-points with the lowest coming in at 254-points.
- The average monthly range in what’s been a very low volatility 2017 is 201-points with the smallest of 138-points.
- The average performance for the ASX200 in December since the GFC is 2.5% which targets 6120.
Based on the above, there is no change to the view of MM with a 6125-6150 target area to say goodbye to 2017 and if it gets there, we’ll be net sellers looking to increase cash ahead of January which is often a weaker month.
ASX 200 Seasonality
On the market, the retailers were well bid today adding +0.65% collectively although Myer was weak and closed on its lows. Two things happened this me this afternoon in this space. We have Secret Santa tonight with my wife’s family – always good and this year I was drawn to buy for the Mother in Law, Ros. In the lift this afternoon with two girls from the office, I said PJs as my present idea and both instantly said Peter Alexander (BUY PMV). I bought these at Myer but again for 5 days before Christmas it was extremely quiet and I had not 1, but 2 highly frustrating sales assistants try to wrap said PJs with no sticky tap, scissors (or any real idea how to wrap something). Now I’m the first to acknowledge my own short comings, and there are plenty of them, with wrapping high on the list but this was laughable. The only saving grace was there was no one in the line behind me while the debacle played out. (SELL MYR)
ASX 200 Intra-Day Chart – good rally from early lows
PORTFOLIO TARGETS – the below targets are a guide only and are fluid depending on market moves in aggregate, however they provide an insight into our thinking at this current stage. Our overarching view is that we’ll increase cash in both portfolios on a mkt move to our targeted region of 6125/6150 in December so we have some cash around to take advantage of any weakness that often plays out in Jan , however we will make specific stock calls at that time. Alerts will be sent as usual during the Christmas period, and the full service will re-commence on January 8th with our 2018 outlook piece.
1.Webjet (WEB) $10.52 / 3.75%; Copped an upgrade from UBS overnight which spurred some buying today. They upped to BUY with a $12.60 price target, saying that a FY19 expected PE of 14.1x and earnings growth of 11% for the next few years looks attractive. So, cheaper than the market + better growth. WEB is on 23x FY18 however that drops substantially in FY19 and the mkt will start to look at the outer years, and get more positive on the stock. We own from $9.54. Webjet Daily Chart
2. Ardent Leisure (AAD) – News today that Ardent had received an unsolicited bid for their Bowling and Entertainment Division at a huge multiple (27x EBITDA) saw the stock up strongly. Once they sell this part of the business for A$160m, the company will concentrate on Theme Parks post the Dreamworld tragedy and their Main Event business. They recently sold off their Marina’s and AAD now have a very strong balance sheet for growth, they just need someone good to run the Main Event business after the recent revolving door. Ardent Leisure Daily Chart
Retail Food Group (RFG) pummelled again and this stock is looking terrible – clearly investors just getting out at any level and buying the dip here has been painful for some. The falling knife has kept falling. The aggressive in the selling has been intense and even today when it looked to find support on the open, the selling just kicked in again and the stock fell another 17%. Now down from ~$4.50 to $1.625 in a week or so.
**Today’s report will be the last for 2017 returning on the 8th January with out 2018 Outlook peice. 2017 has been a big year for Market Matters, we hope you’ve enjoyed and more importantly benefitted from the service. At times delivering a morning, afternoon and income report + email and text message alerts can be draining, but we thoroughly enjoy the markets and are very passionate about presenting our views to the MM community. Thank you to our subscribers, particularly those that have been with us over the long term, and we welcome all our new subscribers in 2017. We will continue to enhance and improve our offering in 2018 and look forward to writing to you early in the New Year. Merry Christmas from our family to yours and here’s to a prosperous 2018 – James & the Market Matters Team**
Prices as at 20/12/17
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.