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The biggest week of reporting season so far, with several of Australia’s largest companies giving updates, has ended roughly flat, with the ASX200 up just 0.1% and the All Ordinaries index down 0.27% over five days. Despite the underwhelming headline performance, there has been significant price action beneath the surface, as investors digest the impact of Covid lockdowns and reopening as well as rising commodity prices on their favourite stocks.
Those finishing the week on a high were the many enthusiastic buyers of CSL Limited (CSL) prior to its results on Wednesday. The CSL share price has been under sustained pressure as the market feared its plasma collections would continue to contract in the face of the Omicron variant, reducing supply and impacting revenue into the second half. On nabtrade, investors have been huge buyers of CSL below $250 this week, with an average buy price of $244 on Monday and $241.96 on Tuesday. Wednesday’s results announcement, despite being lower than the previous comparative period, beat expectations and saw an 8% pop in price, followed by a further 5% rise on Thursday. A small number of investors sold into the rally, while others jumped on the trend reversal.
A safer bet for seasoned traders has been the iron ore price. At $US142 a tonne at the time of writing, it continues to defy expectations, and remains well above both its long run average price of roughly $US60, and above the cost of production (which for the larger producers in Australia has been as low as $20 a tonne). BHP (BHP) delivered a strong half yearly result on Tuesday, in addition to announcing a $US1.50 a share dividend. nabtrade investors have been strong buyers in BHP, hopeful that Macquarie’s price target of $54 is in sight. Fortescue Metals Group (FMG) remains a favourite for high value traders, but is suffering from increased costs resulting in a 30%+ drop in profits. With a dividend reduced from $1.47 to 86c, long term investors may be less enthusiastic on the stock, but traders enjoyed the 4.5% fall in the share price and jumped on board.
Bunnings and Kmart owner Wesfarmers (WES) released its half yearly results on Thursday; the impact of lengthy lockdowns in NSW and Victoria, as well as staffing and supply chain constraints imposed by the rise of the Omicron variant. Profit fell 14%, and even Bunnings was not immune, with earnings in that part of the business down 1% (compared to the combined Kmart/Target earnings down 55%). The half yearly dividend was cut by 9%. The market was vicious in its response, dumping the stock to send it down 7.5%. nabtraders were enthusiastic buyers on the dip.
Also under pressure on Thursday was old faithful Telstra, which disappointed the market with a 4% decline in revenue and a 14% decline in EBITDA. Despite the maintenance of an 8c per share fully franked dividend, the market was not impressed, and sent the shares down over 4% on the day. Nabtrade investors continued their contrarian philosophy and bought the stock. Telstra shares are up nearly 20% over twelve months, significantly outperforming the ASX200.
On international markets, Tesla (TSLA.US) remains a popular trade, Apple (APPL.US), Meta Platforms (FB.US, formerly Facebook) and Microsoft (MSFT.US) have recently returned to the top of charts. While trading in Apple is mixed, Meta is a strong buy – but Apple trades are more than 4x larger.
Analysis as at 17 February 2022. This information has been provided by WealthHub Securities Ltd the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 (NAB). Whilst all reasonable care has been taken by WealthHub Securities in reviewing this material, this content does not represent the view or opinions of WealthHub Securities. Any statements as to past performance do not represent future performance. Any advice contained in the Information has been prepared by WealthHub Securities without taking into account your objectives, financial situation or needs. Before acting on any such advice, we recommend that you consider whether it is appropriate for your circumstances.