The market has bounced – is it time to trim?

Markets have strengthened after last week’s volatility; the ASX200 closed down just 10 points on Thursday, to close at 7078, and is up an impressive 3.5% over 5 days. The rebound could be short-lived, however, as US social media behemoth Meta Platforms (formerly known as Facebook; FB.NAS) fell over 20% in the after market when it revealed a decline in fourth quarter profit. Meta is the 7th largest stock in the S&P500 and comprises nearly 2% of the index, so a decline of this magnitude could be painful for both tech and passive investors. With markets already a little jumpy, it could also affect sentiment.

Meta (aka Facebook) isn’t just a potential problem for those holding exchange traded funds; it is also a substantial holding for well known local fund manager Magellan Financial Group (MFG). Magellan has been under considerable pressure over the last two years as its core funds management products have underperformed the index, while the unexplained departure of CEO Brett Cairns late last year caused further concerns. MFG has fallen almost three quarters from its high, reached more than 12 months ago; it fell a further 7.5% on Thursday as investors considered the impact of Meta’s woes on its fund performance. Ordinarily a fall of this magnitude in a former darling would bring out the buyers; MFG was just the 20th most bought stock on nabtrade, which suggests interest is waning.

Magellan share price over 12 months (MFG)

Source: nabtrade

Wealthy trader favourite Fortescue Metals Group (FMG) has bounced on a resurgent iron ore price, and remains the most traded stock by value on nabtrade. Broadly the stock has been a buy below $20, and a sell above $20, although trading is very active. BHP (BHP) now comprises more than 10% of the ASX200, following its delisting from the London Stock Exchange; it surged 3.5% on Thursday and was heavily sold. Rio Tinto (RIO) also bounced, a more modest 2.5%, and was a heavy sell.

Afterpay shares are no longer listed on the ASX following its takeover by US payments giant Block (formerly Square, SQ.US). Australian investors have received an interest in ASX listed SQ2 (SQ2) but either sold their APT shares prior to the deal taking place, or have failed to trade in SQ2 since based on the low observable volumes. That has changed this week with SQ2 the seventh most traded stock on nabtrade on Thursday; SQ2 fell 9.75% following a 13% fall in the US-listed entity overnight which led to enthusiastic buying. Block shares are down nearly 50% over twelve months, as US tech stocks have been punished over the month of January. The ASX’s relative paucity of tech stocks has proved something of a buffer, although recent trader favourite Brainchip (BRN) continues to see plenty of action. Its share price rose more than 14% on Wednesday following the announcement of a new US patent, then fell nearly 10% on Thursday. 

Brainchip share price over 12 months (BRN)

Source: nabtrade

CSL (CSL), a huge buy around $250 as it approached 52 week lows last week, has remained in the buys below $260, while Westpac (WBC) has become a sell at close to $21.

While Tesla (TSLA.US) is consistently the most popular buy on international markets, others are looking for opportunity in tech. Roblox (RBLX.US) is a gaming platform familiar to the parents of pre-teens; it listed in March 2021 and gained as much as 100% before falling back to be currently trading just above its listing price. Nabtrade has seen small buys on weakness.

Roblox shares over twelve months (RBLX.US)

Source: nabtrade

Analysis as at 3 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. This article does not reflect the views of WealthHub Securities Limited.