The Market Wrap Wed 21-4-10

By Jason Fittler

5000 points for the ASX 200 is this a new start?

Last week we saw the ASX 200 and the Dow Jones hit 2 year highs. The ASX 200 closed above 5000 points and the Dow Jones above 11000 points. This certainly sent a signal that the market is starting to recover. The US markets are currently into reporting season with some good results starting to come through.

Breaching the 5000 level is a good indicator that our market is more likely to hit the upside target for this year being 5400. This will give investors another 10% upside from the current levels, couple this with the high sustainable dividend currently being offered by the blue chips and 2010 will be a very profitable year indeed.

What to do!

At this stage the rally has been led by the blue chip stocks, small caps are clearly lagging the recovery and the second tier stocks have only started to move over the past couple of months.

If you are sitting on cash I would take any opportunity to buy into the market; that is if the market does pull back to around 4700 points buy into the majors such as banks, mining, insurance and retail.

If you already have sufficient blue chips start looking into the second tier market. My key picks are in the insurance (SUN), property, infrastructure and energy. These stocks are paying high yields and have plenty of upside left.

In regards to the small caps I think that they still have some time before they run, but if you are fully loaded on the above stocks then there are some small cap stocks which have good potential from here.

Take profits

For those who were buying from the March 09 lows and are now sitting on some nice profits, lock these in. Do not sell out your entire holding but make sure you take some profits as the market will remain volatile for some time yet. 

The Market Wrap 7-4-10

Are we heading to new highs?

By Jason Fittler

The best part of writing a weekly newsletter is that everything is in writing. Which means you the client can go back and see if what I said has been right or wrong. All of my newsletters can be obtained online. So if you would like to keep me honest please go back and read through them.

Today we are back to the recent highs in the market, as you can see for the above chart the market has moved back above 4900, the Reserve Bank has lifted rates again this month in an effort to make the economy slow down. Major Banks have followed suit, bad for those with large mortgages, but great for us who hold their shares. This is all pointing to a more positive economy here in Australia.

What is more heartening is that our major blue chip companies are now forecasting good earnings moving forward and the market agrees with their figures. From here I expect that we will see the market move closer to 5200 in the next 6 months. This will mean another positive year for the market; we are slowly clawing back the losses of the previous years.

The other positive news is that the US market is also recovering. This indicates long term we should see our market hit new highs.

Do not become to euphoric, the market will still have its dips as it is still fragile but I do expect to see higher lows (being above 4500) on the dips. Right now I am focused on the second tier stocks such as Fortescue Metals and Suncorp; this is where the higher growth should come from over the next 12 months.

The Market Wrap Friday 19th March 2010

The next stage of the market.

By Jason Fittler

You may or may not be aware but on the 09/03/2010 we had the anniversary of the bottom of the market.

Our market bottomed at 3150 we are now back to 4800 a gain of 52% over the past 12 months.

My guess is that the market bottom is still very clear in your mind; it is hard to believe that 12 months has past.

We are fast approaching the third anniversary of the market top of 6800 on the 31/10/2007.

When you see big movements in the markets such as these there are many opinions as to where the market is going to from here, unfortunately this is generally based on fear or past history. What we do know is that there are always stages of recovery of any market, I believe that we are about to enter the next one.

1. Stage One of the recover is a large bounce back. This has happened starting in March 2009 and finishing in October 2009. During this stage good gains can be made by those who have the risk profile to buy into the market.

2. Stage Two you start to see the market consolidate, good companies restructure themselves and re capitalise themselves, this process has been going on for the past 6 months and is highlighted by the sideways movement in the market. As per the below chart you can see that the market has stayed in a trading range of between 4500 and 4800 over this period of time.

During this time you have the opportunity to buy quality blue chip stock paying large dividends at below fair value. This is the time to build a good long term portfolio. There will still be opportunities to do this over the coming months when quality stocks fall out of favor such as QBE this month.

3. Stage Three is when you start to see the second tier stocks and out of favor stocks start to recover.  This is the stage I expect to see start happening soon. There will be plenty of opportunities to buy second tier stocksover the coming six months.

For more information on the best value second tier stocks please give me a call on (07) 4771 4577.

The Market Wrap 12-3-10

By Jason Fittler

Looking for new highs!

The market has made some good moves over the last week, once again we find ourselves above 4800. The question is will we move higher?

Over the past week there has been a lot of positive news out of the US which has pushed the market higher. It is starting to feel a lot like a recovery as such I am expecting to see the market touch new highs in the coming months.

There is still a lot of economic issues to sort out but to date we are seeing increase pricing in Iron Ore, unemployment rates have stabilized and the reporting season delivered solid results and a positive outlook.

Overall 44% of companies surprised to the up side while 29% disappointed. Overall this is an increase of 5% more companies surprising to the upside.  This increase was driven mostly by the big end of town. Couple this with better cash flows, high dividends and low levels of debt and the market is starting to look like it is in good shape.

The one caution is that at the current price the market is around fair value, any move up from here would be on the back of increase in expectations more than based on fundamentals.

The main take away is that you can buy quality stocks with less risk in this market.

Take this opportunity to build yourself a high yielding portfolio, also note we are expecting 13% growth in the market for this year.

Who Should You Follow?

By Jason Fittler

If you read the article in the Townsville Paper on the 05/03/2010 by Daniel Goulding (of my office) you may be wondering who to follow about where the market is heading.  

If we take a look at the below chart you can see we closed Friday on 4767 points, once again we are getting close to the 4800 mark which is where we have seen resistance in the past.  This time it has been a slower move up. We are still experiencing some resistance to the market moving further ahead and we are also seeing most of the gain coming from the big blue chips. The small cap stocks are struggling in this market.

To me this is an indication that the market will struggle to reach new highs at this point in time and we could expect to see a pull back in the near future.

So who should you follow? It depends on what you are trying to achieve.

For long term investors use the opportunities to pick up quality stock paying a large dividend, the two which come to mind are Spark Infrastructure and QBE, I grabbed some for my portfolio this week.

For the Traders, pay close attention to Daniel’s calls perhaps take a look at selling some covered calls.

The Market Wrap 26-2-10

By Jason Fittler

Will the trading range hold?

Over the past weeks we have seen the market test the 4500 low point, once again the market pushed back up to 4700 before re-tracing the gains over the past couple of days. Australian companies are currently in their reporting season and although a number have come out with good results the focus has been on the under performing companies. So far we have seen an ordinary result from Telstra and a poor result from Toll Holdings.

BHP and RIO have also fallen over the last couple of days. I expect the next couple of weeks to be volatile while investors trade on the back of any news. I however will be using any major sell down in good quality stocks as an opportunity to add them to my portfolio.

Right now is a great time for the long term investor, buy good quality stocks paying a high yield and hold for the next 3-5 years, the days of the short term gains have past for now.

Let the institutions rip themselves apart while we sit back and enjoy the healthy dividends.

The Market Wrap 27-1-10

China looks to slow growth.

By Jason Fittler

We have been calling it for some time that the market needed to pull back. 

Over the past couple of days we have seen the market drop back below 4700 from its highs of 4900. Many are calling for the market to drop further; some are saying this is the beginning of the retrace back to the pervious lows.

This is in my book is an opportunity to start buying the big blue chips which are paying a high yield, with a long term view of 3-5 years.

What is clear is that we are not out of a Bear market just yet, however, with stimulus packages around the world working to prevent another collapse I do not expect to see the March 2009 lows retraced. I do expect that the market will stay in this volatile state for some time yet. As the old saying goes “two steps forward one step back”.

Key issues to watch for are:- Retail sales in the US, recapitalization on US companies and strengthening of the US dollar. This could take 3-5 years before we are out of this volatile market.

In regards to the dollar the experts are expecting to see the Australian dollar to hit parity with the US in the next 12 months. For those thinking about going overseas 2010 could be the time to do it.

The Market Wrap 13-1-10

By Jason Fittler

USA reporting season.

After a strong market through December we start to move into the US reporting season once again.

As you can see for the downturn over the last two days of the chart it has not started well. We are looking for strong retail sales over Christmas and strong underlying cash flows.

I expect 2010 will be the year of the US market and I expect to see the large US companies re-capitalise themselves, US interest rates move up and their dollar improve. This should push their market higher.

Short term we can expect to see a little pain as I think retail sales will disappoint.

As you can see our market struggled to stay above 4900 and has started to move back towards the trading range of 4800-4500.

In my books this is a buying opportunity, there are plenty of good long term, high yielding stocks to buy in this market.

The top line of my chart is 5200, this is where I expect to see our market move in the medium term.

If you are a long term investor this market is providing you with plenty of opportunity.

2009 The Year in Review

By Jason Fittler

2009 will go down in history as one of the best years in our market.

There are two important figures here. The market rose 1125 points or 30% from January to December, but from the lows of March 2009, the market rose 1800 points or 59%. Reinforcing our view, not to panic and sell out at the bottom. For those who invested heavily over the 2009 year you have done well.

If we go back a couple of years, you can see from the below chart that the market is 26% off the highs and back to the level of September 2007.



The gains were made in the blue chip sector with the resources and finance sectors doing very well.

We have also started to see a recovery in the infrastructure sector and the property sector, which is currently restructuring and should have a good 2010. I expect to see a lot of takeover’s in the property sector as the strong take advantage of the weak. I am also bullish on the smaller resource companies. Investors in the resources sectors have looked for safety in BHP and RIO and I expect that investors will start looking for more growth and value in 2010.

Cash is still overweight in the market place; many investors are still sitting on the sideline waiting for confirmation that all is well. This cash will push the market higher at some point in the future. As such I am taking a long term view on investments. I do expect to see the volatility continue, any dips should be taken as an opportunity to enter stocks.

Dollar

The Australian dollar started the year at 0.72c and closed at 0.92c with a low of 0.62c. One of the major affect on our dollar is interest rates. As Australian companies have re-capitalised and the Reserve bank has taken the steps to increase interest rates to curb inflation giving  Australia the highest interest rate in the western world. This is a negative if you have a home loan but a positive in attracting overseas investors to our country, giving our market and economy a boost.

Gold

The gold price started the year at $860 an ounce and closed at $1100 an ounce, however, the sale of physical gold has not increased in line. As such it appears that the gold price is being pushed in the futures market as investors look to hedge against the concerns in the US. Going forward we still expect to see the gold price move higher, however, short term I am looking for a pull back.

Oil

Oil started the year at $48 a barrel and closed at $81 a barrel. We have a fair value price of $75 a barrel as such it was looking undervalued at the start of the year. I would expect to see the oil price hold around these levels for now.

2010

Even with 2009 being a good year I do expect to see further upside in the 2010 year.

At present the market is trading in a range from 4500 to 4800. The start of the year saw the market break out of this range once again moving above 4900, my next target for the market is 5200 which is another 8% above the current level. This is a short-term target, other commentators are looking at the market getting to around 5400 being 10% above the current level, and they are expecting this in the current quarter.

I also expect to see some sectors out perform; property and small caps being two that I am taking a close look at.

Also if you are sitting on cash, look to get this invested now, before the masses. You can easily obtain a yield way above the bank term deposit rates in conjunction with good growth. In my view cash in no longer king, as such I will be fully invested as soon as possible.

Make sure you keep an eye on our web site www.growyourwealth.com.au for all the up dates and latest ideas.

Happy New Year.

The Last Market Wrap for 2009

Downside risk!

By Jason Fittler

The last week has seen the market unable to push up towards 4800 again, however, we have stayed in the trading range. Given that we are moving into the Christmas break I would expect to see trading slow over the coming weeks.

The news out of the US is still mixed while at home it is more upbeat. Last week we had NAB looking to take over AXA and Telstra’s negotiations with the Government looking to have a more positive outcome than first thought.

My money is still on buying good quality stocks paying exceptional yields, the price of a company may jump around on news, but if the company has sustainable dividends it will eventually bring the price back up.

Wishing you all a Merry Christmas and Happy New Year.