By Janine Cox |
In this week’s Talking Wealth Podcast, Janine discusses some important lessons about company takeovers and what you should consider when these events occur. She will analyze the takeover offer for Link Administration from a private equity firm to emphasize the important points.
By Dale Gillham |
When COVID-19 hit Australia earlier this year, I don’t think any of us really understood the full extent of what would unfold in 2020. The country went into lockdown, the stock market crashed and retail investors found themselves with more free time resulting in many turning to the stock market to make money.
In May, ASIC released a report about investor trading during the March volatility and the results were alarming, especially around leveraged trading. Two weeks ago, ASIC released a product intervention order (20-254MR) to strengthen consumer protections around trading in contracts for difference (CFD), which is well over due and, in my opinion, a step in the right direction.
While CFD providers disclose the risks of trading leveraged products, the reality is that most retail traders don’t read the disclosures and end up losing large sums of money due to the leveraged nature of these products. While the ASIC order seeks to limit the amount of leverage a retail trader can take on, it will not stop retail traders losing money, it will only limit it, as the majority are not highly educated or experienced in trading the stock market, let alone trading leveraged products.
That said, I applaud ASIC for its initiatives and encourage it to do more in order to protect retail investors. Other areas that need ASIC’s attention include high frequency trading and algorithmic trading as it increases volatility in the market, which is detrimental to retail investors.
Last week the market flipped given that all sectors ended the week in the green with Consumer Discretionary up 6.76 per cent followed by Industrials up 6.44 per cent and Information Technology up 5.68 per cent. The worst performing sectors included Consumer Staples up 2.10 per cent followed by Financials up 2.92 per cent and Utilities up 3.32 per cent.
Looking at the ASX top 100 stocks the best performers included Tabcorp Holdings, which is up 24.62 per cent on rumours of a bid by a private equity firm. Flight Centre, which was last week’s worst performer, also rose 24.42 per cent on positive news that travel would be opening up again. Vicinity Centres was also up over 15.70 per cent, while Scentre Group was up 14.29 per cent and Stockland was up 14.03 per cent.
The worst performers included Pendle Group down 8.04 per cent, followed by Fortescue Metals Group down 4.72 per cent and Treasure Wines Estate down 4.58 per cent.
Over the past five weeks, the market has been on a roller-coaster ride given that since the start of October, the All Ordinaries Index has risen over 7 per cent before falling over 5 per cent and last week it rose strongly up 4.27 per cent. Since 1 June, the market is up 8.9 percent, yet for this calendar year, it is down 5.99 per cent; so, if you have been struggling to determine which direction the market is heading, you are not alone.
Right now, both the US election and COVID are affecting markets around the world, which we all hope will settle, so things can get back to some degree of normality although this may be dreaming. That said, my position about the market has not really changed given that while I believe the All Ordinaries Index will rise into Christmas and possibly beyond, there is still a possibility the market will experience a short term down move before then.
Given the current volatility, it is important to remain cautious, which is why I continue to recommend you sit and wait for the dust to settle, while at the same time get ready for the opportunities that will unfold in the not too distant future.
For now good luck and good trading.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.
By Dale Gillham |
In this week's Talking Wealth Podcast, Dale continues his series on the 10 principles to achieving success in your life. The feedback we have received from those who have listened to this series have confirmed how powerful and relevant the information is in helping you achieve your goals.
By Dale Gillham |
The internet super highway just keeps getting faster, which has the potential to make our lives better and more efficient. Companies that have taken advantage of this growth have grown at staggering rates like Apple, Amazon, Facebook and Google to name a few.
Apple has sold billions of iPhones since it launched back in 2007 and just a few short weeks ago, it released its first 5G phone, which opens up a world of possibilities for future applications. While many consumers don’t have full access to 5G, the technology is here to stay and overtime it will take over 4G.
By all accounts 5G is a game changer, as it will allow many more applications, services and products to enter our daily lives from providing high speed camera surveillance in our streets to keep us safe, to doctors being able to view data, run tests and even operate remotely. For investors, 5G will bring with it a new generation of products and companies that could prove to be very profitable.
So where do you look for the next Apple or Google? This is a million-dollar question and one that we cannot answer easily right now, given that not every company that invests in new technology will succeed. Even Steve Jobs, in his early days of Apple, could not have contemplated where his company would end up.
In my opinion, I don’t believe telco’s will be the companies that benefit the most from 5G, instead it will be smaller companies with entrepreneurial minds in the areas of education, financial management and health. That said, there are many other areas that are set to benefit from the rollout of 5G, therefore, it is our job to keep an eye out for those that may just be game changers.
The market was bearish with all sectors ending the week in the red with Consumer Staples the best down only 0.05 per cent followed by Healthcare down 2.49 per cent, while Utilities, Communications Services and Financials were all down over 3 per cent. The worst performing sectors included Energy down 6.63 per cent followed by Industrials down 5.98 per cent and Consumer Discretionary down 5.52 per cent.
Looking at the ASX top 100 stocks the best performers included Coca-Cola Amatil, which ended the week up 15.63 per cent following a takeover bid. AMP also had a strong week up 12.92 per cent followed by ResMed up 8.47 per cent. The worst performers included Flight Centre down 15.84 per cent, Oil Search down 11.38 per cent while Aristocrat Leisure and Worley were both down over 11 per cent.
October is prone to surprises and last week was no exception, given that the All Ordinaries Index fell over 1.5 per cent on two separate days and fell on four out of the five days with the market now trading at levels it was in May. This has put the market back into the sideways move we have been experiencing for nearly six months. Since the end of May, the Australian stock market has risen just under 5 per cent and after last week, it is not looking strong. This may be due to the Presidential election being in its final stages, as the world waits for the outcome before deciding what the markets will do.
Given the strength of the down move last week, the probability of further falls is likely, although I believe any fall will be short lived with the fall to likely to be between 5,500 and 6,000 points. While I am still of the opinion that our market will rise into Christmas and beyond, given the current volatility it is important to remain cautious, as anything could occur. Right now, it is wise to sit and wait for the dust to settle on the Trump-Biden election but at the same time get ready for the opportunities that will unfold in the not too distant future.
For now good luck and good trading.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.
By Dale Gillham |
In this week’s Talking Wealth Podcast, Dale and Janine interview the founder of Asia Tech Podcast, Michael Waitze, as they look behind the scenes at how the stock market really works. In this revealing interview, they discuss high frequency and algorithmic trading, as well as short selling and how this affects the efficient operation of the stock market.
By Dale Gillham |
There is an old saying that when it comes to investing in the stock market you can’t buy yesterday’s returns. However, many investors attempt to do just that by looking at sectors or stocks that have already performed and invest in the hope they will achieve the previous year’s return or better in the future. But this is exactly the opposite of what an investor should doing, which is echoed in Warren Buffets statement that investors should buy in doom and sell in boom.
In essence, Buffett is telling us to buy assets that have performed poorly and to sell assets that have risen strongly. Given this, investors should be looking to invest for tomorrow’s return, which you can do by following the money flow. For example, in 2020 the Information Technology sector has risen 41 per cent since 1 January, while the Energy sector has fallen 41 per cent over the same period.
Right now, there is an influx of investors buying technology stocks believing the big run in this sector will continue but if we follow Buffet’s advice, we should be looking for opportunities in the Energy sector. That said, I can understand an investors reluctance to buy into an Energy stock like Whitehaven Coal, which is down almost 60 per cent this year, while Afterpay (in the Technology sector) is up over 200 per cent.
As such, I am not recommending that people just sell their Technology stocks to buy Energy stocks and I am sure Buffet would not be suggesting this either. But if you are looking for stocks to buy, then look at the sectors that have been moving down, as this is where you will most often find the greatest opportunities.
Remember what goes up must come down and vice versa, so it is possible to buy tomorrows returns if you are watching the money flow.
The best performers included Information Technology up 4.44 per cent followed by Consumer Discretionary, Consumer Staples and Financials, which were all up around 2.5 per cent. The worst performing sectors included Industrials down 1.57 per cent, Materials down 0.54 per cent and Energy, which was just in the green up 0.33 per cent.
Looking at the ASX top 100 stocks the best performers included Unibail-Rodamco-Westfield up 23.25 per cent, Link Administration up 21.55 per cent followed by Bank of Queensland up 9.86 per cent. The worst performers included Flight Centre down over 9.09 per cent, CIMIC Group down 5.86 per cent while Vicinity Centres, Ramsay Healthcare, Adbri, Aurizon Holdings and Atlas Arteria were all down over 4 per cent.
Last week I questioned whether the strong move up on the Australian stock market was sustainable or whether it was just a sucker’s rally and that this would be confirmed by close of trade last Friday. From 2 October until Thursday 15 October, the Australian market had traded up for nine days closing higher than it opened on all but one day. Looking back, we have not seen such a strong rally since January and currently the All Ordinaries Index is trading at its highest level since March and looking good.
That said, it’s important to remember that October has a history of being volatile with wild swings up and down. Looking at the history of the Dow Jones Index, we know five of the biggest one-day falls, as well as five of the largest one day rises all occurred in October. While it is still possible that the All Ordinaries Index could display some short-term weakness over the next couple of weeks to fall away into an October low, I am confident the market will rise up into Christmas and into early 2021.
For now good luck and good trading.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.
By Dale Gillham |
In this week's Talking Wealth Podcast, Dale continues his series discussing the 10 principles to achieving success in your life.
