Yovich & Co Market Update - 29 September 2015

Sep 29, 2015 | Commentary

Changes in Market

Market Themes

  • The New Zealand market was slightly down but still showing resilience against negative sentiment off shore. Fonterra announced their result last week which saw their share price move upwards over 7% over the past five trading days.
  • More recent news out today (30 September 2015) is that Infratil and the NZ Super fund are selling their combined 30% stake in Z Energy through a book build. The indicative price of between $6.00 and $6.20 looks a bit expensive considering the uncertainty of the outcome for the Caltex takeover, the Commerce Commissions ruling, and the fact that it was trading below $6.00 last week.
  • This might provide an opportunity to buy other higher yielding stocks as investors sell down other holdings to fund the purchase of Z Energy Limited.
  • Weak Chinese Manufacturing Data dragged Aussie stocks lower as investors across the Tasman maintain their bearish outlook for the resource sector. 
  • The Shanghai Composite index was relatively flat, with volatility in the Chinese market starting to normalise. After the big correction from June to August, the market has traded in a reasonably tight range between the 3,000 and 3,250 levels for the month of September.  
  • A sell off in the healthcare and bio tech stocks pushed the NASDAQ index deep into the red while the broader index was more stable after Janet Yellen confirmed that interest rates will only rise this year if conditions are right.
  • The local currency had a strong week against the Aussie as the relative health of both economies remains central to the mind-set of traders.

Investment News

Local Listed Property Investments – High Yield at the Right Price.

The Listed Property stocks had a great run from 2010 to the start of 2015 with most stocks up between 20 to 40 percent over a four year period. This year has seen a correction in prices and presents an opportunity to get in at good prices. The Listed Property sector is aligned with our strategy of picking up dependable yield in a market that might trade sideways in the short to medium term. Our preferred stock is Argosy as outlined in the below comments from the analyst at FNZC:

ARG provides investors with a yield at the top of the sector at ~8.7% based on paying out less than 100% of distributable earnings. In a sector that continues to over distribute and let dividends lead earnings we believe the board is making the correct decision to wait for earnings certainty rather than chasing the yield trade and increasing dividends early. ARG remains a preferred exposure in the sector with our preference at this point in the cycle remaining for more diversified, lower denomination portfolios which have completed their major structural shifts or portfolio recycling. Argosy has 69 properties with a value of $1.32 Billion.

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About the author

Jarrod Goodall

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Weekly Update Investment Shares Bonds Market Commentary High Yield Argosy ARG.nz


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