Australian Sharemarket Update - October 2017

There is a substantial amount of financial material available online regarding Australian equities and sharemarket performance. We don't intend to compete in that regard, but we have had a long term relationship with John Goodlad of Hartleys sharebrokers, who has many expat clients, and include his briefings as a short, sharp briefing for Australian expats. You can make contact with John through our Inquiry Form.

Healthcare and Brent Crude at $60 USD a barrel

Australia’s All Ordinaries index is still range bound between 5500 – 6000 but we are at the upper reaches as the Top 20 companies drift back up.  Macquarie Group Ltd (MQG), one of our preferred core stocks, has outperformed its financial sector peers and is close to a $100 a share.  The banking sector is still an Accumulate – despite plenty of media static and CBA will move up into the 80s as negative sentiment dissipates and the market focuses on its earnings and strong fully franked dividends.  While there is a 15-20% chance of a major property  crash in Australia – particularly as interest rates move out of their current lows at some stage next year -  this is not the consensus economic view. 

In the Industrial space, another preferred company in CSL is making fresh highs.  Healthscope (HSO) has just made our Best Stock Ideas for October and is described as “significantly undervalued” at below $2.00.  We have also been adding to our holdings in Ramsay Health Care Ltd (RHC), Australia’s leading global hospital group with operations across Australia, the UK, France and Indonesia and Malaysia.  We have an Accumulate Recommendation in the ‘60s on this stock.   

One courageous call has been to add Coca Cola Amatil (CCL) to our Best Stock Ideas list.  We note that the stock offers a nearly 6% dividend yield which is viewed as sustainable given CCL’s strong free cash flow and conservative balance sheet. 

The oil price (Brent Crude) has just moved up through 60 USD barrel and, while forecasts vary widely, this is unequivocally good news for the sector right now.  Woodside Petroleum Ltd (WPL) and Santos Ltd (STO) are our preferred large cap companies at present prices. Woodside even make it onto our Model Income Portfolio with a forecast dividend yield of 3.7%.  Oil Search Ltd (OSH) remains our top leveraged large cap. Buru Energy Ltd (BRU) provides some excellent mid cap leverage with oil production from the Canning Basin at 25–30 USD a barrel against the current spot price of 60 USD. 

In the Resources sector, we have seen some stronger prices for the commodities like Copper and Zinc.  Gold continues to stay in its current trading band but that makes it worthwhile for favoured producers like Northern Star Resources (NST) and exploration companies such as Sunstone Metals (STM) to develop their operations.