Elevated Volatility | Treasury Wine Estates – Still Buyers

19 October 2018

Global markets sold off overnight as volatility remains elevated, with US Technology shares continuing their wild ride of late. 

Investor sentiment was hit as weak industrial earnings raised worries about rising expenses and the impact of tariffs, adding to concerns over higher borrowing costs after hawkish commentary in the US Federal Reserve’s minutes.

We reiterate that we believe it is important for medium-term investors to not panic during times of heightened volatility. We would also point out that markets are coming out of what has been an unusually quiet period (pre-October). 


Stock in Focus: Treasury Wine Estates (TWE:AX)

Wine company Treasury Wine Estates (TWE) has been one of the best performing socks on the ASX in recent years, and we are still positive on the company’s outlook.

TWE 1 Year Chart


Treasury Wine Estates chief executive Mike Clarke told shareholders at the company's annual general meeting yesterday that the winemaker was on track to achieve its target of 25% profit growth and also added that the company wasn't being hurt by the escalating trade war between the US and China. 

TWE shares have been hit with other growth stocks in the recent sell-off. The Asia business continues to be the standout with strong volume and price growth amongst luxury categories boosting sales and earnings growth. We maintain a positive view towards TWE on the basis that they continue to benefit from our dining boom and weakening Aussie dollar investment thematics.

We reiterate our BUY recommendation on TWE.


Australia & New Zealand Market Movers

The Australian share market ended trade on Thursday virtually flat (ASX 200 index +0.05%) following a mixed day of trading on the market. In stock news, Afterpay Touch rebounded from a big fall on Wednesday, as investors digested information available about a new Senate inquiry into financial services firms not included in the royal commission, including the buy-now-pay-later sector. Woodside Petroleum closed slightly lower, despite reporting a 25% increase in third-quarter revenue. The increase came largely on the back of the outperforming Wheatstone LNG project in Western Australia.


The New Zealand market was lower yesterday (NZX 50 index -0.51%) as NZ shares were mixed as a dip by blue-chips Spark New Zealand, A2 Milk and Contact Energy took the sheen off Restaurant Brands New Zealand's double-digit spike on a takeover bid. Restaurant Brands, the fast-food operator was the biggest mover on the day, climbing 14% to a record close of $8.67 on almost 10 times the average volume. The company received an indicative offer from Mexico's Finaccess Capital to buy three-quarters of the business at $9.45 a share.


3 Things Markets Will be Watching this Week

1.             US corporate earnings season for the 3rd quarter gets underway.

2.             Trade related news-flow is likely to continue to feature in headlines.

3.             Minutes from the last US Federal Reserve Meeting are released on Thursday morning AU/NZ time.


Have a Great Day

Global markets sold off overnight as volatility remains elevated, with US Technology shares continuing their wild ride of late. 

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