NZ
The New Zealand market (NZX50 Index, +0.3%) was up bucking the sell-off trend, partly due to the index lacking any tech stocks.
Synlait recommenced trading at the end of the day to confirm it had secured its lending requirements which helped limit its sell-off to only -9.4%. Synlait will conduct an arbitration process, but for A2 Milk this is consistent with shifting production internally. We prefer to avoid both stocks. Is A2 playing big brain…drive down share px, then buy Synlait? 4D chess…
On the flipside Fonterra shares were up +4.1%, as investors shift funds back to the conglomerate. Imagine if FSF was investable …
Genesis Energy has been looking into restarting its Huntly Unit 5 plant by end of January, which may help ease burden during an upcoming dry summer which may limit supply available from hydro sources. Genesis is our only gentailer BUY at current levels. We continue to be quite bullish on NZX limited – we see untapped value in the funds mgmt. biz…stay tuned on this.
Aus
The Australian market (ASX200 Index, -0.7%) was down, tech stocks lower following Wall Street sell-off on Friday, accompanied by a rise in oil prices market jitters in Asia.
China’s Evergrande slumped -20% after police detailed staff at its wealth unit as it is believed they are unable to meet some of its obligations. This flowed onto debt-heavy Hong Kong and Australian real estate companies.
Costa group fell -3.4% after PSP’s revised takeover bid was reduced from $3.50 to $3.20 per share, following due diligence revealed weaker profit outlook from adverse weather conditions. We like DGL (if you can get some under 80c, that’s a win). Simon Henry at DGL is hated by the ‘woke’ media – we love that – and we love that he continues to have a laser-like focus on growing his business…now the question is how integration of recently acquired bolt-ons goes
US
US markets (S&P500 Index) were flat overnight waiting in anticipation of a busy week from central banks decisions and data.
Last week’s IPO darling ARM shares fell -4.5%, as the IPO pop starts to fade…they only make 6c per device…and revenue has grown at 15% over three years — hardly a growth story.
Dollar General (DG) remains our high conviction international pick — looks down and dirty in the charts at $113 per share…trading at 11x fwd earnings –over a 50% discount to its historic P/E (~20x earnings)…if you believe the narrative of slow-down in US spending has been priced in it is a good “hold and forget” stock…DG’s mgmt. has been very forward about slow-down prospects…we like the honesty…Dollar General is like the Walmart of small US towns…selling everything from food to consumer goods – they are everywhere and have an excellent distribution network. Op. Margins sitting at 7% vs. historical 9%…if mgmt. can reverse the margin gap then it’s a cheap stock.
Dollar General PE Ratio
Tech stocks continue to crush…
Home purchase contracts falling over tick up…
Buybacks make the world go ‘round….
