February 12, 2021

Natallia Smith
(TruWealth Advice)

We are expecting these key bellwether stocks to report earnings above consensus over the next fortnight.

• Mining: Iron Ore and broader commodities

Key Stocks: RIO, BHP, Mineral Resources, Fortescue

• Property: Domestic property and construction

Key Stocks: CSR, Sims Group, Bendigo Bank, James Hardie, Fletcher Builders, Bluescope, Domain Group

• Recovery: Broad global and domestic economic recovery

Key Stocks: Seek, Nine Entertainment, South32, Afterpay

• Retail: Re-direction of traditional travel and tourism spending to the retail sector

Key Stocks: Super Retail, Premier, JB Hi Fi, AP Eagers, Afterpay

• Cloud: Cloud software and its impact on common business practices

Key Stocks: Xero, NextDC

Valuation is Important

Recently, we have seen brutal reversing markets in regard to hedge funds that have completely ignored valuation. As the stock market recovers, it is vital that valuation occurs.

It’s likely that January’s returns will lead to a continued unwinding of shorts infusing markets over the next few weeks. The greatest advantage will be seen in stocks:

• with tailwinds from one of the identified themes

• confirmed by solid outlook and commentary from one of our bellwethers

• with solid valuation support

Key Portfolio Highlights

A number of stocks sit within these themes. Here are a few to be aware of during the reporting season:

• BHP, a large holding in portfolios, looks prepared to announce a strong set of results. Iron ore and other commodities, like nickel and copper, have performed exceptionally well due to expectations of mass electrification of transport.
  

• Super Retail and Kogan.com are likely to benefit from the retail theme. Ongoing, Covid-related, tourism and travel problems have resulted in consumers increasing their retail spending.Tech One and Xero look like they will continue to thrive. The current switch to cloud computing characterizes changing business practices. Both software options bring cost cutting and productivity gains.

• Banks should perform strongly as the property theme quells the housing bubble burst.

• Mirvac, REA Group, Reliance Worldwide and Brickworks all have exposure to the property and construction theme. Low interest rates, incentives for renovations and a need for improved infrastructure indicates strength in this sector.

• NRW Holdings, Cimic and Downer are all beneficiaries of the domestic recovery or the bullish commodities cycle. Many families are moving to the suburbs, requiring transport, roads, and improved regional infrastructure. High commodity prices means more projects up for tender for contractors.

If you would like more information on share market movement and trading, contact Natallia on 03 8648 6534 or email contact@truwealthadvice.com.au

General Advice Warning:  This is general advice and does not consider your particular circumstances. You should not act on this advice without speaking to Truwealth Advice who can consider if it is right for you.