FYI | Nov 09 2016
By Peter Switzer, Switzer Super Report
Two days out from the US election Hillary Clinton held a 4% lead over Donald Trump — 44% plays 40% — on the NBC News/Wall Street Journal poll. The historical error for this survey is 2.37%, so Clinton fans are relatively comfortable, but post-Brexit, no one can seriously trust polls or bookies anymore unless the gap in the polls is huge.
The latest odds at Sun Bets in the USA has Hillary at 3/10 while Donald is 5/2. Hillary is at Winx odds but odds on favourites can be beaten, though no-one has told this to that unbelievable racehorse.
Meanwhile the FiveThirtyEight website puts the chances of Hillary winning at 64.2% while Donald is at 35.7%. The former is said to be big chance of having 270 electoral college votes already, but I can’t forget Brexit!
On Wednesday our time, before the close of the stock market, we should be seeing the impact of the election. If it’s Hillary, stocks go up, and note our market is down over 5% since the slide began in October. Most of this has been a Donald drama drop, so I’d say a Clinton win could be worth more than what has been lost.
Remember, over the big fear and loathing time period that Donald’s black cloud has hovered over financial markets, we’ve see US economic growth come in at a good 2.9%, the latest new jobs created were a solid 161,000 — that’s healthy growth — and even Chinese economic numbers were more positive than negative. Commodity prices are better than even an optimist like me expected — who would’ve thought I’d love BHP again this year? And US company earnings have come in better than expected.
Seriously, Wall Street should be up and as per usual we should be going along for the joy ride but instead we’ve been taken on a nigthmare spin down ‘Elm Street’ with Donald in the driving seat!
Over the past couple of weeks my expert buddies have been pinpointing stocks they like and some are buying now despite the Trump threat. I know this as some of them might not be so generous with their tips if they weren’t already in.
I’ve said in the past that fund managers such as Roger Montgomery had been talking about building up his cash reserves for an expected sell-off, though he’s not cashing up ahead of a market Armageddon. He simply argued that then he could not see any value companies worth buying, but now he does. And if Donald wins and stocks fall again, which they should, he’ll be a buyer of companies he thinks have been over-beaten up.
A few weeks back he said he likes Healthscope (HSO) and on Thursday’s TV show he reiterated his argument.
He still likes Challenger despite its recent good report and the market support. He sees more upside with this well-run and well-positioned company given the interest rate outlook and the retirement trends ahead.
My Bell Direct friend and expert, Julia Lee, went long Mayne Pharma (MYX) last week, despite the potential threat of Hillary and her plans for the health sector.
A number of experts such as Marcel von Pfyffer of Arminius Capital think Bega Cheese Ltd (BGA) has been bashed up too hard by the market and for a guy who seldom give stock tips on TV, his venturing into this high risk area quite surprised me. It could be the impact of a week of Melbourne Cup hype.
The 52-week range for this stock is $4.41 to $8.13 and is now around $4.65.
In the same vein, Blackmores (BKL) is a company that the smarties now want to buy when it goes under $100. Gary Stone predicted this and when it happened on October 27 and it got to $97.91, the bounce happened, taking it to around $114. In this pre-Trump election win anxiety situation, it’s now $111.49 and the FNArena [broker consensus] target price is $118.33. Over the past 52 weeks, this has been a $220-stock, so it certainly looks like a stock that might have a little upside in a President Hillary Clinton world, if it comes to pass.
The highly hi-tech-interested Simon Bond of Morgans has always liked a company called Superloop, which currently trades at $2.82 and FNArena [broker consensus has] a target of $3.16.
The company lays the black undersea cables that carry the Internet to places like Asia from places like the USA, and Simon remains a big fan.
Charlie Aitken is banging on the table and the drum for companies such as Link (LKN), APN Outdoor (APO) and Star Group (SGR) and I pretty well concur with him, especially on Link.
Clearly many of these companies I would not want to star in my core holdings, but most have potential to be some alpha-deliverers, especially if Trump comes up trumps and the stock market dives.
If this happens, at some time in the future, I will write one of my usual “this is a buying opportunity” stories but picking when could be tricky. If the worst-case scenario out of the US election happens then the dive will be deep but the value created for someone willing to buy and hold for a considerable time could offset the potential fear of having to deal with a President Donald Trump world.
I do think his threat is going to be more market dramatic than it will be economic — the US Congress has derailed lots of Presidents’ policies — but we all know what uncertainty does to stock markets.
From my point of view I will be turning the Trump challenge into an opportunity but is anyone really surprised that I’ve written that?
However, despite the prospect of making money out of Donald, I’d prefer a Hillary win, a market kickback, a sensible OPEC outcome later this month, a US rate rise in December and a good old Santa Claus rally.
This is all I want for Christmas!
Peter Switzer is the founder and publisher of the Switzer Super Report, a newsletter and website that offers advice, information and education to help you grow your DIY super.
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