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Rudi’s View: Uncorrelated Yield & More Conviction Calls

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Always an independent thinker, Rudi has not shied away from making big out-of-consensus predictions that proved accurate later on. When Rio Tinto shares surged above $120 he wrote investors should sell. In mid-2008 he warned investors not to hold on to equities in oil producers. In August 2008 he predicted the largest sell-off in commodities stocks was about to follow. In 2009 he suggested Australian banks were an excellent buy. Between 2011 and 2015 Rudi consistently maintained investors were better off avoiding exposure to commodities and to commodities stocks. Post GFC, he dedicated his research to finding All-Weather Performers. See also "All-Weather Performers" on this website, as well as the Special Reports section.

Rudi's View | Oct 18 2019

This story features GRYPHON CAPITAL INCOME TRUST, and other companies. For more info SHARE ANALYSIS: GCI

Dear time-poor reader: more research on ASX-listed uncorrelated yield options, and more Conviction Calls from stockbrokers.

In this week's Weekly Insights (this is Part Two):

-Does (Lack Of) Substance Mean (Lack Of) Momentum?
-Conviction Calls – Part One
-Uncorrelated Yield – Research Reports
-Conviction Calls – Part Two

-Rudi Talks
-Rudi On Tour

[Items not in bold were published in Part One on Thursday morning]

Uncorrelated Yield – Research Reports?

By Rudi Filapek-Vandyck, Editor FNArena

Australian investors have increasingly become more gun-shy when it comes to deciding upon further investments to boost the income potential of their portfolios.

Sure, there is nothing to be gained from sticking with term deposit-like options, but on the other hand, were global equity markets to experience a repeat of late 2018, or worse, that's not an attractive proposition either.

In addition, I have been warning about the increasing likelihood the year ahead will see, on balance, less dividends being paid out in total by ASX-listed companies, which in simple terms means: dividend cuts are coming. Plenty of speculation around bank dividends are no longer as safe as they were, say, five years ago.

The thirst for income is not drying up, which is probably why a new generation of yield providers is enriching the local bourse. And investors, of course, are increasingly paying attention, as witnessed here at FNArena through enquiries and questions from subscribers and other investors.

I wrote about this new market segment a few weeks ago in "The Right Lessons To Learn"

https://www.fnarena.com/index.php/2019/09/12/the-right-lessons-to-learn/

More recently, colleague Greg Peel, put together a general snapshot in "SMSFundamentals: Finding Yield In A Low Rate World"

https://www.fnarena.com/index.php/2019/10/11/smsfundamentals-finding-yield-in-a-low-rate-world/


For those who want to add to their own research on any of the ASX-listed entities involved, we offer the opportunity to download research reports published by Independent Investment Research (IIR):

-Gryphon Capital Income Trust ((GCI)):

https://www.fnarena.com/articles/D26879C0-94E5-5F43-32B201073E464023.pdf

-KKR Credit Income Fund ((KKC)):

https://www.fnarena.com/articles/D261F91A-032B-4D0E-652FBE14939826AA.pdf

-MCP Master Income Trust ((MXT)):

https://www.fnarena.com/articles/D26DAEC4-A24A-3AE9-8D0E759CF01362D4.pdf

-Moelis Australia Fixed Income Fund:

https://www.fnarena.com/articles/D273CA65-F082-46B9-7032CD94ADBA393C.pdf

-NB Global Corporate Income Trust ((NBI)):

https://www.fnarena.com/articles/D273CA65-F082-46B9-7032CD94ADBA393C.pdf

-Partners Group Global Income Fund:

https://www.fnarena.com/articles/92BEF7FA-969C-56B0-A0443568DA03046A.pdf

-Perpetual Credit Income Trust ((PCI)):

https://www.fnarena.com/articles/D27DD07F-EC20-7BBB-731F333199C91C45.pdf

-Qualitas Real Estate Income Trust ((QRI)):

https://www.fnarena.com/articles/D2829749-BC3F-EB73-513DCE0AE0A9D6E1.pdf

We equally received a number of enquiries about the upcoming Latitude Financial Group IPO, for which we do not have a research report to share with you. In my humble opinion, investors will be better off ignoring the ubiquitous market machine that is now enveloping the local market ahead of the Latitude IPO, from which many an institution will be deriving fees.

Non-aligned analysts at Morningstar recently published their view on the Latitude Financial IPO. Here are some of the key conclusions drawn by Morningstar:

"Our research on the upcoming Latitude IPO concluded with a fair value estimate of $2.00 per share at the lower end of the $2.00–$2.25 indicative price range. Consequently, it is not a bargain even at $2.00, and the process of bidding for stock at an unknown price is annoying.

"While Latitude is launching a buy-now-pay-later product to compete with the likes of Afterpay Touch and Zip, we suggest buy later, not now and south of latitude $2.00".

According to media news reports, the Latitude introductory share price was at first dropped to $1.78, then canceled altogether. 

Conviction Calls – Part Two

Canaccord Genuity equally refreshed its Top Australian Stock Picks for the final quarter of 2019. Included are CML Group ((CGR)), Galilee Energy ((GLL)), Healthia ltd ((HLA)), Kathmandu Holdings ((KMD)), MNF Group ((MNF)), OZ Minerals ((OZL)), Primero Group ((PGX)), Redbubble ((RBL)), and Resolute Mining ((RSG)).

****

Stockbroker Morgans has revealed its list of Best Ideas, consisting of stocks believed to offer the highest risk-adjusted returns on a twelve month view, backed by a higher-than-average level of confidence by the broker's analysts.

It turns out, Morgans' Best Ideas lists no less than 29 names; Telstra ((TLS)), Wesfarmers ((WES)), Treasury Wine Estates ((TWE)), Woolworths ((WOW)), Woodside Petroleum ((WPL)), Oil Search ((OSH)), Westpac ((WBC)), Sonic Healthcare ((SHL)), Sydney Airport ((SYD)), APA Group ((APA)), ResMed ((RMD)), Cleanaway Waste Management ((CWY)), Link Administration ((LNK)), Orora ((ORA)), OZ Minerals ((OZL)), Frontier Digital Ventures ((FDV)), PWR Holdings ((PWH)), Lovisa Holdings ((LOV)), AP Eagers ((APE)), Cooper Energy ((COE)), Kina Securities ((KSL)), Generation Development ((GDG)), Pro Medicus ((PME)), Over the Wire ((OTW)), Iress Market Technology ((IRE)), Orocobre ((ORE)), Red 5 ((RED)), Aventus Group ((AVN)), and APN Convenience Retail REIT ((AQR)).

Earlier this month, Morgans released its Best Buys by sector, declaring it believed share prices for each of Westpac, Cleanaway Waste Management, Telstra and Woodside Petroleum represented "standout opportunities" for local investors.

Other Best Buys include:

-among Diversified Financials: Link Administration, Kina Securities, Generation Development
-among Industrials: Orora, PWR Holdings
-in healthcare: ResMed, Sonic Healthcare, Pro Medicus
-Telcos and IT & Software: Telstra, Over the Wire
-Consumer Discretionary: Wesfarmers, Lovisa Holdings, AP Eagers, Beacon Lighting ((BLX))
-Resources: OZ Minerals, Orocobre, Red 5
-Energy: Oil Search, Cooper Energy
-Infrastructure & Utilities: Sydney Airport, APA Group
-Online Media: Iress Market Technology, Frontier Digital Ventures
-Property: Aventus Group, APN Convenience Retail REIT

****

Small cap specialists at JP Morgan (equally adopted by Ord Minnett) have reiterated their Top Pick preference for Corporate Travel Management ((CTD)), while their Bottom Pick remains Collection House ((CLH)).

****

Market strategists at Wilsons have moved away from the concept of constructing and communicating a Model Portfolio. Their new approach is putting together an Australian Equities Focus List, which offers more flexibility, on their own assessment, through identifying specific stock opportunities.

Here's the central premise upon which the Focus List is based: "Equity market performance has disconnected from earnings performance during 2019. We don't think this is likely to change in the near term."

Wilsons' Focus List is thus Overweight Healthcare, Industrials, Real Estate and Info Tech with most preferred exposures CSL ((CSL)), ResMed ((RMD)), ImpediMed ((IPD)) and National Veterinary Care ((NVL)) for the healthcare sector, Atlas Arteria ((ALX)), Monadelphous Group ((MND)), Seven Group ((SVW)) and Transurban ((TCL)) among industrials, and Goodman Group ((GMG)), Scentre Group ((SCG)) and Rural Funds (RFF)) in the AREITs sector.

The Technology sector is represented via Computershare ((CPU)), Xero ((XRO)), Afterpay Touch ((APT)), Link Administration ((LNK)), Bravura Solutions ((BVS)), EML Payments ((EML)), ReadyTech ((RDY)), and Whispir ((WSP)).

Wilsons list of Conviction Insights experienced the removal of Collins Foods ((CKF)) on October 1st. Remaining inclusions are Bravura Solutions, EML Payments, ReadyTech, Whispir, GUD Holdings ((GUD)), Ridley Corp ((RIC)), ImpediMed, National Veterinary Care, Countplus ((CUP)), EQT Holdings, Pinnacle Investment ((PNI)), Noni B ((NBL)), Ausdrill ((ASL)), Mastermyne ((MYE)), and Whitehaven Coal ((WHC)).

****

Bell Potter has released its Ten Favoured Stocks with a market capitalisation above $1bn for the twelve months ahead, comprising of WorleyParsons ((WOR)), Macquarie Group ((MQG)), Aristocrat Leisure ((ALL)), Goodman Group ((GMG)), Mirvac Group ((MGR)), Lendlease Group ((LLC)), Netwealth Group ((NWL)), Amcor ((AMC)), Downer EDI ((DOW)), and Brambles ((BXB)).

Rudi Talks

Audio interview: are investors buying "cheap" looking stocks at exactly the wrong time?

https://www.youtube.com/watch?v=EQuGHASJ1M4

On Monday, I was interviewed by Peter Switzer about the Trade War and where equities might be heading. A separate video fragment has been uploaded to Youtube and can be accessed here:

https://www.youtube.com/watch?v=Z6WHOKXdIak&t=790s

Rudi On Tour In 2020:

-ASA Hunter Region, near Newcastle, May 25

(This story was written on Monday and Tuesday, 14 & 15 October 2019. Part One was published on the Tuesday in the form of an email to paying subscribers, and again on Thursday as a story on the website. This is Part Two).

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views are mine and not by association FNArena's – see disclaimer on the website.

In addition, since FNArena runs a Model Portfolio based upon my research on All-Weather Performers it is more than likely that stocks mentioned are included in this Model Portfolio. For all questions about this: info@fnarena.com or via the direct messaging system on the website).

P.S. I – All paying members at FNArena are being reminded they can set an email alert for my Rudi's View stories. Go to My Alerts (top bar of the website) and tick the box in front of 'Rudi's View'. You will receive an email alert every time a new Rudi's View story has been published on the website. 

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

FNArena is proud about its track record and past achievements: Ten Years On

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CHARTS

ALL ALX AMC APA APE APT AQR AVN BLX BVS BXB CKF CLH COE CPU CSL CTD CUP CWY DOW EML FDV GCI GDG GLL GMG GUD HLA IPD IRE KKC KMD KSL LLC LNK LOV MGR MND MQG MXT MYE NBI NWL ORA OSH OTW OZL PCI PGX PME PNI PWH QRI RBL RDY RED RIC RMD RSG SCG SHL SVW SYD TCL TLS TWE WBC WES WHC WOR WOW WPL WSP XRO

For more info SHARE ANALYSIS: ALL - ARISTOCRAT LEISURE LIMITED

For more info SHARE ANALYSIS: ALX - ATLAS ARTERIA

For more info SHARE ANALYSIS: AMC - AMCOR PLC

For more info SHARE ANALYSIS: APA - APA GROUP

For more info SHARE ANALYSIS: APE - EAGERS AUTOMOTIVE LIMITED

For more info SHARE ANALYSIS: APT - AFTERPAY LIMITED

For more info SHARE ANALYSIS: AQR - APN CONVENIENCE RETAIL REIT

For more info SHARE ANALYSIS: AVN - AVENTUS GROUP

For more info SHARE ANALYSIS: BLX - BEACON LIGHTING GROUP LIMITED

For more info SHARE ANALYSIS: BVS - BRAVURA SOLUTIONS LIMITED

For more info SHARE ANALYSIS: BXB - BRAMBLES LIMITED

For more info SHARE ANALYSIS: CKF - COLLINS FOODS LIMITED

For more info SHARE ANALYSIS: CLH - COLLECTION HOUSE LIMITED

For more info SHARE ANALYSIS: COE - COOPER ENERGY LIMITED

For more info SHARE ANALYSIS: CPU - COMPUTERSHARE LIMITED

For more info SHARE ANALYSIS: CSL - CSL LIMITED

For more info SHARE ANALYSIS: CTD - CORPORATE TRAVEL MANAGEMENT LIMITED

For more info SHARE ANALYSIS: CUP - COUNTPLUS LIMITED

For more info SHARE ANALYSIS: CWY - CLEANAWAY WASTE MANAGEMENT LIMITED

For more info SHARE ANALYSIS: DOW - DOWNER EDI LIMITED

For more info SHARE ANALYSIS: EML - EML PAYMENTS LIMITED

For more info SHARE ANALYSIS: FDV - FRONTIER DIGITAL VENTURES LIMITED

For more info SHARE ANALYSIS: GCI - GRYPHON CAPITAL INCOME TRUST

For more info SHARE ANALYSIS: GDG - GENERATION DEVELOPMENT GROUP LIMITED

For more info SHARE ANALYSIS: GLL - GALILEE ENERGY LIMITED

For more info SHARE ANALYSIS: GMG - GOODMAN GROUP

For more info SHARE ANALYSIS: GUD - G.U.D. HOLDINGS LIMITED

For more info SHARE ANALYSIS: HLA - HEALTHIA LIMITED

For more info SHARE ANALYSIS: IPD - IMPEDIMED LIMITED

For more info SHARE ANALYSIS: IRE - IRESS LIMITED

For more info SHARE ANALYSIS: KKC - KKR CREDIT INCOME FUND

For more info SHARE ANALYSIS: KMD - KATHMANDU HOLDINGS LIMITED

For more info SHARE ANALYSIS: KSL - KINA SECURITIES LIMITED

For more info SHARE ANALYSIS: LLC - LENDLEASE GROUP

For more info SHARE ANALYSIS: LNK - LINK ADMINISTRATION HOLDINGS LIMITED

For more info SHARE ANALYSIS: LOV - LOVISA HOLDINGS LIMITED

For more info SHARE ANALYSIS: MGR - MIRVAC GROUP

For more info SHARE ANALYSIS: MND - MONADELPHOUS GROUP LIMITED

For more info SHARE ANALYSIS: MQG - MACQUARIE GROUP LIMITED

For more info SHARE ANALYSIS: MXT - METRICS MASTER INCOME TRUST

For more info SHARE ANALYSIS: MYE - METAROCK GROUP LIMITED

For more info SHARE ANALYSIS: NBI - NB GLOBAL CORPORATE INCOME TRUST

For more info SHARE ANALYSIS: NWL - NETWEALTH GROUP LIMITED

For more info SHARE ANALYSIS: ORA - ORORA LIMITED

For more info SHARE ANALYSIS: OSH - OIL SEARCH LIMITED

For more info SHARE ANALYSIS: OTW - OVER THE WIRE HOLDINGS LIMITED

For more info SHARE ANALYSIS: OZL - OZ MINERALS LIMITED

For more info SHARE ANALYSIS: PCI - PERPETUAL CREDIT INCOME TRUST

For more info SHARE ANALYSIS: PGX - PRIMERO GROUP LIMITED

For more info SHARE ANALYSIS: PME - PRO MEDICUS LIMITED

For more info SHARE ANALYSIS: PWH - PWR HOLDINGS LIMITED

For more info SHARE ANALYSIS: QRI - QUALITAS REAL ESTATE INCOME FUND

For more info SHARE ANALYSIS: RBL - REDBUBBLE LIMITED

For more info SHARE ANALYSIS: RDY - READYTECH HOLDINGS LIMITED

For more info SHARE ANALYSIS: RED - RED 5 LIMITED

For more info SHARE ANALYSIS: RIC - RIDLEY CORPORATION LIMITED

For more info SHARE ANALYSIS: RMD - RESMED INC

For more info SHARE ANALYSIS: RSG - RESOLUTE MINING LIMITED

For more info SHARE ANALYSIS: SCG - SCENTRE GROUP

For more info SHARE ANALYSIS: SHL - SONIC HEALTHCARE LIMITED

For more info SHARE ANALYSIS: SVW - SEVEN GROUP HOLDINGS LIMITED

For more info SHARE ANALYSIS: SYD - SYDNEY AIRPORT

For more info SHARE ANALYSIS: TCL - TRANSURBAN GROUP LIMITED

For more info SHARE ANALYSIS: TLS - TELSTRA CORPORATION LIMITED

For more info SHARE ANALYSIS: TWE - TREASURY WINE ESTATES LIMITED

For more info SHARE ANALYSIS: WBC - WESTPAC BANKING CORPORATION

For more info SHARE ANALYSIS: WES - WESFARMERS LIMITED

For more info SHARE ANALYSIS: WHC - WHITEHAVEN COAL LIMITED

For more info SHARE ANALYSIS: WOR - WORLEY LIMITED

For more info SHARE ANALYSIS: WOW - WOOLWORTHS GROUP LIMITED

For more info SHARE ANALYSIS: WPL - WOODSIDE PETROLEUM LIMITED

For more info SHARE ANALYSIS: WSP - WHISPIR LIMITED

For more info SHARE ANALYSIS: XRO - XERO LIMITED