It’s times like these when I think that a sell off is overdue that I like to think bigger picture and longer term with my investments. This frame of mind is easier to deal with and it means I don’t have to do stock picking for the short term, which can be rewarding. But it’s also really hard to consistently pull off.
Right now, I like a nine month window for investing, where I could get it wrong across September to October, but where I reckon, I’ll be pocketing nice gains over the period November to April. History shows the best two quarters for US investing are the December and March quarters, meanwhile April is actually a good month of returns before the old cliché “sell in May and go away…” becomes a consideration.
This chart is an oldie but a goody!
September should be the start of another leg up for US stocks as the first interest rate cut is bound to start on September 18. However, the expectation of this cut is so high that it could see the market fall based on that old market happening of “buy the rumour, sell the fact”, which often is the case.
However, provided no recession fears are escalated, big investors will factor in more rate cuts and the expected improvement in company bottom lines, especially for those growth companies carrying debt, that were smashed as rates rose. This could carry the market higher in early 2025. Locally we should be into our early rounds of rate cuts then, and there should be a rotation into many companies that have seen their share prices fall as rates rose. That’s why I like the ETF EX20, which cuts out the top 20 stocks from the S&P/ASX 200 index, many of whom have done well, which includes the banks.
EX20 gives me the other 180 stocks in the S&P/ASX 200. I’ve bought more BHP as this stock and Rio have been losers lately, though being top 20 stocks.
I showed this chart below in Saturday’s Report, but it bears showing again.
This is what I said on Saturday: “This ETF excludes the top 20 stocks and buys the other 180 and is an indicator of rotation to other stocks. EX20 is up 3.14% in the past month while the S&P/ASX 200 is up 0.56%”.
The rotation play, as rates fall, historically has favoured smaller cap companies and I’m expecting history to repeat itself.
I also like IHVV, which gives me all the S&P 500 stocks that haven’t performed like the Magnificent Seven, and AI-benefitting stocks that have done well over the last year.
Both EX20 and IHVV, which is hedged for a rising $A, should makes gains as a catch up play for stocks that haven’t done well over the past couple of years.
These give me a nice base for the core part of my portfolio. Stock picking-wise, Audinate (AD8) and (MP1) look oversold. Here are the latest on those two stocks from FNArena’s analysts:
As you can see, the consensus is split but I like the sticking to the stock by Macquarie and UBS.
For Megaport the ‘love’ continues, so I’ll stick, but it could take time before I start popping champagne with both these two tech stocks.
One new one on my radar is the Kelsian Group (KLS), which is a tourism/shipping play with a consensus call of +82! Here are the views of analysts:
This is how the company explains itself: “Today, the Kelsian Group of companies consists of Australia’s most experienced providers of multi-modal public transport services and tourism experiences, boasting performance-driven capabilities across ferry, bus, and light rail both domestically and internationally”.
The brands they have collected are unbelievable and have the likes of SEALINK, Captain Cook Cruises, All Aboard America and many more.
This from FNArena indicates KLS, now at $4.03, could be in the buy zone: “Ord Minnett has transferred coverage of Kelsian Group to its ‘retail research partner’ and the stock is now rated a Buy from Hold previously, with a $6.60 target price. The broker expects the concerns over margin pressures at the domestic operations, which have resulted in a -30% decline in the stock price, will be alleviated in FY25.
EPS growth of 24% is forecast by Ord Minnett with potential upgrades to expectations through to FY28 from new contracts.”
Kelsian Group
The chart isn’t screaming that it’s time to buy with confidence, but it is one to keep watching because, as interest rates fall, tourism will ride again (KLS reported today, and the market gave it a bit of a whacking).
Macquarie has a target price of $7.70 and this is what FNArena has noted from its expert on KLS: “The outlook is still focused on the tendering pipeline and M&A, Macquarie notes. The second half will benefit from the ramp-up of new Sydney contracts and Bankstown rail replacement, AAAHI momentum and the return of international tourism and fare increases for Marine & Tourism”.
For the record, I’m still sticking with the highly risky GEAR exchange traded fund, which today is $30.45, and I might close it out when it goes over $33. But if the market drops, it will drop like a stone. That said, I’d expect a rebound as the overall index climbs in early 2025.
That’s my best guess with this high-risk play, so approach it with care.
Meanwhile, for greater international exposure with a fund manager that has performed well, the WQG or WCMQ funds have delivered, as these chart show.
Note: Both of these funds have been brought to the Oz stock market by Associate Global Partners, which I own a significant shareholding in. But they’ve done well, and as I do a lot of educating for other companies’ funds, I should be able to blow my own trumpet occasionally, only occasionally!
The fund manager behind these funds is WCM Investment Management, who are the investing brains behind WCMQ and WQG. They are US-based, and history has shown that they’re pretty smart stock pickers!
Important informati on: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
