Australian Sharemarket Update - Mid 2017

There is a substantial amount of financial material available online regarding Australian equities and sharemarket performance. We don't intend to compete in that regard, but we have had a long term relationship with John Goodlad of Hartleys sharebrokers, who has many expat clients, and include his briefings as a short, sharp briefing for Australian expats. You can make contact with John through our Inquiry Form.

2016 - 2017 a "Stellar Year"

The Australian Stock Market finished the financial year up over 9%.  If we add in dividends of around 4%, it’s been a stellar year for investors.

And for investors who stuck with the tried and true diversification mantra, the gains were across the board – and not just the Banks and the Miners.

And in a plus sign for contrarians, some of last year’s losers were this year’s biggest winners in Qantas, Bluescope and A2 Milk.  Volatility abounded in the mining sector but RIO finished the year up 40% with BHP offshoot, South 32, performing even better.

The Banks finished up and investors enjoyed strong fully franked dividends as well.

Where to now? 

The market is trading at its long term average price to earnings ratio of around 15 – 16 x with dividend yield running at around 4%.  As long as investors have a diversified core portfolio to ensure market performance, they can afford to focus on stock and sectoral or thematic selection.

One theme that may benefit over the next year is the Mid-cap Industrial space.  This was a massive outperformer a couple of years ago when the whole Industrials sector lifted strongly.  But it is now trading at a discount to the majors companies in the ASX 50.

There are a number of particular companies that may pick up as the markets recognises their earnings and their potential.  One recent example was Flight Centre (FLT) which was trading in the 20s a few months ago.  It is now back well over the 40 dollar level.  Potential companies in this league include Greencross Limited (GXL – the pet care industry) and Retail Food Group (RFG) – which has been caught up in the whole Amazon - related Retail selldown.

Another way of covering this theme is WAM Capital Limited (WAM).  The Wilson Asset Management team have an enviable track record of picking the right mid cap companies to buy and sell.  With a 6% fully franked dividend, it is a great way to cover this important sector.

At the large cap end, we are still buyers of BHP in the low 20s and South 32 if it dips back to the mid 2s.

Wesfarmers in the 30s always repays a Buy, and Woolworths at current levels is attractive.

Our top banking buy at current levels is Westpac and we have been nibbling away at QBE on its most recent dip.

Our latest Month in Perspective contains our latest research on Aged Care provider AVEO (AOG), Blackmores (BKL),  Greencross (GXL) and Mayne Pharma (MYX) – all have Accumulate recommendations attached.