Vaccine moves markets, ASX crash has no effect and … 4 ASX stocks to watch
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According to Nigel Green, chief executive and founder of deVere Group, the growing noise about the rotation from growth to value stocks as a result of the optimistic vaccine news is “misguided” and could “catch-out investors.
Over the past two weeks there have been several key breakthroughs in the fight against COVID-19, causing an ‘unprecedented’ rotation in stocks – the counter movement by traders from one equity class or sector into another.
“Optimism driven by progress towards a COVID-19 vaccine has prompted many investors around the world to ditch several of 2020’s high-flying stocks - the ones that benefitted from the impact of the pandemic - and buy ones that were beaten down by coronavirus,” Green said.
“In the last few days, there’s been a historical, violent rotation from growth and momentum stocks, like stay-at-home tech, to value funds, including financials and industrials, as a result of the positive vaccine news.
“Hopes for a potential vaccine are legitimate and the developments are, without question, positive news for humanity.
“However, The Great Rotation could be misguided and could catch-out investors.
“They might be looking ahead to the post-pandemic era with a virus-free economy, but the world, the global economy, how we live, do business and interact remains fundamentally changed.
“It is doubtful the world will go back exactly to how it was pre-COVID – there are many aspects of the ‘new normal’ which people like and support. As such, some of the major shifts are unlikely to be reversed.
“The remote working phenomenon is one example. Even if 20% of office workers return to the office full time, the change in working patterns is monumental.
“Other examples include business travel being replaced with videoconferencing, and online retail - people have fallen in love with it. Will they all suddenly go back to the stores? Then there’s the use of apps for everyday tasks such as banking, also for healthcare and medical analysis, amongst many other things.
“In many ways, COVID-19 simply accelerated the growing trend that existed before towards consumer convenience, for 24/7 access and on-demand.
“Therefore, dumping stocks that support these major societal and economic seismic shifts in favour of so-called recovery stocks might catch investors off guard.”
The deVere CEO also highlights that the roll-out of a mass global vaccination agenda will be a lengthy process and will face an uphill logistical struggle, plus there are the “vaccine sceptic concerns to address.”
“The best way for investors to position themselves for the opportunities and to mitigate risks is to have a broad spread of investments, and not to try to second guess the market.”
4 ASX stocks to watch
MyFiziq (ASX: MYQ)
MYQ is racking up deals as it thunders towards a NASDAQ listing. This week, the company signed a binding term sheet that could give it access to approximately 60 million end users. The deal is with The Original Fit Factory Ltd, a UK based technology company that has developed a flexible and at home health and fitness platform for both end users and B2B partners. The companies will work together to integrate MyFiziq’s body tracking application into The Original Fit Factory’s B2C and white label B2B offerings across fitness and wellbeing, medical, corporate wellness, and insurance sectors. Known as TRUCONNECT, The Original Fit Factory Ltd app, is a world-leading app tackling fitness and mental health, available in 71 countries, across 7 continents. The Original Fit Factory has access to approximately 60 million end users globally across these sectors. Under the terms of the binding terms sheet, a market ready iteration is expected to be rolled out by 31 January 2021.
88 Energy Ltd (ASX: 88E)
88E completed a capital raise up to AU$10.07 million before costs, 88E is Primed for Another Run in Lead Up to Multi-Billion Barrel Drilling Event. The company announced it is planning to drill two wells in Q1 of 2021, which will drill through multiple large conventional oil targets at the project. 88E’s Project Peregrine has a 1.6 billion barrel mean prospective resource across three prospects.Two prospects alone, Merlin and Harrier, combined, have a prospective, unrisked resource of over 1 billion barrels. A significant share price run in the coming months is expected, on strong volumes, in the lead up to this large drilling event in February 20211.
Galileo Mining Limited (ASX:GAL)
Nickel explorer GAL has been quiet of late, but that doesn’t mean it stopped working. News this week bumped its share price up a couple of percentage points, proving there’s life in the stock. The company announced results from a large program of ongoing electro-magnetic (EM) surveying surrounding its Lantern Prospect in the Fraser Range region of Western Australia. Results confirm that GAL is working in a highly prospective area and with plenty of work programs planned, we should see newsflow pick up into the new year.
GTi Resources (ASX: GTR)
GTR is preparing to drill its Niagara Gold Project in December. The company has analysed multi‐element assays from the recently completed first pass shallow aircore drilling program at Niagara, which follow the previously announced gold assays from the aircore drilling program that intersected elevated gold values and anomalism of up to 2.8 g/t gold. The areas that lie within the Niagara Project are largely under-explored despite historical mining having identified high-grade mineralisation. Consequently, the upcoming exploration program could be a defining moment for GTI.
This week’s high flyers
While several of our portfolio companies have enjoyed a solid week based on news flow, others hit new highs without even trying.
Vulcan Energy Ltd (ASX: VUL)
Vulcan has enjoyed spectacular momentum this year and this week saw the company reach the $2.50 milestone. The company’s share price was just 18 cents in February. There looks to be no slowing down either, as Vulcan rides the electric vehicle wave with the world’s largest lithium resource in its arsenal.
Whitehawk Ltd (ASX: WHK)
Cybersecurity expertise has never been more sought after, which suits cybersecurity provider WHK. The company broke out this week, closing at a high of 28.4 cents on no news. WHK started the week at 22.5 cents and has grown steadily over the course of the year from 8.5 cents in January. WHK continues to rack up high level contracts across US government departments.
Euro Manganese (ASX: EMN)
EMN has had a good week, up from 30 cents to 40 cents. It is sitting on the largest manganese resource in Europe, right in the thick of the action in the rapidly growing EV battery markets in Europe, where there is no local primary supply of manganese and will produce 50,000 tonnes per annum of the highest-purity manganese metal available.
Vonex Limited (ASX: VN8)
VN8 closed at a high of 22 cents this week. Again on no news. Its AGM is today, so perhaps investors are expecting big news to come out. Whatever happens, we will cover the stock ion more detail next week, so keep a keen eye out.
International stocks to watch
eToro’s Adam Vettese has the following stocks on his radar.
Intuit (NASDAQ: INTU)
Finance and accounting software firm Intuit has gained 35% in 2020, including a 14% increase over the past three months. The firm sells popular products TurboTax and QuickBooks, and owns a huge portion of the online tax preparation market in the US. Intuit delivered its latest set of quarterly earnings this week, after beating expectations last quarter. Wall Street analysts’ expectations for the firm have ticked up over the past three months, with an earnings per share figure of $0.41 anticipated for the latest quarter.
NetEase (HKG: 9999)
Chinese internet technology firm NetEase is a major provider of online and mobile games and internet services in China. The company has a Nasdaq listing in the US, and has added nearly 40% to its share price year-to-date. NetEase delivered its latest quarterly update on Thursday morning New York time, with its dividend and how gaming demand has sustained in China after several months of Covid-19 being effectively contained. Wall Street analysts lean heavily towards a buy rating on the stock.
Workday (NASDAQ: WDAY)
Financial and human capital management software firm Workday offers businesses access to a range of applications through the cloud, and as such has gained more than 35% in 2020 so far on the back of mass remote working. That rally has stalled recently, however, with the stock close to flat over the past month. Over the past three months, multiple analysts have upgraded their view of the stock to a buy rating.
The best and worst-performing sectors this week
The ASX market performed well with the Financial Services sector up over 5 percent followed by Energy up almost 5 percent while Consumer Discretionary was up nearly 2 percent. The worst performers include Information Technology down nearly 2 percent followed by Utilities down nearly 1 percent, while Communications Services is just in the red.
Looking at the ASX/S&P500 top 100 shares, the best performers include Unibail-Rodamco-Westfield, which jumped up strongly again by over 30 percent with retail investors attempting to profit from a stock that has performed very poorly over the past few years.
Next is Bendigo Adelaide Bank, which is up over 14 percent followed by Whitehaven Coal up over 13 percent. The worst performers include Evolution Mining down over 7 percent followed by Northern Star Resources and Ausnet Services, which are both down over 6 percent.
So we do we expect in the market moving forward?
According to Wealth Within’s Dale Gillham, “The Australian market continues to rise on the back of good news around a COVID vaccine with the market rising for twelve of the last thirteen trading days achieving a gain of nearly 10 percent. While it is possible the market may move down for a few days in the coming week, everything looks good for the All Ordinaries to rise strongly until late January and possibly into February.
“Given this, my expectation is that All Ordinaries Index will continue to move up to break above the previous all-time high set in February of this year at 7,289 points. While I don’t expect the technology sector to be a big mover during this period, I do believe that stocks in the Energy, Materials, and Financial sector will perform well. Given the volatility in the market right now, it is not a good time to be taking risks to bottom pick stocks, nor is it the time to be buying penny dreadfuls, rather you should be focusing on quality blue-chip stocks.”
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