Is it time to reconsider the banks?
Published 02-NOV-2018 13:09 P.M.
2 minute read
Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.
In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.
The below articles were written under our previous business model. We have kept these articles online here for your reference.
Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.
Click Here to View Latest Articles
The Australian share market fell to 5,721 points this week, its lowest since October 2017.
However, it did bounce back up by more than 3 per cent overall, with the stand out sectors being Healthcare which was up over 5 per cent and Financials up around 4 per cent.
CBA and Macquarie were also up around 5 per cent, NAB around 3 per cent and ANZ around 4 per cent after reporting 3rd quarter earnings this week. Westpac is due to report earnings on Monday.
The key points to highlight in these reports is the impact on the banks’ bottom lines from the Royal Commission, as well as the damage resulting from redemption costs to pay back those that were wrongly charged in the fees for no service scandal.
Overall the third quarter earnings report from the banks was as expected as profits were down across the board. This can be attributed to restructuring costs as they simplify their business model in reaction to the Royal Commission report.
So, is it time to invest in the banks? They have been under the microscope for quite a while now, with the heat of the report from the Royal Commission hopefully being the last piece in the puzzle. I think the worst is behind the banks, so moving forward I believe they are attractive over the medium to longer term.
One thing to keep in mind is to wait for confirmation that the banks are rising rather than trade on speculation. The streets are littered with investors attempting to pick the bottom, with AMP being the latest to strip investors of their hard earned money as it fell off a cliff on news of the sale of its long-standing life insurance division.
Picking bottoms on stocks is a dangerous game if you don’t have the knowledge because more often than not the stock will fall further. Given this, investors are far better off waiting for the stock to rise over weeks and months rather than days before investing.
So what do we expect in the market?
After recovering around 200 points this week, we may have seen the bottom of the recent fall. That said, this is unconfirmed given the rise has so far only been a few days. To confirm the low, we need to see the market fall slightly to test the low of 5,721 points set on 26 October 2018.
If the market stays above this level over the coming weeks and continues to rise, then we may be in for a good Christmas. Right now, the market has time on its side to rise back up to the highs in August, and it very well may do so. Before you get too excited, it pays to exercise caution right now and be selective with your investments.
Good luck and good trading!
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in book stores and online at www.wealthwithin.com.au
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.