FNArena’s Weekly Insights – May 10 2021

In this week’s Weekly Insights:

-Back To Pre-Covid Forecasts
-Conviction Calls
-Research To Download
-All-Weather Stocks: My Research & The Model Portfolio

By Rudi Filapek-Vandyck, Editor FNArena

Back To Pre-Covid Forecasts

In the end, the local share market did not require another momentum boost from the local banks to rally towards a fresh all-time high for the ASX200 at the start of the second week in May.

Financial updates delivered by ANZ Bank ((ANZ)), National Australia Bank ((NAB)) and Macquarie Group ((MQG)) proved, on balance, a rather mixed affair after the well-received, better-than-expected operational performance from sector laggard Westpac ((WBC)) on the first trading day of the month.

But look beyond the immediate share price responses, and the media headlines, and the end result was simply not that bad. In FNArena terms: most consensus target prices have moved higher post market updates, effectively handing investors more wiggle room to push share prices higher without running the risk of moving into overheated ‘bubble’ territory.

A brief recap post last week’s results releases:

-Westpac – consensus price target moved to $28 from $26.79
-ANZ Bank – consensus price target moved to $29.92 from $30 (down!)
-NAB – consensus price target moved to $27.49 from $27.20
-Macquarie – consensus price target moved to $161.20 from $152.38

The sobering post-results observation is, of course, that ex-Westpac most moves have remained pretty benign. Both Westpac and ANZ Bank shares are trading well below their respective targets, but this is no longer the case for National Australia Bank, Macquarie or sector leader CommBank ((CBA)).

Equally noteworthy: there have been no universal upgrades to earnings estimates for the sector.

Hence, the market’s upside limitation has not been removed, at least not via the banks. With copper rallying to an all-time record high and iron ore achieving the same feat, breaking through US$200/tonne last week, the next upgrades in earnings forecasts, dividends and valuations & price targets will be coming from resources companies led by index heavyweights BHP Group ((BHP)), Rio Tinto ((RIO)) and Fortescue Metals ((FMG)).

Here the not so good news is that share prices for all three are already trading above targets, implying the market is front running the next mark-to-market updates from mining sector analysts.

Click to read the Full Report