Market Commentary for March 2019

"Which way and asymmetrical... "

By Alan Hull

This commentary is in part or entirely created using extracts and comments from my weekly Blue Chip Report. For more information about the Blue Chip Report, including subscription details and a recent sample report, go to Blue Chip Report

Last month I said that global Stockmarkets will trend this year. This coming month, I think we're going to find out which way. And the analysis is pretty simple as the SP-500 index is either going to break up or break down from this point. Call it critical mass, the crossroads or the moment of truth. And as for our local Stockmarket...we are merely the tail.

There are two paths that the SP-500 can follow and as the blue and pink trendlines are merging, the clock is ticking and it has to make up it's mind. In the meantime we simply have to wait. And on the local front, our mid-year reporting season is at its end for 2019. Every February, Australian publicly listed companies compulsorily release interim financial results. And this year has been as fickle as any other.

Good results don’t mean a thing if the marketplace is expecting it and bad results could be a reason to buy a stock while it’s a bargain. Or investors might crucify it more…who knows. On a positive note, there was Cleanaway (CWY) who released stunning results and the market responded in kind. It’s gross revenues were up 46% year-on-year and the share price jumped just over 10%.

But then there was Bingo (BIN) who said that this year’s results would merely be inline with last years results. So no growth and the share price was nearly cut in half…

Same industry but two very different outcomes. My observations have been that the market’s response to many of this year’s results is asymmetrical, leaning more to the downside. In other words, the market is more critical of bad news than it is rewarding of good news. And the surprises also seem to be to the downside. Thus I would be very unhappy if I owned Blackmores shares which reported record first half year results with a profit of $34 Million.

In spite of this, investors wiped 25% off it's share price because of problems it's having with sales to China. Go figure. So I have always seen reporting season as something of a lottery and a very good advertisement for risk and money management.