Latest / ausbiz a.m / 14.08.26 with Mitch Stone, Invest With Mitch
Transcript
- Andrew: Good morning. Welcome to your morning rap from OSB setting you up for the day for the Australian share market. It is Friday, August the fourteenth, and we're expecting another negative session on the local market. ASX futures down around four tenths of a percent. In a moment, we'll preview the day ahead with Mitch Stone, but first quick wrap of where global markets finished overnight on Wall Street. The SP rose 0.7% to a record closing high, largely fueled by advances in tech stocks, in particular Sand Disc doing very well. The Nasdaq was up around eight tenths of percent, the Dow around one-tenth of a percent higher. Investors pretty much encouraged by that tame inflation report we got in the previous session, with that data supporting expectations the Fed will not raise interest rates at its September meeting. Meanwhile, Iran and the US remain at log ahead so they efforts to agree to a permanent end to the Iran war. Among the commodities, Brink crude is down 2.3% to $87 a barrel. That's largely on a weak demand outlook. Gold slipping around one and a half percent to close to four thousand three hundred and fifty dollars an ounce, Bitcoin trading below sixty three and a half thousand, and the Aussie dollar, it's at seventy point six US cents. Let's get across those market moves now. Mitch Stone is joining us from Invest with Mitch. Mitch, good morning. Mitch Stone: good morning Andrew. Thanks for having me on. It's Andrew: So how how did you what did you make of that session? yet another record with the S P. Mitch Stone: It just keeps pushing higher and higher, doesn't it? It's just like the investors are looking for an excuse to buy. You get a tame inflation report and everyone's on the bid all of a sudden. A little bit, a little bit cautious with the tech stocks at the moment. you know, I've thought that the NASDAQ in particular is just gonna fall, but it just keeps going higher and higher. So I'm in the position now where I don't want to invest in it, but I still don't want to bet against them. Andrew: So h how do you position yourself then given that? Mitch Stone: You don't, you don't, you just stay clear, you just sit on the sideline. I know it's boring, but too much risk at the moment for my lacking. Andrew: All right, so you're of the view that this is gonna unwind at some point. Better to be sitting on the sidelines. Mitch Stone: Yeah, I think so. You know, we've largely missed the boat in the in in the in the tech run. but you've got to look forward. And I think that there's so just so much hype around the whole AI trade and too much risk versus reward at the moment in my opinion. Andrew: Well, of course we've largely missed out on that here in Australia because we simply don't have that exposure to AI, at least directly. nonetheless, Mitch, more recently we did take out a new record just a little lower this week though. What what are you seeing on the on the broader market here in Australia? Mitch Stone: Well, we're getting into the thick of reporting season. So so far our companies have reported quite well. yesterday, for example, Treasury Wines stood out. I mean you can hardly say that it was a it was a great result. It was a a one point zero eight billion dollar loss, but the market was largely expecting that and that was because of a one point three billion dollar impairment due to its US business. But if you strip that out, underlying Ebbett actually came in at four hundred and ninety two million dollars ahead of the guidance range. So I think it's a good opportunity there in penfolds at the moment. sorry in in Treasury at the moment. Andrew: Of course the I mean the company's done a complete strategic reset. It's actually dumped quite a few brands. Do you so you think given that streamlining, it's actually setting it up quite well now? Mitch Stone: Yeah, absolutely. So Penfold's is still the the crown in the jewel, if you will. I think it's a good story there in China. so the new CEO, Sam Fisher, seems to be doing a a really good job. This is very much a turnaround story and he's he's certainly not sugarcoating it, isn't he, isn't he? He's Flag 2028 is the year of the benefits and cost cuttings, restructuring, and I think they'll they'll swing to a a decent profit in the years years ahead. This it's an interesting story, Treasury. you have a look on the on the buy side, you've got this French billionaire, Oliver Gourdet, continues to to buy into this stock through his investment vehicle platin sale. And on the on the other side you've got the short sellers with about fifteen percent of the the the the float currently bet against. So someone's gonna be a big winner here and someone's gonna be a loser, but I sure as I wouldn't want to be betting against the the French billionaire, put it that way. In fact I think he's gonna continue to take his stake up steadily, potentially to close to twenty percent. Then there could be some some action. Andrew: Okay. So so broadly then you're seeing upside, you're quite happy to be then with Treasury One. Mitch Stone: Y yeah, absolutely. so look, there's still a bit of debt, one point seven billion dollars. I think management will probably let the the share price go up to mid sevens, eights, and then probably do a a raise to short the balance sheet, but still at current levels, yeah, decent upside. Andrew: Mitch, just looking ahead to today. It's actually fairly quiet. we've got Abacus Storage King, QB Insurance, another insurer. And baby bunting, let's take a look at that. Look, the retail space, we won't know what's going on there. Obviously, Australians are very reticent to open their wallets very widely at the moment, given what's going on with cost of living pressures and where interest rates are potentially likely to go. How do you see baby bunting fairing? Mitch Stone: Well, I think look a as a father, you know, especially with your with your with your firstborn, y you want that peace of mind when you're when you're buying for your you know, your your son or or daughter and you wanna go into the store, you wanna feel the product, you wanna talk to somebody. So I sort of I've got a lot of confidence in this in this stock at the moment. the market cap's sort of dwindled down to geez a hundred and twenty odd million dollars. I think management have set the bar very low on this stock. they cut guidance from seventeen million down to sixteen million. And I think they'll surprise the upside today. I mean they're still they're seeing solid solid growth in their stores. and it's really the the margins very healthy, sort of thirty two to forty percent. I found quite surprising. So look if they if they print a figure of anything north of fifteen, sixteen million dollars NPAT today, I think this stock's gonna rally hard. So certainly one to look out for. Andrew: Sounds as though you look at it as not as a discretionary stock. I'm I'm guessing because you are Mitch Stone: No. Andrew: a a father with young kids that you see them as necessities. Mitch Stone: Yeah, I a absolutely for sure. I mean, yeah, like I I personally want to go into a store. I wanna see the product, make sure it's, you know, high quality material and I wanna have a chat to somebody and you're just not gonna get that online. this is a This is a business with they've got seventy nine stores around Australia and they're actively re refurbishing them. they've managed to get the cost of the the new fit outs down from one and a half million dollars, sorry, one point seven million dollars last year down to around one million dollars this year. But more importantly, they're starting to see the fruits from that. they're seeing twenty five percent uplift in in store sales after those fit outs. So yeah, look it's a it's a it's a turnaround story. much like Treasury Wines, but it's been oversold and yeah, I think it's think it's gonna do quite well. Andrew: Mitch, how how are you feeling more generally about the retail space at the moment? Mitch Stone: Look, it's it's tough, isn't it? I mean it's it's hard to it's hard to get excited about it. What I'm looking for is stocks that have already been absolutely smashed that are genuinely good businesses. so yeah, baby bunting is is a fits that criteria. Andrew: Let's l turn to another stock on your list, which is in the energy sector, Karoon. interested to know why you're looking at this. Now of course we know the the broader story, what's going on with with the energy sector having benefited from the conflict in the Middle East. What are you seeing with Karoon at the moment? Mitch Stone: So cheap. I just for the life of me, I can't work out why it's still on a PE of five and a half to six. It kind of reminds me of Yanko five to ten years ago. Do you remember when Yanko was trading on a P of three and people just assumed there was something wrong with the business? It's it's the same with Karoon at the moment. It's being priced as a a real speculative stock, but it's far from. I mean, they're producing 22,000 barrels of oil a day for a very low cost of production, around 13 $13. And as you said before, oil's what eighty seven dollars a barrel. so very, very cheap stock. it's free cash flow about a hundred and fifty million, that's US dollars as well. very, very manageable debt. I mean management's own words, they said this this stock is well undervalued, so we're gonna We're gonna initiate a buyback. So I just on on every metric this this stock is is undervalued. Andrew: Have you had broader exposure in the energy sector, particularly since the war began? Mitch Stone: Yeah, yeah. So when this war kicked off, when was it? Sort of March. we entered Karoon. at higher levels than today, we're sort of underwater, ten cents a share, but we're confident we'll make it back. I also we're s also doubled up in buying Woodside energy. so Karoon is more of a an oil play. but Woodside is more of a a nat gas play. So yeah, I like the two stocks. Yeah, I mean very different companies. Karoon's market cap is one billion dollars and Woodside's around sort of fifty, fifty five billion. So it's a much larger company. But yeah, risk to reward, my money's on Coron. Andrew: interesting as to where perhaps the oil price is going. I mean, who knows how this conflict is gonna win, but once it does Mitch I'm I've caught up with a couple of technical analysts who say that look the the oil price could tumble significantly. Does that concern you at all? Mitch Stone: Yeah. no, not at all. I think I think that I'm I'm the opposite. I'm so bullish on oil at the moment. I think it's a crowded trade that that oil's going lower. I mean headlines are are causing a lot of volatility, but ultimately what's going to drive the actual price is supply and demand and not a lot of supplies getting through the straight off or mozz at the moment. I mean, tanker traffic is down to a a three month low. so yeah, I I'm taking the complete other view. I I think that oil will push higher and looking for those stocks with higher betas to the energy to to the price of oil, such as such as Karoon. Andrew: Well Mitch, great to get across those stocks you're watching this reporting season. hope you enjoy it. Looking forward to catching up towards the end of it as we get some some more detail and perhaps some other stocks you're watching. Thanks for joining us. Mitch Stone: No thanks Andrew. Have a nice day. Andrew: And that is your Ausbiz Morning wrap. Hope you have a great day. I'm Andrew Gagan. Thanks for listening.