Latest / ausbiz a.m / 19.08.26 with Angus Geddes, Fat Prophets
Transcript
- Andrew: Good morning and welcome to your morning wrap from Ozbiz setting you up for the day on the local market. It is Wednesday, August the nineteenth, and we're expecting another negative start to the local session. ASX futures down around a quarter of a percent. In a moment, we'll preview the day ahead with Angus Geddes. But first though, a quick wrap of where global markets finished overnight. Long-term borrowing costs from US, Germany, Japan, they've all hit their highest in decades because of a ballooning government debt and The geopolitical situation, which of course raises borrowing costs for companies and households, and that prompted risk off sentiment among investors, Wall Street closing lower, the civic conductor shares leading the declines there, the S P down around two thirds of a percent, the Nasdaq down one point three percent, the ⁓ Dow off around one fifth, and the biggest drags coming from those chip companies, Nvidia and Micron, as well as the data storage firms Sandisk and Wich Western Digital. Among the commodities, oil ⁓ Brent is up slightly in ninety-one dollars a barrel, gold down around one point eight percent to four thousand three hundred and thirty dollars an ounce, Bitcoin trading around sixty-four and a half thousand, and the Aussie dollar slightly lower at seventy point eight US cents. Well, joining us to get across the market moves is Angus Geddes from Fat Profits. Angus, good morning. So what did you make of that ⁓ session? Obviously the focus there on where those longer term bond yields are going. Angus: Good morning. Yeah, I th look I think the the bond vigilantes ⁓ are certainly beginning to ⁓ to stir and ⁓ start knocking on the door really. yeah, look, I think, you know, we're seeing a bit of trouble brewing in the bond market. The ten year ⁓ treasury, as you mentioned before, you know, it's pushed up to the highest level ⁓ in a number of years. The thirty year ⁓ at the highest level since two two thousand and seven. And so clearly the bond market's becoming more concerned about this ongoing stalemate in the Middle East, ⁓ the fact that there's been no resolution, and the fact that, you know, oil prices and energy costs have been elevated and remain elevated. And so the fear is is that that that's going to transmit into higher inflation. ⁓ it could force the Fed into action to raise rates ⁓ in coming months, and of course. you know, that that's not what the stock market really wanted to hear. So a bit of selling pressure came through last night, mainly in the technology stocks ⁓ and and and the growth sort of segment of the market where high PE ratios, high high valuations ⁓ carry a much greater sensitivity to ⁓ to higher bond yields. Andrew: So turning our attention to the local market then, Angus, ⁓ it's actually been quite negative over the past five sessions or so. What what are you putting that down to? It does tend to make try and make a bit of a comeback, I guess. We saw that yesterday in particular, right? Healthcare doing a lot of the heavy lifting. We'll get to that in just a moment. But obviously given we're in the middle of earnings season now, what what are you seeing going on in the local index? Angus: Look, there is a bit of dispersion going on in earnings season. You know, companies that are missing ⁓ market expectations have been marked down quite savagely. You know, we saw that with JB HiFi last week. ⁓ you know, some of the discretionary retailers ⁓ are doing it a bit tougher. But, you know, conversely, you know, any company that's beating expectations are being rewarded. And ⁓ yesterday I think, you know, a couple of the standouts were CSL where the market had very subdued expectations going into that result. The their headline number ⁓ read pretty badly, but you know, I think, you know, the market probably saw that as a cleansing event. ⁓ new CEO, you know, wiping the decks down. ⁓ and I think investors were probably a bit more optimistic in terms of the growth prospects for that company. And of course we had s ⁓ we had BHP reporting yesterday, the largest company on the ASX two hundred by market cap. ⁓ and I think, you know, that was that result really illustrates ⁓ the one sector which we are, you know, getting a lot of growth ⁓ and positive surprises in terms of earnings coming through is the resources sector. ⁓ and obviously a lot of the copper producers are doing Very well now with with copper close to record highs. Andrew: Yeah, it is very much the copper story, isn't it? So we look forward to to Rio as well. ⁓ interestingly, actually, today we've got Evolution Mining ⁓ reporting that obviously they've got a bit of copper and gold as well. ⁓ w what are you making of evolution at the moment? Angus: Look, I think ⁓ they've they've got the potential to surprise on the upside. I mean, we'll we'll know more when they report results this morning. But, you know, simply the last ⁓ the last twelve months, you know, we've seen gold prices trade in a wide range, but up to record levels at fifty six hundred and a decent decent bounce in recent weeks. And of course, you know, thirty percent of their revenues comes from copper. ⁓ and copper copper's been performing quite strongly. So All in all I'd expect ⁓ there there there to be a decent chance of a positive ⁓ earnings surprise on that front. A lot of the, excuse me, a lot of the ⁓ sorry, a lot of the gold producers ⁓ have have come in ⁓ with quite strong earnings earnings results, ⁓ you know, based on that elevated spot gold price. So ⁓ I think we'll get more from the same from evolution this morning. Andrew: Just in terms of copper and exposure there, Angus, are you sort of more sort of happier to to to get it via those larger diversified producers such as BHP or or would you be interested in maybe a pure place such as Sandfire? Angus: Look, Andrew, we're playing both both sides of the copper, ⁓ the copper theme. ⁓ certainly we've got ⁓ BHP as one of our sort of cornerstone ⁓ holdings across our portfolio, but also ⁓ a fair amount of exposure to Rio. But I also like the pure plays, ⁓ you know, the likes of Sandfire ⁓ Sanfire ⁓ resources, which ⁓ w which is which has been doing well and has quite a ⁓ quite a solid sort of growth profile outlook going forward. ⁓ and even, you know, down to some of the smaller copper miners such as twenty nine metals, which has been plagued by production problems and ⁓ you know, w water flooding issues at some of its mines. I think there's a turning point probably coming there. So yeah, playing playing it at the larger end but also at the smaller end. And also ⁓ capstone copper, which is a large ⁓ Canadian domicile copper miner. ⁓ it's a mid tier producer, but also listed on the ASX 200. We've got a decent amount of exposure there. Andrew: ⁓ so what about the gold story then obviously mentioning evolution? are you feeling more confident perhaps we've seen that base in gold and ⁓ as a result, are you perhaps getting greater exposure there? Angus: Andrew, yeah, look, I I I'm of the view that that we've seen ⁓ this this correction that's played out in gold ⁓ since the the March highs at 5600. I think that's now complete and we're in a new in a new phase of the cycle. technically it you know, gold looks to have really ⁓ sort of confirmed a major bottom at four thousand. And I think we could set at five thousand, back at five thousand by the end of the year. I'll base that on a couple of a couple of ⁓ factors. Firstly, the US dollar, despite the fact that the bond market has sold off in recent ⁓ recent weeks and recent months, we haven't seen the US dollar run away to the top side. ⁓ secondly, I think ⁓ we're seeing wholesale selling of US treasuries, and ⁓ that's weighing on the greenback. And some of that cash that's that's coming out of the US Treasury market ⁓ wouldn't surprise me if it's going into physical gold. I mean, physical gold is a financial asset. It's a great way to diversify in into an asset class that doesn't carry a liability on the other side. And I and I think, you know, the this this trend that we've seen in recent years of central bank buying, ⁓ that's that's reasserting. We know that the Chinese central bank has continued to buy so You know, all in all I'm a ⁓ I'm bullish on gold looking into the end of the year and you know, I think it's got a ⁓ a decent chance of getting back to five thousand. Andrew: And are you playing that via the the larger producers or perhaps are you sort of looking further down the scale? Angus: Look, we we we definitely ⁓ play the larger some of the larger producers such as Newmont. ⁓ but I also like Evolution. That's one of our largest positions. ⁓ you know, it's a solid mid-tier gold producer, ⁓ you know, managed ⁓ domiciled in Australia, managed ⁓ by Australians. And I I like the fact that it's got a blended ⁓ copper mix, so thirty percent of the revenues come from copper. So you're getting ups you're getting ⁓ you're getting ⁓ exposure to to the base metal and the AI thematic ⁓ via copper. And also the fact that they've got a number of high quality mines in tier one jurisdictions. ⁓ and by that, you know, I'm you know I'm talking Australia and the developed developed world, not not some of the more risky ⁓ geographical locations around the world. Andrew: Angus, obviously energy has done well, we know that, given ⁓ certainly over the duration of the conflict in the Middle East. ⁓ just taking a look though at the coal miners, ⁓ how are you feeling about those at the moment? In fact, today we've got Whitehaven and Yang Coal reporting. What are your thoughts? Angus: Look, we we like the I certainly like the energy sector generally. ⁓ certainly in Australia, Santos Woodside, low valuations, good dividend payers, cheap relative to international peers. But look, you can't go past the coal miners either. I mean, I know they're politically out of favor, you know, given the you know, given the greenhouse emi emission issue, but ⁓ you know, the world still needs coal, ⁓ you know, metallurgical coal which goes into ⁓ making steel, you know, that's needed. And I think, you know, as far as the Australian domestic coal miners are concerned, valuations there are quite cheap, ⁓ with respect to companies we own, such as Whitehaven and New Hope. ⁓ and they're great dividend payers. And I think, you know, given the improving ⁓ coal price this year, you know, which has moved higher in lockstep with with crude oil markets, ⁓ You know, we can probably expect decent results from both of those companies when they report. Andrew: Well I think it's great to get across what you're looking for in reporting season. Thanks for joining us in Fat Profits. Angus: Thanks, Andrew. Bye for now. Andrew: And that is your Ausbiz Morning Wrap. Hope you have a great day. I'm Andrew Gagan. Thanks for listening.