Why change horses when winning the race?



The headlines in the media said it all this morning“US markets had their worst day in 7 weeks”. The Dow Jones pared deeper intraday losses to close down 0.45% with the Nasdaq and S&P500 losing around 0.5% apiece. I guess it’s a sign of the times when the Dow loses 0.45% and the headlines in the media focus on the ‘volatility’. These are calm times for the markets, but rest assured, high volume levels are going to make a return in time. However I believe this will be a theme for next year.

In yesterday’s note I referenced the overextension of the Dow relative to the 200 day moving average, and so a few more days like today are needed to close the gap. US indices dropped on Wednesday after a number of disappointing corporate earnings results and the usual ebb and flow of concerns in Washington over the tax overhaul.

After strong gains on the open, Japan’s Nikkei finally snapped its record run of gains losing 0.5%. India’s S&P BSE Sensex jumped as much as 1.6% after Prime Minister Narendra Modi’s government said late on Tuesday it will inject an unprecedented 2.11 trillion rupees ($32 billion) to recapitalise the country’s banks and boost credit.

We own ICICI Bank, one of India’s largest – in the Fat Prophets Global Contrarian Fund and in the Global Opportunities Managed Portfolio. The US listed ADRs rallied 5.7% today on top of yesterday’s 8% jump. I am going to write more about the Indian Banks and our investments in the world’s fastest growing most populous country tomorrow.


In Australia, the market was fairly flat on Tuesday, with the ASX200 edging up 8 points to close at 5905. The inflation numbers fell short of expectations, which will only reinforce the cautious approach to rate tightening by the RBA. Inflation is on the way over the medium term globally, and this will further boost the resource sector which had a good day. South32, one of our favoured stocks was well bid, with a gain on 3.2%.

The financial service platform stocks had a good day yesterday with OneVue rising 2% to 70 cents, and Praemium up 2.75% to 56 cents. Greg Smith covered off OneVue at yesterday’s Members webinar. Last week’s quarterly update was clearly well liked by the market and followed on from a robust 2017 full year result, with all business units now profitable at the bottom line. Given that most of the company’s cost base is fixed, ongoing growth in FUA will have a pronounced impact on profitability in our view. The analyst team have maintained a buy rating.

One Member asked whether we OneVue or Praemium was better, and Greg noted that both ‘could’ have their place in a diversified portfolio. Both stocks have strong operating leverage, with one point of difference being the international turnaround exposure at Praemium’s UK business.


Disclosure: The Fat Prophets Global Contrarian Fund declares a holding in ICICI Bank, South32, and Praemium.

Carpe Diem!

CEO | Fat Prophets
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