Yovich & Co. Weekly Update - 10 November 2014

Nov 10, 2014 | Commentary

 Changes in Market



This Week’s Themes

  • The local market has bounced back over the last few weeks to again be at record highs. The buying interest has been centered on the higher yielding companies as investors start to price in a sustained period of low interest rates.

  • The ASX 200 is lagging behind the performance of the New Zealand market as possible regulation for the banking sector and low resource prices continue to drag on the market across the Tasman.

  • At the end of October, Janet Yellen, the US Federal Reserve Chairman, announced the end of the Bond buying program, also known as Quantitative Easing. The market has taken great confidence in this signal and pushed the US stock markets back to all time highs. Over the past 6 years, the US Fed has dropped interest rates to zero per cent and expanded their balance sheet by $4.5 trillion to stimulate the US economy and avoid a sustained recession since the Global Financial Crisis.

  • The strength of the recovery in the US saw the USD rally against most major currencies and as a result the Kiwi fell against the USD.

Investment News

High Yield New Zealand Shares

Over the past month we have seen the large cap, high yielding utility companies like Mighty River Power (up 18%) , Contact Energy (up 11%) and Spark (up 12%) rally significantly as investors chase yield. Below is a list of other high yielding shares that are on our preferred list:

PGG Wrightsons – PGW.nz

FNZC Investment View: Our enthusiasm for the stock is premised on a combination of some recovery in earnings growth in an undervalued business that continues to make significant strides in repairing its balance sheet.

Forecasted Gross Div Yield: 12.34%                   Current Price: $ 0.485                          Target Price: $0.53

Methven – MVN.nz

Yovich & Co Investment View: Clear growth strategy with pursuing opportunities in China with strong cash flow despite challenging market conditions in Europe and Australia. Recent takeover of Chinese manufacturer has secured supply chain and improved global competitiveness. Slightly disappointing result has not changed our long term view of their potential.

Forecasted Gross Div Yield: 9.54%                    Current Price: $1.16                             Target Price: $ 1.30

Opus International Consultants – OIC.nz

FNZC Investment View: After many years of making small incremental acquisitions, OIC has finally made a significant leap forward with a scale transaction that also brings a new dimension in the form of oil and gas discipline into its fold. OIC is poised to benefit from the on-going Christchurch rebuild momentum. A recovery in other NZ regions' infrastructure spending will likely further boost the prospects for OIC.

Forecasted Gross Div Yield: 7.93%                    Current Price: $ 1.51                            Target Price: $ 2.20

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About the author

Jarrod Goodall

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Weekly Update Investment Shares Bonds Market Commentary PGG Wrightsons PGW.nz Methven MVN.nz Opus International Consultants OIC.nz


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