CognitiveWealth Financial Partners – Market Update March 2021

It has been quiet for the past five months, with the market trading in a very narrow band. This is the main reason why you may feel our communication to you has been lacking. Given the run up from the Covid sell off we are struggling to see value in most of the top end stocks.

Even with a “good” reporting season behind us (February) – some analysts regard it as “the best ever” – we saw the market do very little, some companies were sold off despite beating expectations. This furthers our caution towards current pricing.

Themes & stocks we’re currently considering:

– A2M – A2milk has been severely punished due to a sudden loss in sales (Daigou) on the back of border closures from the pandemic. We believe the long term outlook is positive, with the share price having incredible upside potential. Borders re-opening would be the major catalyst. In the meantime we are monitoring the increase in business to business distribution channels to China. These have been steadily growing.

– CSL – CSL has been punished in the market despite strong 1H earnings, they’re currently trading at a 22% discount to their pre-Covid level, despite an increase in earnings and the company being in a better position than last year

– Commodities (CRN, TGF) with the Biden administration in the US, we expect them to lead a global push toward renewables. We believe this can’t be achieved without some of the “dirty” stuff, predominantly iron ore and coking coal (large scale renewables  consume a lot of steel). We favour Coronado (CRN) over other metallurgical coal producers due to their Australian and US operations. Tribecca Global Resources (TGF) we find this listed investment company to no be trading at a 20% discount to net tangible  asset (NTA). Whilst the 1st year after listing performance was rather poor, the management team have redeemed themselves and are now sitting at a NTA of $2.30/share (price is $1.90)

– Gold (NST) though our team generally advises and cautions against the yellow metal, current market uncertainty and the selloff in gold has prompted us to consider a short-term trade potential. With gold prices significantly off their highs we believe a short-term  investment in Northern Star Resources (NST) could prove to be worthwhile.  Market analysts expect at revenue growth of 10%+ in FY 22. Technical analysis also indicates a bounce off support levels

– SNS – Sensen Networks surveillance technology company focused on development of smart cities with the use of AI technology. Incredible growth opportunity as it continues to win local government contracts. They have new contract revenue with a target of $6m (from $2.5m current) by the end of the year.

The market continues to be rather indecisive, rest assured, the companies we have recommended have strong balance sheets which can withstand volatile times. The share price doesn’t always reflect a company’s true value and investors must maintain the long-term view, away from the daily volatility and sensational headlines.

For clients that follow our advice our returns over both the last year and also the long term have far exceeded the market return.  We shall continue to search for opportunities missed by the market but feel free to contact us at any stage for a market update or to discuss the above more specifically.