Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Retailers readying for a pre-Christmas boom
Galloping into November, it’s often considered the prime entry point before months of positive returns supported by the Christmas rally. However, not every rule holds, as October showed without any major selloff. On average, November is the fifth-highest returning month of the year, as shown below.
Last year, however, returns in November 2020 were the best they had been in 30 years, led higher by the unexpected vaccine news. The S&P/ASX 200 Index returned a whopping 9.9 per cent, rising to 6,517 points. Leading into Christmas here are our two picks:
JB HiFi (ASX:JBH) – According to an Australian Retailers Association (ARA) forecast, this year’s pre-Christmas spending should come in about 11.3% above what was recorded in 2019. It comes at a time when savings are at an all time high and Australians have just come out of lockdown, keen to splash some cash in their favourite retailers. November is considered the start of the Christmas rally and a great point to get in. The first stock is electronics retailer JBH. At its October AGM, the company reported that FY21 sales fell due to lockdown restrictions.
But with the lockdown restrictions over, sales are expected to rise now that the worst of store closures is behind the company. JBH is one of the better retailers, having an established multichannel offer, and is always ready for the Christmas trading period. Macquarie has upgraded its recommendation to “outperform” with a $52.50 target price. The broker says that improving sales trends have been evident since the August update and lockdowns have simply held back demand. There should be a big surge into Christmas.
OpenPay Group (ASX:OPY) – With Christmas around the corner, shares in the Buy Now, Pay Later (BNPL) should see a reasonable increase in earnings from consumer purchases. These include Afterpay, Sezzle, OpenPay and Zip Co. The OpenPay platform is similar to its rivals but targets higher-value sectors like automotive, healthcare and home improvement. The company is funded for its launch in the US which should help OPY establish itself in the world’s largest market.
OpenPay has also joined forces with EzyVet, which is a cloud-based veterinary software service for veterinary professionals who want to save time and grow their business. The company is also beefing-up its strategy in Australia. This includes initiatives such as Officeworks co-marketing program, Bunnings magazine placements, a Melbourne Storm campaign, and MyHealth1st engagement for health customers. Growth across three major regions should allow the business to grow at scale. This will ensure a clear path to profitability in the mid-term.
Recent weakness in Openpay’s share price sees Shaw and Partners recommend the stock as a buying opportunity, especially given its recent announcement of a key acquisition in the UK market. The stock trades at a significant discount to its peers. Shaw and Partners has a “buy” rating and $4.00 price target on the company’s shares.
