Following a flat couple days of trading during the week, the ASX hit a record high on the 2nd of June, The ASX rallied 1.1%, or 75.2 points, to 7217.80 points, surpassing the previous record close of 7179.5 points from just last week.
Oil and iron prices soared once again, and the ASX’s performance has been underpinned by gains made by the energy sector. Santos, Whitehaven Coal, and Origin Energy were the best performers, while Megaport led the losses in the tech sector.
In this shift from growth to value, the ASX is estimated to continue performing well. With inflation fears setting in and commodity prices soaring, the resource heavy ASX has further structural tailwinds for a solid performance for the rest of the year. There are several other plays investors can look for in the current market environment.
Commonwealth Bank shares have performed extremely well since September 2020. The Federal government’s monetary policy has been one of the driving factors for this performance. Easing of regulations around lending and ultra low interest rates have meant that CBA along with the other Aussie banks have enjoyed a rather favourable operating environment.
In what is being dubbed as the reflation trade, CBA shares have been on a hot streak since the end of February as value stocks are now in favour over growth stocks, not just in Australia, but globally. Last week, CBA shares also reached the $100 a share mark for the first time in its grand history. Another positive quarterly result was posted by the firm and this has underpinned the already upbeat performance of the stock and taken it to record highs. Business lending, home lending, and household deposits have all increased once again – resulting in a 2% rise in operating income. The operating environment is extremely favourable for the Aussie banks and our economy is going extremely strong. CBA’s dividends are also expected to be given a boost and there are talks of a buyback also around the corner. Either Way, the banks right now are still a good place to be, and CBA is arguably the best among them.
The Aussie supermarket giant operates liquor and express divisions along with supermarkets. After a rather torrid time for COL shares, they have started to rebound, returning close to 7% in the past month. The rebound has been largely due to normalising consumer behaviour and Coles cycling the significant impacts of Covid19. In the third quarter update, Supermarkets sales decreased by 6.1%. Liquor and Express sales increased by 2.6% and 7.4% respectively.
Early signs of normalising consumer behaviour were observed including improved transaction growth, a recovery of COVID-19 impacted categories such as impulse, convenience and food-to-go, and Sunday returning to be the busiest trading day of the week.
The narrative with Coles is that the stock price has had a correction recently and it has started moving in the right direction once again. With inflation being a matter of when rather than if, consumer staples with pricing power such as Coles is a good place to be as the firm can pass on the added cost to consumers. Consumers still have to buy groceries!
COL shares currently trade at $16.60 a share and with a dividend yield of 3.64%, it makes for a good blue-chip dividend stock.
These guys have a 100% interest in Sydney airport, which when functioning to full capacity without restrictions, connects over 90 travel destinations globally. The travel sector is still plagued by the border restrictions due to the coronavirus. The stock price has thus been subject to volatility in the past year. Prior to the pandemic, the SYD shares were soaring and the company was overseeing considerable growth in revenues and earnings. They are essentially a monopoly that generates revenue from multiple streams such as – retail spaces, parking, hotels, office spaces, leases from airliners, transportation, etc. This diversified business model and monopolistic characteristics with extremely wide moats has made SYD one of the mainstays in Aussie investor portfolios.
With vaccines rolling out and the government aiming for an opening of international borders in 2022, SYD deserves a second look and one to be kept a close eye on for a pullback opening up a buying opportunity. SYD shares are currently trading at $6.01 a share on the back of a 4% gain in the past 1-week.
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