Last week we said the All Ords could push past 6,000 points. It didn’t. It hasn’t.
But it will. We have complete confidence that it’ll happen in April. We think it’ll be sooner rather than later. And when it does, it will be the opening of the floodgates.
In the last week the Aussie market has simply gone sideways. This is on a backdrop of an interest rate announcement, and now more heat on the Aussie banks.
In an environment of pessimism, the market hasn’t faltered. It hasn’t shot the lights out, but it’s getting ready to.
Just have a look at the list of companies that make up the All Ords, and how they traded yesterday.
197 stocks fell in price. 77 had no change to their price. 225 rose in price. OF the companies in the ASX, Stanmore Coal [ASX:SMR] was the biggest gainer, up 11.9%. For the rolling year, Stanmore is up over 129%.
The biggest loser yesterday from the All Ords was Objective Corp [ASX:OCL]. It was down 7.73%. But still, Objective is up 21.56% for the last 12 months.
Have a look at the annual figures of All Ords companies. The biggest gainer is CleanTeQ Ltd [ASX:CLQ] up over 559%. The biggest fall is Ding Sheng Xin Ltd [DXF], seeing a 72% decrease in price.
But here’s the thing. A 72% fall in price is bad. It’s really bad. No investor would want that kind of negative performance. And if you had invested say $1,000 into Ding Sheng Xin, it would now be worth just $280.
However if you had also invested $1,000 in CleanTeQ that holding would now be worth $6,590. If those were you’re only two holdings, you’d still have $6,870.
In other words, you’d be sitting on a $4,590 profit. That’s even after seeing most of your investment in Ding Sheng Xin disappear.
It doesn’t always go according to plan — it could all crash
Of course, picking the best performing and worst performing stocks in the ASX All Ords isn’t easy. There are 500 stocks to choose from. But the point here is that in the investment game, when you hit a big winner it could easily cover any losses you might take along the way.
Now I should also point out this doesn’t always happen. Picking the best performing stocks on the ASX isn’t easy. And the fact is, any kind of investing in stocks carries a degree of risk that you need to understand and be familiar with.
Some of that risk includes the fact that the Aussie economy and Aussie market might not race off in a massive bull market like your editor expects. In fact, it could tumble. The economy could head to recession, unemployment could shoot higher. The property bubble could burst.
Our colleague Vern Gowdie is of the firm belief that things in Australia are about to get worse…far worse…before they get better. And he’s put together specific action to take if you share the same view, in his latest book, The End of Australia. But with the costs of printing and shipping a hard-copy book, Port Phillip Publishing could only produce so many copies. Vern’s unique analysis will only be available until midnight this Friday. If you’re at all worried about the economy and the country, then you have to head here to find out more.
While we can see where Vern’s coming from, we don’t agree. But that’s OK with us. Not everyone agrees with our stance either. In fact, we’re sure Vern doesn’t. A lot of people we talk to think the market is set for a massive fall.
Again, that’s fine. But from our analysis of the ASX, we don’t see it. In fact, we think that the Aussie market is primed for the biggest bull run we’ve seen every. Even bigger than the impact of the commodities boom.
Buy the fear and ride the greed
It’s going to be a decade long run. But it’s going to start with vigour and fury this year. That’s hard to consider. After all, the Aussie government is unstable. The world is on the brink of all-out trade war. The EU could disintegrate. These are all huge considerations.
But in our view the ASX has begun to decouple from these events. It’s now behaving independently from external factors.
Look at how the Aussie banks are moving ‘out of cycle’ with the RBA. The RBA leaves the cash rate on hold, but the banks move rates. They do this because of factors specific to them, not to the broader economy. This is much the same way as how the ASX is starting to behave.
The ASX is starting to move out of cycle with major macro-economic events. With all the negativity and pessimism, the All Ords are still on the brink of punching through 6,000 points.
It’s because the companies that exist on the ASX are pushing the market forward. The number of companies that are succeeding outweighs the companies that are not. It’s like the example of CleanTeQ and Ding Sheng Xin. For the ones that lose, there are ones that win, multiple times over.
These big winners are becoming more frequent as small Aussie companies turn their businesses into huge successes. Part of this is because of the access they have to global markets.
30, 40 years ago Aussie ASX companies didn’t have the internet or cloud services. They didn’t have the easy access to global markets they have today. The middle class in China was virtually non-existent.
Today, that’s all changed. Companies can leverage new technologies, huge markets, and global trade to go from micro- to small- to large-cap companies in record pace.
There are examples of these kinds of companies every day, every week, every month, and every year on the ASX. Blackmores [ASX:BKL] is one example from 2015. Galaxy Resources [ASX:GXY] in 2016. CleanTeQ [ASX:CLQ] is an example from 2017.
In any macro environment in any year there are ASX stocks that win, and win big. Even when things seem bad, there’s plenty to get excited about on the ASX. And as the market pushes back towards record highs in a negative environment, it will spark the beginning of a huge bull run. Things eventually get better — they always do. And it’s those people that bought during the fear who will see their investment supercharge as average punters flood back to the market.
Buy fear, sell greed. It’s a simple premise. But we think right now the best plan of attack is to buy the fear and ride the greed. The bulls are at the gate and it’s about to swing open. The chance to buy the fear might be running out.