Good Evening,

Welcome to Equity Espresso’s Daily Recap. Optus faced a grilling today before a senate inquiry while the Sohn Hearts & Minds conference kicked off in Sydney. We’ll catch you up on both stories, plus the rest of the day’s news. Let’s jump in.

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The Recap

The ASX200 index traded in the red for most of the day before an afternoon rally saw it move closer to parity, but inevitably closed 0.13% lower to 7,049.40, marking the third session of the week where the index finished down. Despite today’s fall, the ASX200 index ended the week over 1% higher to continue the positive run in November.

The Energy (-1.59%) sector fell again today, continuing its torrid week as WTI crude oil futures fell by 5% to trade below $73 per barrel on Thursday. This marked the lowest point since July, amid increasing signs of low demand and eased concerns about scarce supply.

Discretionary (-1.06%) was the other sector to see a sharp fall today, while Health Care (+0.55%) and Industrials (+0.50%) finished higher.

A quieter day for ASX company news; however, it was all action for Optus as it faced the music in a senate inquiry after last week’s network outage. We recap the highlights in the Quick Singles section of the newsletter.

The Sohn Hearts and Minds conference occurred today, where global fund managers put forward their top picks for 2024 in the name of charity. Check out the Deep Dive to see the companies featured.

Economic Data

• U.S. Unemployment Benefits rose by 13,000 to 231,000 for the week ending November 11, the highest point in nearly three months, surpassing estimates of 220,000.

• The NAHB/Wells Fargo Housing Market Index in the U.S. declined by 6 points to reach 34 in November, significantly below the market's expected level of 40.

• U.S. Industrial Production fell 0.6% MoM in October, the largest drop in four months and more than market expectations of a 0.3% drop.

Wall Street

U.S. markets rose slightly after another set of weak economic data underscored a gradual slowdown, reinforcing the belief that the Federal Reserve will end its rate hike campaign. The S&P 500 (+0.12%) squeezed out a gain, while the NASDAQ (+0.07%) also rose. Ten-year yields fell eight basis points to around 4.45%.

Walmart shares fell after providing a disappointing guidance of adjusted earnings per share of $6.40 to $6.48 for the year, slightly lower than analysts anticipated. The retail giant said U.S. consumers were spending cautiously because of inflation, even as it raised its annual forecast for sales and profit.

Outlook

The U.S. reports Building permit and Housing data for October overnight. In the U.K., retail sales for October are reported, while the Eurozone is the latest region to report CPI data, which is forecasted to grow by 2.9% YoY in October, down from the 4.3% rise in September.

A mixed session is on the cards in the U.S., at least at this stage, with the S&P 500 futures (+0.11%) higher while the NASDAQ is slightly lower (-0.04%).

A quieter night for company earnings, with BJ’s Wholesale Club, Atkore Inc. and Spectrum Brands, some of the companies set to report.

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Quick Singles

🪃 Local News

• Optus chief executive Kelly Bayer Rosmarin and Managing Director of its network division, Lambo Kanagaratnam, fronted a senate inquiry today regarding last week’s network outage. Here are the highlights:

  • CEO Kelly Bayer Rosmarin apologised to Optus customers in her opening statement, saying the outage shouldn’t have happened.

  • Optus was worried about ‘strange coincidences’ between last week’s outage and a data breach last year, which led to initial fears they may be dealing with a cyberattack.

  • The company had never held a crisis planning simulation for an outage of this scale.

  • Optus is unsure why 228 triple-zero calls failed during the outage.

  • Around 8,500 small businesses have sought compensation from Optus, totalling about $430,000.

• The AFR reported today that Optus chief Kelly Bayer Rosmarin is considering leaving her post, according to sources closer to her.

• Coles has increased the availability of its low-sensory shopping experience called "Quiet Hour" to five days a week. All Coles supermarkets nationwide will now offer the Quiet Hour experience from 6:00 pm to 7:00 pm, Monday to Friday.

🌏 Around The Globe

• Workers at hundreds of Starbucks stores walked off during a promotional event on Thursday, demanding better staffing and schedules, according to Workers United on X social media platform.

• During its Ignite conference in Seattle, Microsoft announced two new chips. The first one is called Maia 100, which is an artificial intelligence chip that could potentially compete with Nvidia's coveted AI graphics processing units. The second one is called Cobalt 100 Arm and is intended for general computing tasks.

• Amazon has launched a security robot for U.S. customers for a sale price of $2,349.99. The robot moves around autonomously or via remote control, is equipped with an HD periscope camera with night vision and offers a 24/7 live view and two-way talk.

• Sephora will remove all fragrances from its shelves to reduce theft in the category. Tester bottles will remain available, but customers must request boxed packages from store staff to check out.

• Huawei Technologies and China Mobile have built a 3,000-kilometre internet network. The companies claim it is the world’s first internet network to achieve a “stable and reliable” bandwidth of 1.2 terabits per second, several times faster than typical speeds worldwide.

Markets

ASX200 Company Movers

Index & Commodity Prices

Bond Prices

Sector

ETF Watch

ASX News

🗞️ Company Announcements

• Accent Group (AX1) shares fell after providing a trading update for the first 19 weeks of FY24. While total sales are up 2.1%, like-for-like sales have dipped 2%. Gross Margins to date are broadly in line with the same period last year.

• COG Financial Services (COG) has acquired a 19.99% stake in Centerpoint Alliance Limited, totalling $13 million. COG Financial says that the acquisition is further applying its expertise in the identification, due diligence, integration, and management of interests in financial services distribution businesses.

• Fortescue Metals (FMG) will invest US$35 million in a U.S.-based advanced manufacturing Center in Michigan. The facility will produce automotive and heavy industry batteries, hydrogen generators, fast charges and electrolysers.

• Pacific Smiles Group (PSQ) owes the ACT Revenue Office $884,003 in payroll tax shortfalls covering the four financial years from 2019 to 2022, according to the tax office.

• Nuix (NXL) will appear in federal court on November 20, with the hearing expected to last four weeks. ASIC is suing Nuix over a breach in disclosure in 2021, a claim Nuix is disputing.

Recommendation

Friday Book Recommendation

Deep Dive

Sohn Hearts & Minds Conference

The Sohn Hearts & Minds Conference is an annual non-profit finance event supporting Australian medical research. The event brings together investment professionals worldwide to share their best investment ideas for the coming year.

All proceeds are donated to Australian medical research beneficiaries.

Each year, a panel of finance experts give their best idea for the year; here is a summary of the top picks from today:

1. Canon Inc. (TSE: 7751) - Short, Ricky Sandler, Eminence Capital. A short position to start with Ricky believing the printing business is 20% below pre-pandemic levels, but Canon is yet to feel that decline. He cited a decline in camera sales as another reason to bet against the stock.

2. Ashland (NYSE: ASH) - Long, Ricky Sandler, Eminence Capital. He thinks the market is mispricing Ashland and expects a post-pandemic restocking boom, predicting a 55% upside to the current share price.

3. Telix Pharmaceuticals (ASX: TLX) - Long, Rikki Bannan, IFM Investors. The broker believes that if the market values its suite of products correctly, the company would be trading closer to $16 rather than the current share price of ~$9.50.

4. Swire Pacific (HKG: 0019) - Long, Tom Naughton, Prusik Investment Management. The broker expects a three times return on the company, based on the fact it is undervalued and overlooked by investors.

5. NexGen Energy (TSE: NXE) - Long, Jeremy Bond, Terra Capital. Believes this uranium company can become one of the top 10 miners in the world and that uranium prices will pass all-time highs from back in the mid-2000s.

6. Bath & Bodyworks (NYSE: BBWI) - Long, Dan Loeb, Third Point. The retailer of candles and hand sanitisers that recently spun out of Victoria’s Secret, which Dan believes was a hidden jewel, reported a terrific third quarter yesterday.

7. UniCredit (BIT: UCG) - Long, Martin Hughes, Toscafund. Several tailwinds for the Italian bank: the company has pricing power, has beaten analysts’ estimates for six straight quarters and will return about 50% of its market cap in the next two years through dividends and share buybacks.

8. AIA Insurance (HKG: 1299) - Long, Ashish Swarup, Aikya Investment Management. Negative sentiment in Hong Kong has presented a buying opportunity for AIA Insurance, which he predicts can appreciate by 50% in the next 12 months.

9. Miniso Group (HKG: 9896) - Long, Jun Bei Liu, Tribeca. The Hong Kong-listed retailer operates in what the broker says is a fragmented market with a proven concept and a powerful supply chain. Jun Bei believes the company can double over the next five years.

10. ResMed (ASX: RMD) - Long, Chris Kourtis, Ellerston Capital. The sleep apnea market is still underpenetrated, with people going undiagnosed. The cost of weight loss drugs like Ozempic is prohibitive, and the resulting weight loss is unsustainable in the long term.

11. Lamb Weston (NYSE: LW) - Long, Anglea Aldrich, Bayberry Capital. The U.S. frozen food processor has fallen on weaker margins and concerns about weight-loss drugs. Angela believes the company has room for growth from its speciality fries coupled with supply constraints, which will drive up prices.

12. Games Workshop Group (LON: GAW) - Long, Sharif el Khzan, Metronome Capital. The broker thinks the U.K.-based group’s well-known Warhammer brand has further to penetrate in the U.S. market.

13. Webster Bank (NYSE: WBS) - Long, Ravi Chopra, Azora. Webster Bank didn’t make the mistakes of others who bought low-rate, duration fixed-rate assets and have best-in-class capital and profitability.

14. Grayscale Bitcoin Trust (GBTC) - Long, Cathie Wood, Ark Invest. A proxy for the Bitcoin price, Cathie sees short-term upside with the likely approval of a Bitcoin ETF and sees the Bitcoin price at US$600,000 - US$650,000 by the end of the decade.

15. Wise (LON: GBX) - Long, Keiran Moore, Munro Partners. Sees about 50% upside from the current share price and will benefit from a rising interest rate environment due to holding deposits.

Technical Analysis

Chart Watch

A bullish chart to keep an eye on - Arizona Lithium (AZL)

Notes

• The share price has broken out of the $0.15 - $0.20 range and has flipped the 100 and 200-day EMA on a daily timeframe.

• Price has retracted after its 170% move and is holding above both EMA’s.

• If the share price can get into the grey zone, it could provide a good buying opportunity with a price target of $0.30.

Social Media

 📱 Post of The Day

Recommendation

Friday Book Recommendation

A classic book for your long-term buy-and-hold investors

Daily Quiz

❓️ Test Your Knowledge

Yesterdays Question. What was Australia's peak unemployment rate during the 2020 COVID-19 pandemic?

Answer: 7.5%. Unemployment in Australia peaked at 7.5% during June and July 2020, jumping from 5.3% at the beginning of the year. This was the second most popular answer (27%), with 5.8% receiving the highest number of votes. The current unemployment rate of 3.7% is at historical lows.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of November 13

📊 Broker Ratings

What do the brokers have to say?

1. a2 Milk (A2M) - Upgrade to Buy from Neutral (Citi)

Updated broker commentary for Altium.

👨‍💼 Director Transactions

What are the insiders doing? (On-market trade only)

Social Channels

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DISCLAIMER: None of the information provided in this newsletter should be constituted as financial advice. This newsletter is strictly for educational purposes only. It should not be taken as investment advice or a solicitation to buy or sell assets or make financial decisions. Please do your research.