Good Evening,

Welcome to Equity Espresso

We’re here to catch you up on the day’s stock market news in Australia and abroad.

Here’s a sample of what you may have missed today:

1. 📈 An ETF Deep Dive

2. ✈️ Qantas'Turbulence

3. 🚀 Polynovo's Revenue Rockets

4. ⬆️ Uraniums Upward Momentum

5. 📰 Hollywood's Historic Strike Ends

The Recap

Markets Mimic Friday's Frenzy

It felt like Deja Vu today; markets dropped out of the gate, spending the rest of the day clawing back lost ground to finish with an unlikely gain.
Mirroring Friday’s trade, the ASX200 index fell by 46 pts. early in the session, but ended Monday up 7.7 pts or 0.1% to 7,076.50

The ASX200 went against the grain as Asian markets retreated today amid renewed concerns over China’s Real Estate sector. China Evergrande Group announced that it will not be able to issue new debt because of a current government investigation into its unit, Hengda Real Estate Group. This news caused the property developer's shares to drop by almost 25% during Hong Kong trade, resulting in losses for other real estate stocks.

Tech (+1.92%) was the best-performing ASX sector of the nine that finished higher, with Wisetech (+1.6%), Xero (+2.0%) and NextDC (+1.3%) all finishing in the green. Materials fell (-0.7%) as iron ore futures slumped to $US117.20 per tonne.

In company news, Qantas continues to stay in the headlines, flagging a $200 million additional hit in costs due to higher fuel prices and announcing it will spend $80 million to make ‘customer improvements’.
Lithium miner Allkem fell after it flagged higher costs at its mines.
Milk producer Synlait rose despite reporting a full-year earnings loss—more on this and the other companies with announcements in our ASX company section.

Uranium prices continue to rally, trading at over $US65.50/lbs. Paladin Energy (+6.1%), Boss Energy (+5.1%) and Deep Yellow (+13.1%) all finished higher.

Outlook

U.S. futures were flat to slightly down this afternoon as markets navigate a hawkish stance from the Federal Reserve and soaring Treasury yields that have spooked investors in the last week.

• S&P 500 Futures -0.01%

• NASDAQ Futures -0.07%

Economic News

• In Australia, retail sales are one of the key data points to keep an eye on this week, due on Thursday. August inflation will be reported on Wednesday, where a spike in fuel prices is expected to push this figure to 5.2%, up from 4.9% in July.

• In the U.S., Building data, GDP, Home Sales and a Fed Chair speech are some of the key events on a jam-packed economic calendar. Check out our economic calendar later in the newsletter for the complete list.

Wall Street

The S&P 500 fell 2.9% last week, its biggest weekly decline since March. It extended a three-week losing streak amid re-elevated inflation and the projection for higher terminal rates, which required a re-valuation of the equity markets. Tech stocks took the biggest hits, with Amazon and Tesla down 8% and 11% for the week.

Yields on the benchmark U.S. 10-year Treasury, which move inversely to prices, stand near 16-year highs. High Treasury yields dull the allure of stocks by offering investors an attractive payout on an investment seen as virtually risk-free.

Sponsor

5 Minutes That Might Change Your Life

Sign up for the ‘Your Next Breakthrough’ newsletter and receive
one idea, one question, and one exercise each week that could spark your next breakthrough.

Just five minutes each week that might change everything.

Quick Singles

🪃 Local News

• Keep an eye on your bank account - $21.7 billion in dividends will be paid to investors this week. Pilbara Minerals, BHP Group, Coles, Telstra, Woolies and CBA are just some companies paying their investors dividends.

• CBA General Manager of Fraud James Robert said that the amount of money lost to scams has reduced by a third as consumers become more aware of the tell-tale signs of a con. “We’ve seen a 37 per cent reduction in losses to customers in the period from July to December last year compared to the January to June period, which is a pleasing positive sign as historically, we’ve seen an upwards trajectory,” Mr.Roberts said.

• Santos Managing Director and CEO Kevin Gallagher will continue in his position under flexible working arrangements to enable him to support a family member’s medical treatment through to the end of the year.

🌏 Around The Globe

• On Sunday evening, the Writers Guild of America announced that major film and television studios and striking writers had reached a tentative agreement after intense negotiations. This agreement provides a path forward to end the historic work stoppage that has frozen production and caused significant disruption throughout Hollywood.

• Tensions between India and China don’t appear to be cooling - Canada said it would reduce the number of diplomats in India due to security concerns. India seems to have suspended visas for Canadians. This diplomatic row began over the murder of a Sikh activist.

• United Auto Workers expanded strikes against GM and Chrysler parent Stellantis across 20 states, targeting 38 parts-distribution centres. Union president Shawn Fain stated the move would affect drivers seeking repair parts.

• The stock of Arm Holdings has dropped below its initial public offering price for the first time. Additionally, some investors are betting against the chip designer, as around 14 million ARM shares are being borrowed for short selling. This represents approximately 8% of the stock's available shares.

• Microsoft has announced two new laptops: the Surface Laptop Studio 2 starting at $1,999 and the Surface Laptop Go 3 starting at $799. Both models will be available on October 3.

• Apple is handing out smaller pay rises to retail employees of around 4%, a return to the levels from 2020.

₿ Crypto Corner

• During a prison raid this week, Venezuelan authorities seized an unlikely technology from criminals: Bitcoin mining machines.

• Coinbase is seeking to expand its global footprint; it has recently considered buying FTX Europe.

Enjoying The Recap?

Forward this e-mail to a friend, family member, or work colleague who would benefit from getting up to speed on the day’s news ⬇️ 

Markets

ASX200 Company Movers

Index & Commodity Prices

Bond Prices

ASX By Sector

ETF Watch

Newsletter Recommendation

ASX News

ASX Company Announcements

Allkem (AKE) shares fell -3.2% after it flagged higher costs in its latest lithium project estimates, with costs blowing out by $US413 million ($640.7 million) because of higher labour and material expenses.

GPT Group (GPT) has appointed Russell Proutt as the company’s next CEO. Proutt is currently the CFO of Charter Hall and was previously managing partner at investment house Brookfield Asset Management.

Imugene (IMU) rose 6% after it completed a $18.2 million share purchase plan.

Polynovo (PNV) resurfaced from a trading halt this morning to rise 3.2% after reporting triple-digit revenue growth during August.

Pact Group (PGH) shareholders will have until November 8 to decide whether to accept Kin Group’s takeover offer to acquire the remaining stake it doesn’t own in the company for $0.68 per share. Kin Group holds 50.04% of Pact Group.

Qantas fell 1.5% today after it flagged that higher oil prices will see it spend an additional $200 million in fuel costs. The airliner also said it would spend $80 million investing in customer improvements to address 'pain points'.

Star Entertainment Group (SGR) went into a trading halt today, with speculation it’s set to conduct a capital raise of $750 million.

Strandline Resources (STA) shares fell 20% following the resignation of Managing Director Luke Graham. Jozsef Patarica, appointed as CEO of the company in July, will now assume the role.

Although Synlait (SM1) reported a 3% decrease in revenue and a significant 111% drop in NPAT, resulting in a loss of $4.3 million in their full-year report, their shares still rose. Synlait attributed the poor results to a significant decrease in customer demand, CO2 shortages, and extreme weather events.

Post of The Day

Deep Dive

ETF Comparison

Quality vs Wide-Moat

Today, we look at two popular ETFs with exceptional returns in 2023. How do they compare against each other?

The two ETFs we will look at are:

1. Van Ecks MSCI International Quality ETF (QUAL)

2. Van Ecks Morningstar Wide Moat ETF (MOAT)

Before we start - What is an ETF?

An exchange-traded fund (ETF) is a type of pooled investment security that will track a particular index, sector, commodity, or other asset.

So, what sort of stocks make up these two ETFs?

QUAL - A portfolio of diversified international quality companies worldwide (ex. Aus). Quality is based on three key fundamentals,
1. High return on equity,
2. Earnings stability, and
3. Low financial leverage.
The ETF comprises approximately 300 companies across various geographies, sectors and economies. Management Fee is 0.40% p.a.

MOAT - A portfolio of attractively priced U.S. companies with a sustainable competitive advantage or a “wide economic moat”, according to the Morningstar equity research team. Management Fee is 0.49% p.a.

Holdings

Let’s look at the top 10 holdings of each and the current weighting as of the end of August.

Key Observations

• The QUAL ETF is much more concentrated, with 34.6% of the holdings from the top 10 compared to 27.3% for MOAT. Concentrating on some big winners like Nvidia, Eli Lily, Meta, and Novo Nordisk has helped QUAL’s short-term returns.

• Domino’s Pizza is the #1 company in the MOAT ETF. While we can joke that below-average pizza shouldn't constitute a ‘MOAT’, Domino’s large store footprint and superior technology over smaller players would give them a significant advantage—still a surprising number 1.

• Minimal Overlap - Only Alphabet (Google) appeared in the top 10 on both lists. This is good if you’re considering holding both ETFs

• Similar themes in the MOAT ETF. The companies in this ETF are ones you might not have heard of but have an almost monopolistic stranglehold in their operating sector. This makes it difficult for them to be displaced.

Historic Returns

Now, how have they performed historically? Below are the price returns, including dividends paid. We’ve included the benchmark index both ETFs are measured against as a comparison.

Both ETFs have beaten their respective benchmarks in almost every period. QUAL has a slight outperformance over MOAT in the short term, which is likely attributed to the concentration and strong returns of Nvidia and Novo Nordisk of late, which have been star performers. MOAT has the edge over a more extended period, ahead in the 3-year and 5-year timeframes and all-time.

Have an ETF or two you want us to do a deep dive on?
Reply to this email and let us know.

Daily Quiz

Test Your Knowledge

Last Week’s Daily Quiz Question. 1964 Rupert Murdoch purchased his first international newspaper, 'The Dominion'. Where was it based?

Answer: New Zealand. 38% of you got that one correct, with the UK as the most popular answer.

A Little Extra

📉 Going Down?

Top 10 shorted stocks on the ASX - as of September 19

1. Pilbara Minerals (PLS) - 11.62%

2. Flight Centre (FLT) - 9.49%

3. Genesis Minerals (GMD) - 8.82%

4. Elders Limited (ELD) - 8.66%

5. IDP Education (IEL) - 8.55%

6. Core Lithium (CXO) - 8.53%

7. Syrah Resources (SYR) - 8.31%

8. Select Harvests (SHV) - 7.80%

9. Sayona Mining (SYA) - 7.53%

10. Mesoblast (MSB) - 7.34%

📊Broker Ratings

What do the brokers have to say?

1. AGL Energy (AGL) - Upgraded to Outperform from Neutral (Macquarie). Target price increased from $11.43 to $11.56.

2. Brambles (BXB) - Upgraded to Outperform from Neutral (Macquarie). Target price increased from $15.05 to $15.45

3. Westpac (WBC) - Downgraded to Sell from Neutral (UBS). Target price reduced from $22.00 to $20.00

Read what the brokers had to say about each company here

👨‍💼 Director Transactions

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

💲Dividends

Companies trading ex-dividend today

📅 Economic Calendar

Data to keep an eye on this week

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.