Market flat for the week, positive lead from the US, manufacturing recovering

The ASX 200 finished 0.2% lower for the week, down just 0.1% on Friday, despite a strong US lead.

Suncorp Group Ltd (ASX:SUN) was the highlight, beating expectations despite reporting a 33% fall in profit and finishing up 11% for the day.

Over the week, it was the IT sector, behind WiseTech Global Ltd (ASX:WTC) up 40%, and healthcare behind CSL Ltd (ASX:CSL) that supported the market despite the hit of Victoria’s lockdowns becoming more clear.

Australian retail sales grew 3.3% in July from June, with household goods up 30% as consumers divert their $100 billion travel spend to improving their homes.

This came as Scentre Group (ASX:SCG) locked out Mosaic Brands from some 129 stores.

It was a day for the small caps, with few big names reporting, our short summary follows:

• BWX Ltd (ASX:BWX) – Finished 3.8% higher after reported a 26% increase in sales and 59% improvement in profit to $15.2 million after a difficult few years.
  • Sukin brand demands 55% of sales with 4,000 new stores in US, Asia, Europe and even Target.
  • Comment: Strong result with 10% sales growth forecast in FY21.
• MyState Ltd (ASX:MYS) – Finished 3.9% higher despite cancelling their dividend and closing six branches.
  • Profit fell 3% to $30 million, however home loans growing 70% faster than the market.
  • Wealth management lost AUM of $100 million.
  • Comment: Tough business but ramping up loan issuance.
• Redbubble Ltd (ASX:RBL) – Reversed recent gains falling 2.3% despite announcing 132% year on year sales growth in July and 36% increase in revenue to $349 million.
  • Strong growth in Australia, 24%, UK, 33%, and the EU 30%, with 30% growth in first purchases on the platform.
  • Strong free cash flow of $38 million and 6.8m unique customers, a global platform.
  • Comment: Great result, a global Kogan (ASX:KGN).
• Suncorp Group Ltd (ASX:SUN) – Stunned the market in a positive way, adding 11.1% after retaining its dividend, but cutting by 50% to 10 cents per share.
  • Underlying profit weakened less than expected, falling 33% to $749 million as both banking and insurance were hit by impairments and claims.
  • Net interest margin of 1.94% was strong.
  • Comment: Looking solid despite higher funding costs.
• Inghams Ltd (ASX:ING) – Poultry producer rallied 3.0% as volumes increased 4.3% benefiting from huge demand as the population was forced to stay at home.
  • Previously flagged issues relating to their processed alternatives meant a 28% cut to the dividend after profit fell 62% to $40 million.
  • Comment: Quality defensive business with cost base now rest.

Fourth straight weekly gain, Apple (NASDAQ:AAPL) stock split ahead, three thoughts

The S&P 500 delivered a fourth straight weekly rally, finishing 0.7% and adding 0.3% on Friday as Apple finished 5% higher.

The US election campaign is beginning in earnest with the backdrop of an improving economy, manufacturing PMI increasing to 53.6, despite another spike in Coronavirus cases.

With a lot of action this week my three takeaways were:

1. It’s time for a new set of blue chips – Reporting season has exposed the structurally challenged nature of many Australian businesses, there is a new group of mid-caps, enabled by technology, ready to take over.
2. Look past the headlines – One off or significant events, underlying vs. statutory profit. It’s never been more important to review every earnings report with a fine-toothed comb.
3. Vaccine may be hopeful – It was a week of hope according to our politician’s, yet 25% of the country remains under strict lockdown with little economic support. Whilst we are all hoping for a vaccine, I’m not confident enough to bet on it yet.