Katana Asset Management
Add – Cash
We see a number of potentially negative macro triggers. Foremost of these is the Dow Jones index, which has broken its long-term up trend after appreciating from a low of 6500 in 2009 to a high of 18,351 in 2015. We have therefore adopted an overweight cash stance and will watch to see how this unfolds.
Accumulate – Australian Finance Group (AFG) $1.02
AFG is a true West Australian success story, having built the biggest mortgage “aggregator” in Australia from scratch. AFG boasts a mortgage book in excess of $100 billion, the biggest network of brokers and the strongest monthly inflows. AFG is well positioned to leverage this scale and further enhance margin.
Wait – South32 (S32) $0.92
History has been particularly kind to spin-offs, and we anticipate that this will be the case with S32 (spun out of BHP) in the fullness of time. The share price has now traced 61 percent since listing. The bottom may be close, but we need to see confirmation that the commodity complex has turned before investing.