Greg Canavan gives his best stock idea for this | Australian Markets

Three stuff you need to know immediately…

1) Everyone forgets this important level concerning the US…

Shares are wobbling and the headlines are popping out to spook you, me and anybody else who tunes in.

Donald Trump’s trade conflict is coming to smash the world financial system…or so the idea goes.

I don’t agree.

Right here’s one motive why.

Nearly all people is specializing in US stock markets presently, and main companies like Tesla and Nvidia.

What concerning the US property market?

Monetary commentator Charlie Bilello factors out…

‘The average home price in the US is up over 53% in the last 5 years, more than double the increase in wages. The widening gap between prices and incomes has led to the least affordable housing market in history.’

In the event you’re a US first home purchaser, this sucks, no doubt.

Nevertheless, anybody within the market is probably sitting on massive wealth positive aspects…and lots of US owners are nonetheless paying the low charges from years in the past.

Knowledge from final 12 months mentioned 60% of US mortgages are under 4%.

And we care about this why?

70% of the US financial system is shopper spending. That is additionally what drives the world financial system, and Chinese language exports.

For many Individuals, US housing and jobs are more important than the stock market.

There’s additionally this from analyst David Goldman…

‘Here’s a back-of-the-envelope calculation of the affect of tariffs: in December 2024, the American financial system imported $250 billion value of items, whereas retailers bought $650 billion in items.

‘Imports are about 40% of retail sales. If the average tariff is 10%, and half of that 10% is absorbed by exporters to the United States, the resulting impact on the price level for imports goods would be 5%.

‘In turn, 5% of the 40% import share in retail sales is 2%. Goods comprise roughly half of the Consumer Price Index, so the impact on overall inflation would be around 1%.’

General, it’s not clear to me why the US financial system would go into recession over Trump’s antics to date. We would get a slowdown, sure.

However the share market is unlikely to fall precipitously on this state of affairs.

And what do you and I do about it?

It’s completely in accord with investment principle to buy into the market at common intervals. It’s referred to as greenback value averaging.

Some days the market will likely be flying. Some days it will likely be down within the dumps.

And whereas there are no ensures in any market…

Traditionally, shares ship a great efficiency in comparison with different asset lessons.

Right here’s the US stock market over the past 5 years to show the purpose…

2) Right here’s more proof for the long-term bulls…

Since 2009, US shares have fallen more than 5%…thirty occasions.

The average intra-year drawdown is -16%.

Right here’s one other snippet from Charlie Bilello…

The Nasdaq is down about 13% because the peak this time round. So about average to date.

3) What’s one concept to think about snapping up on this sell-off?

I requested my colleague Greg Canavan this very query. He nominated US fund supervisor GQG Companions [ASX:GQG].

However right here’s some background on the company…

GQG Companions is an American fund supervisor based mostly in Florida.

That is a substantial business. They’ve on the time of this report, over US$160 billion underneath management. That ought to give them US$800 million in income in FY25. Large money!

Like all asset managers, GQG Companions makes more (or much less) from the quantity of money they handle.

They need to keep successful consumer inflows. They will try this in the event that they proceed to report great outcomes from their methods.

You’ll be able to observe their progress by way of their fund underneath management (FUM) updates, launched each month.

Why is a US fund supervisor listed out right here?

One motive is to get close to the huge pool of Australian capital from our tremendous fund industry.

The more money GQG can put underneath management…the more money they’ll make as a business. An Aussie firm additionally seeded them years in the past.

The Chief Funding Officer, Rajiv Jain, has a cracking status as an investor…and owns thousands and thousands in GQG shares himself.

Greg informed me…

‘GQG trades on a single-digit PE and a double-digit dividend yield.

‘So if you don’t suppose this market is about to break down, it’s a good time to buy some stock.

‘The CEO and Chief Investment Officer certainly think so. Rajiv Jain purchased 660,000 shares on market in March.

‘Jain is an active value investor. He attempted to institute a buyback scheme recently, but was unsure of the tax implications (given the shares trade on the ASX as “Chess Depository Interests”, or CDIs).

‘So it looks like he’s doing a personal buyback, whereas the shares are low cost.’

Is sensible to me! You may like to provide the identical concept some thought.

Greatest needs,

Callum Newman,
Editor, Small-Cap Techniques and Australian Small-Cap Investigator

PS: Don’t neglect to take a look at this presentation from US tech guru James Altucher. Nothing Trump is doing modifications what he’s speaking about right here: the upcoming Starlink IPO.

President Trump simply purchased a Tesla to show his assist for Elon Musk…

There’s no ‘friend in high places’ greater than this one.

Try what James is saying right here…

***

The correction is gathering steam with financials right here and within the US seeing stiff promoting strain.

Regardless of the final malaise beneath the floor of the ASX 200 over the previous 12 months, the power of the banks managed to keep the index aloft.

Now that the ultimate pillar holding the market up has cracks showing, the index is dropping like a stone.

Nothing ever strikes in a straight line, however there are no indicators of a backside showing but.

We noticed a main correction within the ASX 200 in 2022 which led to 2 years of vary trading.

The rally we’ve witnessed over the previous 12 months took the ASX 200 to the important thing Fibonacci resistance degree which is 61.8% above the vary created within the 2022 correction.

Now that there are clear indicators that the resistance degree is holding, we are able to create targets back to the midpoint of the vary (level of control within the chart above).

A fall to 7,000 would see one other 10% drop from present ranges and will set up a fabulous shopping for alternative.

It might take months to get there, however the odds are growing that a retest of the purpose of control will occur in some unspecified time in the future.

Regards,

Murray Dawes,
Editor, Retirement Dealer and Fats Tail Microcaps