ASX 200: three stocks to watch as of 30 January

ASX200 Overview

The ASX200 added 26 points (0.34%) on Friday to close at 7494, for a 0.56% gain for the week. Last week’s gains came despite the release of higher-than-expected Australian inflation data, which has significantly increased the probability of a 25bp rate hike at the RBA’s Board meeting next week.

At a sector level, the Materials Sector has gained 10.14% in January, Consumer Discretionary +9.69%, the Financial Sector +5.87%, and the IT Sector 4.65%. Last year’s star performer, the Energy Sector, has added only 1.91% in 2023.

Drilling down a little further into the outperformance of the Consumer Discretionary Sector, the substantial gains in January have followed robust retail sales data and trading updates from consumer-facing companies that suggest that households have taken the RBA’s 300bp or rate hikes in 2022 in their stride.

In this week’s Three Stocks to Watch, we review the recent news and charts of three ASX-listed Consumer Discretionary Stocks and if their outperformance can continue.

JB Hi-Fi (JBH)

In a trading update two weeks ago, JB Hi-Fi reported that sales growth was up 8.6% in the December half to $5.3 billion, as consumer spending stayed firm into year-end.

Following the trading update, the share price surged to an eight-month high at $49.72, extending its rally from the October $37.52 low to 32%.

Due to concerns around cost-of-living issues and households tightening spending habits after the RBA’s 300bp rate hikes in 2022, as well as the overbought nature of the rally, we would be cautious of chasing the share price at current levels. Instead, the preference is to buy on dips back towards a band of support between $46.00 and $44.00.

Super Retail Trading Group (SUL)

In a trading update two weeks ago, Super Retail reported record revenues of $1.96b for the six months until December end. It said it expected normalised profits before tax to be between $212 million and $218 million.

“All four core brands traded strongly over the peak cyber sales and Christmas trading period as customers embraced the festive season, contributing to record first-half sales.”

Following the trading update, the share price of SUL gapped higher, extending its rally from the October $8.65 low to over 50% at this morning’s $13.03 high.

Like JB Hi-Fi, due to concerns around cost-of-living issues and households reducing spending after the RBA’s 300bp rate hikes in 2022, as well as the overbought nature of the rally, we would be cautious of chasing the share price of Super Retail Group at current levels. Instead, the preference is to buy on dips back towards the bottom of the gap higher, near $11.50.

Myer (MYR)

In a trading update last week, department store group Myer reported sales for the six months until the December end surged by 24.8% from the year before, the most significant increase since 2004. Myer expects 1H23 NPAT to be between $61m and $66m, up between 89% and 104% on 1H22 results.

Following the trading update, the share price of Myer has since touched $1.00, taking its year-to-date rally to +44% from the $0.68c it started the year.

Like the two stocks above, due to concerns around cost-of-living issues and households reducing spending after the RBA’s 300bp rate hikes in 2022, as well as the overbought nature of the rally, we would be cautious about chasing the share price of Myer at current levels. Instead, the preference is to buy on dips back towards a band of support between $0.80c and $0.75c.

The figures stated are as of January 30th, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.