Australia Strategy: Why catalysts are key

About the author:

Tom Sartor
Author name:
By Tom Sartor
Job title:
Senior Analyst
Date posted:
14 May 2021, 2:30 PM
Sectors Covered:
Junior (Emerging) Resources, Bulk Materials

  • Adverse macro economic forces or at least investor fears of them have again taken control of short term market direction.
  • But as we’ve seen many times before, we think company fundamentals will again re assert themselves as we view inflation fears as overdone.
  • We explain why identifying fundamental stock catalysts has become an increasing tactic since the onset of the pandemic.
  • We identify 27 stocks with material upcoming catalysts (login to view the full list), with notable opportunities in highly rated names including Sonic Healthcare (ASX:SHL), Sydney Airport (ASX:SYD) and Lovisa (ASX:LOV).

Company fundamentals to re-assert themselves

Fears of rising US inflation and its potential impact on interest rates have dominated investor attention and put growth stocks under pressure.

At this stage the majority of economists see higher US inflation figures as a transitory issue driven by the pandemic, driven by strong post-pandemic rebounds while global supply chains remain disrupted.

The US is also arguably distorted by the sheer scale of stimulus spending. Michael Knox explains why inflationary fears look premature in Reflation, not inflation and US inflation refuses to scare.

Overall this leads us to think that a market worried about macro-economics/ inflation will again give way to stock fundamentals.

Continuous disclosure = continual catalysts

Corporates have been issuing trading updates and updated guidance far more frequently since the onset of the pandemic.

The far better than feared performance of Aussie corporates through this period has meant these updates often drive share prices as much as 1H/FY results do.

We’ve also seen the market increasingly move in anticipation of them. So the ability to identify stock catalysts early has become an important tool for investors in the current climate.

On pages 2-3 of our full research note (login to view) the Morgans Research team identifies 27 stock catalysts in coming months that could drive both market surprise or disappointment.

Notable stocks with positive upcoming catalysts which also reside in our Morgans Best ideas or Equity Model portfolios include:

  • Sonic Healthcare
  • Sydney Airport
  • APA Group
  • Tyro Payments
  • Eagers Automotive
  • Lovisa
  • Acrow Formwork
  • Alliance Aviation

Figure 1: Growth stocks have had a choppy ride since the onset of the pandemic

Growth stocks have had a choppy ride since the onset of the pandemic

Source: Morgans, Bloomberg

Find out more

We share the full list of 27 stocks with material upcoming catalysts and share our analysts' comments in our full research note.

Download full research note

If you would like access or more information, please contact your adviser or nearest Morgans office.

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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