An upgrade in a downgrading market equals = a gem! | Australian Markets

Here are three issues I’m excited about at this time…

1) The vibe of market strategists is down and gloomy. Here’s what to do…

I prefer to keep a pulse on the opinions going round. Here’s what you need to know. Most of the investment bank varieties predict this rally to fizzle out.

Now, all opinions are like you realize what. *Ahem*

That mentioned, we are able to’t simply ignore why they suppose like this proper now. They suppose ASX firms are going to make much less money in the upcoming 12 months.

Not good!

Earnings drive share costs over the long time period.

This is a headwind for the market.

It’s laborious for me to get excited in regards to the basic index because of this alone.

That places a passive strategy in the highlight.

The market doesn’t look like posting a huge carry this yr. The risk for a lot of share costs shall be to the draw back, if this performs out.

We’re in a difficult place.

This dynamic additionally does one thing else. It makes any company posting an earnings UPGRADE look particularly interesting.

Good news.

We simply noticed one yesterday.

2) Discover the forgotten cyclical Cedar Woods Properties.

Cedar Woods (CWP) is a advice of mine. I’ve adopted it for years.

It’s a property developer. CWP’s been on the ASX for over twenty years.

I’d hazard a guess it’s largely forgotten or unknown for many retail punters. An older hand, like myself, has seen it undergo a few cycles now.

That brings in housing.

For years I’ve steered Perth property was set to carry huge after a decade in the wilderness between 2010-2020.

It simply so occurs that CWP owns a lot of land in WA, adopted by Queensland.

What can we see?

The latest Commsec ‘State of the States’ report places WA because the no 1 economic system in the nation. Queensland isn’t far behind at quantity 3.

CWP has a supportive backdrop due to this.

Now to their replace yesterday.

What can we see?

3) Cedar Woods is firing!

CWP upgraded their steering for the yr from 10% revenue growth to fifteen%. Presales are $700 million.

That’s the very best I can bear in mind seeing on that, although don’t take it as gospel.

CWP’s management likes the look of subsequent financial yr for more gross sales too.

What are the fundamental numbers?

CWP has a market cap of $462 million.

Net revenue must be about $45 million for the yr. That places it on a P/E of roughly 10, and even decrease for 2026.

Also see this quote from the crew at fund supervisor Balmoral…

“The stock is trading at a 15-20 per cent discount to NTA with significant land assets held at cost on the balance sheet.

“You can’t import or export land, so tariffs are not a big issue.

“Its share price has drifted down, and it trades on an 8-9 times price-to-earnings ratio, has a 10 per cent earnings-per-share growth and provides a 5 per cent dividend yield – as such it looks good.”

That got here out earlier than yesterday’s announcement. CWP lifted 7% yesterday. The market likes the numbers.

Let’s take a look at a VERY long-term chart of CWP…

This goes back 25 years. You can see that the share price can go on some epic rallies….after which huge down strikes. It’s very cyclical.

That mentioned, I prefer it from right here.

If rate of interest cuts come in as anticipated, and the market chases cyclical thematics like property, CWP has each likelihood of going for a huge run.

I’m not saying it’s with out risk. You can see the stock fell laborious in the 2022 bear market. That might occur again.

The share market is about enjoying the percentages.

What can we see if we bundle every part up:

• We have robust home costs.
• We have falling fee expectations.
• We have anticipated earnings growth.
• We have undervalued land property.
• We have a suppressed small cap market.

This all varieties a stable base for CWP. Now we simply need to see if the market is ready to bid it up.

You’re a potential 25% upside with a good yield thrown in If it simply went to 15x earnings.

It’s not, and can by no means be, the subsequent Afterpay or Nvidia.

But a good little potential earner? I’ll take that in this market.

That jogs my memory…

On Tuesday I discussed my “favourite small cap of 2025”.

It’s the lead advice in my latest report. That share is up 20% in final two days.

It additionally launched a good quarterly replace. As you’ll be able to see, there’s a lot of alternative nonetheless in this market.

If you need to begin taking benefit of this potential, get what you need to know right here.

Regards,

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

I’ve been warning since February that oil regarded harmful and will collapse if the price fell beneath US$69.00 for brent crude.

We noticed a break beneath US$69.00 over the past month during the tariff tantrum. The price fell rapidly to $58.50.

The query then turned, ‘is that it?’

When a main break happens you usually see a retest of the prior help degree.

If sellers are lined up there and costs then fall back beneath the earlier low, that may be the beginning gun for a severe fall.

There isn’t a lot technical help for brent crude beneath the present price.

There is a few help round US$54.50 after which main help at US$46.50.

We have seen two years of vary trading in oil so I believe there are various positions that shall be liquidated if oil continues to fall.

Watch out beneath.

Regards,

Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps