Dear Reader,
Oh, what a mind bender the market can be. I warned the other week that a sell-off could be imminent because we’re all getting a bit too comfortable.
But I’m also seeing other similar articles elsewhere too. The market never does what we all expect. Is the crowd too bullish or bearish?
Right now, I can’t say for sure.
The tricky part for us in Australia, like most countries, is we are hostage to the lead of the US markets.
The ASX, on the whole, looks pretty solid. It’s American stocks that look frothy and toppy.
However, should the US tank for some unexpected reason, Aussie stocks would likely fall in sympathy.
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That would be a dip to buy, in my view. Of course, it depends on your risk tolerance, time frame, and confidence. But a drawdown does not mean a meltdown.
However, picking the exact bottom is never on the table either. You might look or feel foolish if you enter and things keep going south.
Of course, all this is conjecture until we do get a sell-off.
But I’m thinking strategically. What industries or sectors do you accumulate with the long term in mind?
I made the case for real estate-related stocks last week. But there are plenty of others. Anything related to solar is a must on your watchlist.
Then there is another big one for the years ahead: 5G.
I can’t help but think this is a topic that should be closer to the forefront of our minds but isn’t.
We know the phrase instantly when we see it. But how many of us know what’s coming and when? More importantly, cui bono? Who benefits?
5G and the Telstra Share Price:
We’ll have our first taste perhaps when Telstra releases its results on Thursday.
It’s not that 5G is a driver of Telstra’s earnings right now. In fact, it’s a big cost as they buy the spectrum and fit out the enormous infrastructure that 5G demands.
But 5G has the power to revise the outlook of Telstra from broken blue chip stock to a rational play on the next communication wave. This is a tide that will lift many boats.
This earnings result will be stake in the ground on the path to that future. The financials are probably less important than the market reaction, absent any big surprise.
Expectations on this set of results appears to be low. Telstra has already guided it expects its earnings to be stronger in the second half than the first.
This is giving Telstra, overall, a low bar to beat.
Why do we care? Telstra holding steady on Thursday would signal that the market is looking beyond the NBN butchering of the last few years to a 5G uplift in its mobile division.
Thursday will tell the story. But if the market is prepared to price in a 5G lift for the Telstra share price, should it come, then it will be doing the same for other stocks too.
This is not a theme unique to Australia, either. We can stray from our home territory. There are other names you might like to place on your watchlist along this theme.
One is Corning Inc [NYSE:GLW]. Its ‘Gorilla Glass’ division is in line for a renewed surge in demand as the global mobile user base upgrades to new 5G phones. Another is Nokia [NYSE:NOK].
But it’s the angle into Corning that I find extremely curious right now, because it’s done with glass.
Glass? Have you ever stopped to think how ubiquitous, useful but unappreciated this product is?
More power to you if you have, because until recently I took the lot of it for granted. And yet specialised glass is becoming a massive growth industry.
It’s not just 5G phones and flat screen TVs. It’s the relentless march of solar panels all over the world.
We don’t have a direct play on solar panel manufacturing on the ASX. But we do have some on the raw material you need to make glass in the first place. Do you know what it is? If not, tune in tomorrow. There’s more to glass than meets the eye.
Best wishes,
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Callum Newman,
Editor, The Daily Reckoning Australia
PS: Our publication The Daily Reckoning is a fantastic place to start your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.
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