With over 19,000 stocks and 3,000 exchange-traded funds (ETFs) sitting there waiting to be traded, it can be hard to know where to begin with investing in the markets.
Even the most seasoned stock market traders have found the going tough over the last 18 months, with unprecedented volatility striking the markets following the onset of the Covid-19 global pandemic.
That’s why we’ve put together an up-to-date guide on the ten most traded stocks by our Australian clients in the last month. Consider it an instant hit-list of potential stocks to watch out for with exceptional liquidity to execute long (buy) or short (sell) positions in the market.
1. Fortescue Metals Group Ltd
The undisputed number-one stock our clients wished to trade in August 2021 was FMG – and it’s not surprising when you consider it recently revealed its annual profits more than doubled. The outcome for FMG shareholders was a record-high dividend of AU$2.11, which represented a 17% yield underpinned by healthy iron ore prices.
The price of iron ore peaked at a record-high $233 per tonne. This was underpinned largely by continued demand from China - the industry's number-one consumer - as well as ongoing supply issues in rival markets like Brazil. Fears that iron ore values would quickly retract were founded when they plunged fast to $158 per tonne, just weeks after the Chinese government outlined a crackdown on CO2 emissions and the rapid recovery of Fortescue's Brazilian counterparts.
Junvum Kim, Sales Trader, Saxo Markets, believes the short-to-medium term outlook for Fortescue could hinge on its investment in its Iron Bridge magnetite development, as well as its renewed focus on greener iron ore supplies.
“For FMG, its trading volume surged as it announced record annual profit that more than doubled (AU$10.3b vs $4.7b) and highest ever final dividend (AU$2.11 vs $1) implying 17% yield on the back of the strong iron ore prices despite the recent correction during August when iron ore price fell 30%," said Kim.
"While FMG forecasted fiscal 2022 iron ore shipments in the range of 180 to 185 million tons, risk and the performance is expected to be subject to its Iron Bridge magnetite development that could cost $1b more than its initial estimate taking the total hit up to $3.5b. This CAPEX is a key for improvements in the overall quality of the ore but a number of factors including material costs, labour shortages and exchange rates could continue to be volatile heading into the first production date December 2022.
"FMG declared it would be the world’s first major supplier of green iron ore focusing on emission reduction to diversify into renewable energy and green hydrogen through its unit Fortescue Future Industries (FFI). It set aside $10% of the earnings for FFI to target a supply of 15 million tonnes of green hydrogen a year by 2030."
2. Amazon.com Inc.
Amazon’s Australian trading arm has been tipped to experience exponential growth in 2021. The world’s e-commerce giant is undergoing aggressive expansion at a local level, with 360,000 sq. metres of warehouse space to cater for ever-increasing demand. According to Morningstar’s analyst forecasts, Amazon Australia will almost triple its footprint nationwide this year.
The groundwork has been well and truly laid by Amazon down under in recent years, with expansive fulfilment centres already operational in Sydney, Perth and Melbourne. It now plans to develop a new facility in Brisbane and double its capacity in Sydney and Melbourne. Its latest AU$500m centre in Sydney will deliver the latest in robotics and automation, cementing a state-of-the-art logistics hub in the Emerald City.
In terms of global headwinds, traders should keep a close eye on Amazon’s success stateside. Amazon is taking on Walmart with new 30,000 sq. foot stores in Ohio and California that are a third of the size of a typical Walmart outlet and designed to streamline the consumer experience.
3. BHP Group Ltd
Client attention shifted to BHP Group in mid-August when the global mining giant announced plans to cease its dual listing on the London Stock Exchange and move its entire shares onto the ASX, where 50% of its stock has long been traded.
Like FMG, BHP Group posted a 42% rise in profits for the year to the end of June 2021. Much of which was derived by record-breaking profit margins of 64% from its Pilbara-based mines. There was further positivity on the BHP Group share price when it revealed plans to amalgamate its gas and oil assets within Woodside Petroleum, making Woodside one of the ten leading producers of oil and gas in the world. BHP shareholders will also receive shares in the reformed Woodside Petroleum stock.
4. Apple Inc.
Apple is part of an exclusive club of stocks that simply garners interest from retail traders purely because of its name. Besides that, the Apple share price has experienced continued growth since mid-June, even scaling record highs at the end of August/early September.
Its last quarterly earnings once again surpassed expectations, registering $81.41bn in revenue and an impressive profit of $1.30 per share. This was underpinned by a 50% year-on-year rise in iPhone sales which continue to play a huge role in Apple’s commercial landscape.
In the weeks and months ahead, retail traders should keep a close eye on Apple’s legal headwinds. The operator’s App Store has come under legal scrutiny for failing to provide a “free and fair marketplace” for its app developers, according to Tennessee Senator Blackburn.
5. Alibaba Group Holding Ltd
Alibaba shares have captured the imagination of bearish retail traders, given the decline in value of the stock by almost 25% in the last quarter. Furthermore, the Alibaba share price is almost half the value of its historic peak, posted in October 2020.
The retail giant’s price-to-earnings ratio stands currently at 19.25, which is some way short of its 2020 high of 42.85. All these signs would suggest that the Alibaba stock is undervalued and has the potential to rebound, but the uncertain August has seen question marks linger over the corporation’s ability to withstand regulatory reforms.
The Chinese government is reinforcing its crackdown on the e-commerce market, with corporations like Alibaba set to be held accountable for intellectual property violations. If Alibaba eventually has the CCP to answer to regarding pirated goods, confidence could quite conceivably sap from its most bullish speculators.
6. Qantas Airways Ltd
The Qantas share price also captured the attention of many of our retail clients, given the release of the blue-chip airline’s full-year 2021 results. Despite Qantas posting significant pre-tax losses, with billions of dollars in revenue lost due to the Covid-19 pandemic, investors were able to look beyond the headline figures and delve deeper into the balance sheet.
The figures demonstrated that Qantas still has impressive liquidity totalling AU$3.8 billion, with 95% of its domestic operations still ‘cash positive’. In addition, Qantas was focused on delivering AU$650m in cost-saving benefits in the coming year.
Yet although Qantas appears to have the depth to survive the last 12 months, retail traders and Qantas themselves simply cannot predict the future. The airline is still wholly unaware when border restrictions will ease, with the continued restrictions forecast to result in an AU$1.4bn loss to underlying Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) in the first half of their 2022 trading year.
7. Tesla Inc.
Tesla’s Australian chairman Robyn Denholm spoke recently to the Tech Council of Australia about the need for the tech sector to drive employment and economic growth down under. Ms Denholm believes the tech space can yield an additional AU$77bn for the country over the next ten years.
Retail traders have long been drawn to the Tesla stock as founder Elon Musk continues to innovate the next generation of vehicles. The Tesla share price is up more than 3% in the last month and is continuing to attract interest based on reports of Tesla’s move into the Indian market.
India is considered one of the world’s fastest emerging car markets and if Tesla can partner with auto parts suppliers within the country, it could make huge inroads. This would be a significant boost given that analysts believe Tesla has missed its early-stage vehicle sales targets in China.
8. Zip Co Ltd
Zip Co is an Australian fintech giant that’s transformed the ‘Buy Now Pay Later’ industry in the country. However, many of our retail clients have been drawn to the decline in the Zip Co share price, which has plunged by a third in the last six months.
It has long been one of the leading shares traded on the ASX, but its volatility has reached exceptional levels in recent times. ASIC data showed that Zip Co was one of the most shorted stocks on the ASX during August.
That’s due to the outcome of its full-year results, which were less than impressive compared with its long-time competitor Afterpay. Zip Co posted a AU$653m loss in FY21, which is staggeringly higher than its AU$19.94m loss in FY20. Confidence is waning in Zip Co’s ability to compete worldwide, despite a growing presence stateside. The recent AU$39bn takeover of Afterpay by digital payments giant Square and the continued proliferation of Scandinavian rival Klarna could leave Zip Co trailing in its wake.
9. Pilbara Minerals Ltd
Lithium mining giant Pilbara Minerals was another Australian stock to hit the watchlist of our retail clients after hugely promising FY21 results. The firm revealed it had increased its cash gross margin to AU$46.2m in the 12 months to 30 June 2021.
Pilbara Minerals’ managing director Ken Brinsden described their results as an “incredible turnaround”, particularly “during the second half of FY 2021”. Brinsden cited the surge in demand for lithium raw materials worldwide as the basis for generating “substantial increases” in its products. T
he company is also anticipating a further rise in shipments for FY22. Shipments are expected to total 440,000 to 490,000 dmt for the full year, which would represent a year-on-year increase of between 56% and 74%.
10. The a2 Milk Company Ltd
The A2 Milk Company also made it in our list of the ten hottest stocks among our retail traders last month. The infant formula giant, which was once one of the favourites among the bulls, has lost its sparkle. The firm published its FY21 results towards the end of August, with revenue plunging over 30% to just AU$1.21bn.
Revenues fell most significantly throughout Australia and New Zealand, earnings 42% down year-on-year at AU$559.7m, which remains its biggest market. The stock’s increasingly bearish sentiment was compounded by a 77.6% fall in EBITDA to just AU$123m.
Net profits with A2 were unsurprisingly down over 79% to a mere AU$80.7m, with the company confirming there would be no shareholder dividend to ensure stability on the balance sheet. A decision that caused further panic and sell-offs within the market.
Hopefully, this comprehensive list can provide some food for thought on your next informed investment decisions when trading the biggest ASX stocks with Saxo