Icarus Signal New Entries For Today: CommBank

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This story features REA GROUP LIMITED.
For more info SHARE ANALYSIS: REA
The company is included in ASX100, ASX200, ASX300, ALL-ORDS and ALL-TECH

By Rudi Filapek-Vandyck

Risk appetite is steadily climbing to elevated levels. One way to gauge it is by looking at the Australian dollar. AUD/USD is trading above 1.07 this morning.

FX experts at Forex.com put it as follows yesterday: given the positive momentum for global risk assets, AUD/USD may well temporarily revisit 1.10, but there's no fundamental justification for such an elevated level. Hence why Forex.com is preparing for a retreat.

Another way to gauge risk appetite is by comparing the share price of CommBank ((CBA)) with the consensus price target for the stock. Those who've kept an eye on CBA shares recently would have noticed the share price trading slightly higher, before yesterday's weakness pushed the price below consensus target again. This is likely to be reversed again in today's session.

Traditionally, the gap (negative or positive) between target and price for CommBank has proved a good indicator for risk appetite. The fact that the other Big Banks in Australia are still up to 14% (NAB) below their target indicates that appetite can move a lot further to the upside, still.

Admittedly, CommBank is the only one to report interim results this month and expectations are pretty low. Full year cash earnings per share should not grow for the year to June and then post a small advance of some 4% in the year thereafter. What are the chances these estimates will have to be revised dramatically? What are the odds analysts will lift their targets substantially above today's levels?

We will all see the answer to those questions in the weeks ahead, but I don't think there will be any dramatic changes. Not this month.

Another name that has landed on Icarus radar is REA Group ((REA)) as that share price is now approaching price target too. Same questions will be on investors and traders mind this month. The price chart for the past two years shows a persistent reluctance for the share price to rise much further and subsequently hold on to those gains. I am pretty certain technical chartists will have something to say about this as well.

There are currently 25 stocks closing in on their price target with margins less than 3%. The aforementioned CommBank joins DWS Advanced Business Solutions ((DWS)), St Barbara ((SBM)), Leighton Holdings ((LEI)), Sigma Pharma ((SIP)), Regis Resources ((RRL)), Sydney Airport ((SYD)) and DuluxGroup ((DLX)) as today's newcomers.

Three stocks left this group to join the stocks that are trading above target; SP Ausnet ((SPN)), Consolidated Media ((CMJ)) and Specialty Fashion Group ((SFH)). The first two are solid dividend payers of 8%-plus and 6%-plus respectively, which can probably serve as an indication that not everyone is adding risk during this rally. (Though some may argue ConsMedia is also feeling the Fairfax-effect). Specialty Fashion had an annus horribilis in 2011 and the consensus target might have fallen too far, which probably explains why the share price is now above it.

If consensus forecasts prove accurate, Specialty Fashion should (finally) have a year to look forward to in FY13.

Daily update on share prices and consensus price targets.

Investors should consider the information and data are provided for research purposes only.

Stocks <3% Below Consensus

Stocks Above Consensus

Top 50 Stocks Furthest from Consensus

To see the full Icarus Signal, please go to this link

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