Is it time to sell the banks?

We tell you exactly how to move your ASX Share portfolio into defensive mode to beat inflation!

This is a must read for all serious investors.

In response to rising inflation, we at Under the Radar Report are reducing our blue chip portfolio’s exposure to the markets movements, in order to reduce our risk.

We use Blue Chips to protect, Small Caps for growth.

We tell you how now:

Banks & Financials: Is it time to sell the banks?

We're looking to trim a big overweight position in the banks.

While we are comfortable being overweight in the banks, which means owning a bigger percentage than exists in the benchmark S&P/ASX 200 Index, it might be worthwhile trimming our exposure.

For one thing, we will look at removing regional bank, Bendigo Bank (ASX:BEN) but the bigger banks are in a very strong position.

Their balance sheets have been bolstered thanks to the regulator APRA. They are still delivering decent returns on the model.

But they are to be watched closely because of their high domestic beta (correlation to domestic economic activity).

On that basis in our outperforming Blue Chip Portfolio we will look to reduce positions in:

  • Westpac Banking (ASX:WBC)

  • Australia and New Zealand Bank (ASX:ANZ)

  • National Australia Bank (ASX:NAB).

Our Blue Chip portfolio is performing better than the market, which is rebounding.

Follow our Blue Chip Report with our price targets and fundamental analysis on 40 of our favourite top ASX Blue Chip stocks.

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Resources: What should you do with your big resources stocks?

Our Blue Chip portfolio manager, Sam Ferraro will be looking to trim our resources holdings in the next rebalance, guided by the model’s valuation.

This is a macro call to trim on the basis of anecdotal evidence of weakness in the Chinese property market, which puts a cloud over the entire economy.

We still like owning the big resources companies because of their cash generation combined with their shareholder focus.

By shareholder focus we mean the capital management, mainly in the form of dividends. So we’re not going to throw the baby out with the bathwater!

In a similar vein to the banks, we are looking to reduce the beta of our portfolio by reducing exposure to cyclical stocks, in this case global cyclicals.

Retail: Join Blue Chip for $20 a month to find out what to do with your retail stocks.

Industrials: Join Blue Chip for $20 a month to find out what to do with your big industrial stocks.

Defensive Stocks to Buy

We have favourite Blue Chip stocks that we are buying up now.

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Investor Takeouts

Portfolio management is where art and science meet.

The macro calls we make at Under the Radar Report are based on economics (the science of demand and supply).

Our stock selection is based on both our valuation as well as instincts and stock specific elements.

  1. Blue Chips are valuable in reducing the risk of your portfolio, but so are Small Caps. The more you hedge the market, the less risks you have in your portfolio.

  2. Ultimately growing you value is about being patient and buying stocks with good fundamentals.

This is what Under the Radar provides to subscribers.

In response to rising inflation, Under the Radar Report's Blue Chip Value Portfolio Manager, Sam Ferraro, is reducing our portfolio’s “beta”, which is its exposure to the markets movements, in order to reduce our risk.

While some stocks are more interconnected than others, such as cyclical stocks whose earnings rise and fall depending on the amount of economic activity out there; others are more stable as their products are necessities irrespective of the broader picture. These include utilities and infrastructure stocks, as well as some Small Caps.

ABOUT THE AUTHOR

Richard Hemming

Richard Hemming

Follow Richard on linkedin

Richard is a leading market commentator and expert on ASX Small Caps

www.undertheradarreport.com.au provides investment opportunities in Small Caps that you won’t get anywhere else.

Under the Radar Report is licensed to give general financial advice only (ASFL: 409518). The author does not own shares in any of the stocks mentioned.

Under the Radar Report is licensed to give general financial advice only (ASFL: 409518). The author does not own shares in any of the stocks mentioned.

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