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ASX smashes into the black for 2014

The S&P/ASX 200 Index (ASX: XJO) rose 9.9 points, or 0.18% to finish at 5,392 points. A strong interim result from Australia’s largest miner, BHP Billiton  (ASX: BHP), lifted the ASX. The market has stormed backed into positive territory for 2014 following a sluggish start to year, gaining 0.76% since the start of the year.

The recent market rally will be a welcome relief for nervous investors who watched the index fall to 5,070 points during the first week of February.

The ASX and Australian dollar were supported following release of minutes from the Reserve Bank of Australia’s February policy meeting, which confirmed that the central bank is likely to keep the official cash rate on hold at its record low level of 2.5%. That should assist in improving business and consumer confidence.

Although it is still early in the reporting season, results to date from Australia’s largest companies have been well received by investors. BHP rose 2.3% to $38.89 following a 31% increase in underlying profit, beating market expectations. The positive result from BHP follows better-than-expected results from Rio Tinto (ASX: RIO) which reported underlying earnings up 10% from the corresponding period, Commonwealth Bank of Australia  (ASX: CBA)Australia and New Zealand Banking Group (ASX: ANZ) and Telstra Corporation (ASX: TLS).

Other companies reporting positive earnings include:

  • Monadelphous Group (ASX: MND) soared 9.7% after reporting a record half-year profit of $87.1 million, up 10.1% on the prior period.
  • Challenger Limited (ASX: CGF) rose 3.3% to $6.61 following a 25% rise in interim net profit.
  • Sirtex Medical Limited (ASX: SRX) increased 3.82% after a 43.6% increase in interim net profit.

However, it wasn’t all good news, with Coca-Cola Amatil (ASX: CCL) falling 5.3% to $11.22 following a whopping 82.5% fall in full-year net profit. Other stocks that declined following the release of interim results include Seven West Media  (ASX: SWM), Asciano (ASX: AIO)Sonic Healthcare (ASX: SHL) and Arrium (ASX: ARI).

Foolish takeaway

Strong interim results from some of Australia’s largest companies should give investors renewed confidence. However, the reporting period has emphasised the importance of buying quality companies that are trading at attractive prices. The speed of the market rally highlights the difficulty in attempting to pick the market bottom. Instead, investors should buy companies with good long-term growth prospects that are trading at attractive prices, for example Sirtex Medical and Challenger.

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Motley Fool contributor Bradley Murphy owns shares in Sirtex Medical Group and Coca Cola Amatil.

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