This week, the reality of our current economic situation caused a fall in many share prices. The Qantas Airways Limited (ASX: QAN) announcement of large-scale layoffs was a bit of wake up call and we also followed United States markets down as concerns over a second wave of COVID-19 started to take hold. In light of these events, here are three ASX share price trends I think are worth keeping an eye on next week, including some tactics to get the most out of them.
Oil and Gas
This week saw the oil price fall, bringing the share prices of all of our large oil and gas companies down with it. However, this is only the start of the challenges facing this sector. The LNG price has recently hit a 25-year low due to slow economic recoveries and modest industrial energy needs. There is also reduced demand for cooling with many regions being cooler than forecast.
This is likely to put more pressure on the share prices of the oil and gas majors. Companies like Woodside Petroleum Limited (ASX: WPL), Santos Ltd (ASX: STO), Origin Energy Ltd (ASX: ORG) and Oil Search Limited (ASX: OSH) have already seen share price slumps this week. I believe this is likely to continue into the coming week.
This might, however, be a good time to pick up solid companies at a reasonable price. I believe Woodside is still trading at a premium due to many of the large-scale projects it has underway. Origin Energy, however, is worth a closer look in my view.
In a normal market, companies like Evolution Mining Ltd (ASX: EVN) would be seen as overbought. The company’s price to earnings (P/E) ratio of 33 is way above its 10-year average. So too with other gold miners like Saracen Mineral Holdings Limited (ASX: SAR) and Northern Star Resources Ltd (ASX: NST). However, these are not normal times and this is not a rational market.
The US dollar gold price is higher than it has been since October of 2012. In Australia, it is also near all-time highs. Personally, I have invested in Bellevue Gold Ltd (ASX: BGL) which is an exploration company. This is despite it too currently trading at an all-time high.
Regis Resources Limited (ASX: RRL) is another well priced gold mining company likely to benefit from the high gold price. I like this company over the medium term regardless of what happens with the gold price.
Real estate share prices
After several weeks of trading at very high volumes, the three A-REITs with the most exposure to retail markets have fallen this week. Vicinity Centres (ASX: VCX), Scentre Group (ASX: SCG) and GPT Group (ASX: GPT) saw their share prices edge lower over the course of the week. I do not see this trend reversing anytime soon, particularly with the uncertainty surrounding dividend payouts due to the poor trading conditions.
I also expect the A-REITs exposed to the housing market, like Stockland Corporation Ltd (ASX: SGP), to follow the retail sector downwards. There has been a lot of commentators pumping up this sector of late. However, personally, I cannot see it reaching anywhere near the levels seen in January with all the uncertainty surrounding the job market.
I think investors looking for real estate exposure would be better served to consider DEXUS Property Group (ASX: DXS) as it is a pure play commercial real estate company.
I believe these trends are a continuation of issues that have been building for some time. Yet despite the apparent negativity, there are often opportunities to be found. I’m confident it’s still possible to profit from a rising gold price. In addition, commercial real estate is rising while retail is falling. When you see a downward pattern, it always pays to look a little closer to see if any other sector may benefit.
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Motley Fool contributor Daryl Mather owns shares of Bellevue Gold Ltd. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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