The current market must have day traders pulling their hair out. Just as they start rubbing their hands together in anticipation of a nice little payday, it all turns abruptly the other way.
No flitting away for a weekend away for them. Nor fancy dinners in an upmarket restaurant. Instead the harsh truth that there was little money to be had this week. And even more pointedly, the doubt that things are likely to change anytime soon.
Since June, the major market index has traded sideways, in an ever-tightening band. Go back to the start of the year, and the story is the same. In a little under nine months, the index has barely nudged at all.
It’s easy to look at a market like this and see little to no opportunity.
The banks? Maybe… But where will their next stage of growth come from? Plus, you can’t go a day without someone calling for the so-called property ‘bubble’ to burst.
And the bulk mining stocks? Yep, they’ve been running again over the last few months. But again, can they go on with it?
Look at the other heavyweight stocks. Like supermarket behemoth Woolworths Ltd [ASX:WOW] and its arch-rival — the Wesfarmers–owned Coles. You’re unlikely to find any positive news in this space.
All you ever read about is price deflation. And that Aldi continues to erode both their market share. Plus, the impending arrival of Amazon is keeping investors away.
It’s little wonder that the index — which reflects these mega-cop stocks — can find any momentum at all.
The quiet achieving stocks
While some of the big-cap stocks struggled, the reporting season uncovered some positive results.
At the small-cap end, online electrical retailer Kogan.com Ltd [ASX:KGN] gained 50% after its results. Its share price has now doubled in less than three months.
And at the bigger end, shares in global wine player Treasury Wine Estates Ltd [ASX:TWE] also jumped. TWE shares have gained over 15% in the last month.
Those investors who bought into TWE five or six years ago will be patting themselves on the back. They have watched its share price increase four times over. TWE is now a $10 billion company, and ranks 33rd on the ASX.
Hidden among the other results, though, was a stock that received little attention. Perhaps that’s because its results didn’t — on the surface — knock it out of the park.
The stock, Sydney Airport Holdings Pty Ltd [ASX:SYD], announced traffic growth of 3.6%. Perhaps nothing to get too excited about. However, this translated into a near 8% increase in revenue.
Sydney Airport also had good news for its income-hungry investors. Next year it expects its distributions to grow by over 11%, to a total of 34.5 cents for the year.
With passenger growth of just 3.6%, how could Sydney Airport increase its distribution by that much?
The sector growing at 10%
The answer is international tourists. Australia is going through a tourist boom, yet you’d be hard-pressed to find anyone talking about it.
Sydney Airport levies higher fees on its international passengers. And with Sydney Airport quoting a near 10% growth in inbound tourism, this flowed through into its results.
But where are all these international travelers coming from?
In the main, from China, India and Japan. Nothing too surprising there. However, Australia is also a popular destination for those from other Asian countries. Like the Philippines, Indonesia and Vietnam.
Often with China, the focus tends to be on our export markets. That is, products like coal and iron ore, through to dairy and baby products. Plus, there’s the Chinese investment in property, both residential and rural.
However, there are millions more tourists coming to Australia to enjoy our sun, beaches, food and wine. Tourism Australia and the ABS estimate the number of Chinese tourists will reach two million by 2025. That’s nearly double the 1.2 million that travelled here last year.
And within this boom has been a massive growth of international students. The government put the number of international students at around 565,000 as of July this year. That’s a 15% jump since last year.
With the rising Asian middle class looking to include travel as part of their spending, more of this money is finding its way into the Australian economy.
Back in the broader market, many of the big cap stocks are slugging it out to ratchet up minimal growth. However, there are other less well-known companies that have been investing to capture this growth in international tourists.
One of which, I recently added to the Total Income buy-list. To find out which company that is, plus a broad analysis of the tourism sector, you can trial the Total Income service by clicking here.
All the best,
Editor, Total Income