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Reporting season was characterised by the lack of earnings guidance and company outlook statements provided to the market. What was especially surprising is the market's reaction to these results, as 22% of stocks by market cap surprised to the upside, forward earnings were downgraded by just 3.90% and the market is still expecting 13.68% EPS growth in FY09. Sector Focus: Consumer Discretionary: Following a top down analysis of the sector, we (CS) are recommending an overweight stance in selected Consumer Discretionary Stocks, given this combination of a less severe cyclical slowdown, the high appeal of the sector as a candidate for further consolidation and the current valuations of these stocks within the sector. Flight to quality: ROE, large size and earnings certainty described the stocks investors were after this month, consistent with Credit Suisse risk appetite falling to almost panic territory. Quality stocks such as Large Miners COH, CSL, CCL and selected high yield LPT have outperformed MMX, FMG, BCM, BBI, ABS and BBP by a large margin. Given the growth outlook, risk appetite may fall further continuing the current trend. - Coutesy of my mate at Credit Suisse |
