Why ANZ shares are still not cheap enough

By Money Team

Published on April 13, 2016

This week Money asks Invast for a hot stock pick - ANZ (ASX:ANZ)

Key statistics:

12.04.16 closing share price: $22.840

52 week high: $36.98

52 week low: $21.86

Most recent dividend: 95c

Annual dividend yield: 8.13%

Franking: 100%

We issued two Hot Notes on ANZ last month and that resulted in a gain of around 5% over a two-week period.

We called the exit perfectly and the stock has continued to decline since then. Many might think that ANZ is now cheap.

We think otherwise. There has been a big shift in market sentiment over the past two weeks and the smart money is anticipating more bad news.

There is a growing chorus of voices that see the need for the bank to come back to the market and increase its provisions for bad debt exposure.

When the smart money, the instructions, get onto a trade like this, it becomes very difficult to buck the trend.

There is support in the low $20 range for ANZ shares, so we're willing to short at current levels with a stop-loss at $24.

If the bank does not hold support levels, we could see it sub-$20. On our estimates, the amount of ANZ short positions would now require around 10 days at average volume to completely cover. This is likely to grow in the coming days, making a bounce much harder. Remember, the stop-loss at $24 is crucial.