Endeavour Group Lists on the Stock Exchange

Last Thursday, Woolworths fell over 13 per cent on market opening and, at one stage, was down over 15 per cent during the day. No doubt, investors would have been distressed with their beloved share falling so heavily while others would have been scrambling to understand what happened.

Woolworths and Endeavour Group demerger

The reason the share price fell is because Woolworths underwent a corporate action, as it split off the alcohol and gaming side of its business into a new entity called Endeavour Group (ASX: EDV). The intent of the demerger is to make the supermarket simpler and more streamlined, which I believe will be good for Woolworths.

However, before you get too excited and rush out to buy shares in Woolworths because they now appear cheap, you need to understand that the company is worth far less than what it was on Wednesday, given that Endeavour is now trading on its own rather than as part of Woolworths, which means a significant part of the value of Woolworths balance sheet has been removed from their bottom line.

While Woolworths has been a great stock for a long time, I recommend sitting back before buying in to either company to see how the market reacts to the demerger. This is because with corporate actions it can take time for the stocks to settle, so you may be jumping the gun if you buy in especially with Endeavour Group given the issues and regulation around gaming and alcohol.

What were the best and worst performing sectors last week?

Once again, the best performing sectors included Information Technology up over 3.1 per cent followed by Materials up 2.25 per cent and Consumer Staples up 0.68 per cent. The worst performing sectors included Healthcare down over 4.30 per cent followed by Financials down 2.66 per cent and Energy down 2.15 per cent.

The best performers in the ASX/S&P top 100 stocks included Afterpay up 12.76 per cent followed by Boral up 8.26 per cent and IGO Limited up 5.59 per cent with South 32 not far behind up 5.40 per cent. The worst performing stocks included CSL down 6.67 per cent followed by Oil Search down 5.46 per cent and Treasury Wine Estates down 5.21 per cent

What's next for the Australian share market?

Last week the All Ordinaries Index traded lower again ending the week down 0.60 per cent although it is up over just over 3 per cent in the last month and up 2.32 per cent for June. It has now been eight trading days since the All Ordinaries Index made a new all-time high and in that time it has only closed higher on three of these days, which suggests the market is slightly more bearish than bullish at present.

While it is still possible the Australian stock market could trade higher, without wanting to sound repetitive, I still believe the market needs to fall away with the fall likely to be in the vicinity of 8 to 12 per cent, which would see it fall to between 7,000 and 6,700 points. However, as I have said before, since COVID the market has had a mind of its own, so anything is possible. Given this, I urge investors to look for high quality stocks to buy rather than speculate on low cap or speculative stocks.

For now, good luck and good trading.

Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.