The Reserve Bank of Australia (RBA), concluding its monthly monetary policy meeting Apr. 3, decided once again to keep its target overnight interest rate, or “cash rate,” unchanged at 4.25 percent but left little doubt that it will cut when it meets again on May 1.

The Australian dollar has been telegraphing the coming move since late February, falling from USD1.0809 to around USD1.0295 as of midday Apr. 4 in Sydney.

It’s likely the aussie will weaken against the US dollar until the perception that the “yield gap”–which can be boiled down to the difference between the overnight interest rate Down Under and the US Federal Reserve’s fed funds rate–will close no longer carries the day.

The Australian Bureau of Statistics (ABS) will report inflation data for the quarter ending Mar. 31 on Apr. 24. Inflation is trending down from 3.6 percent for the quarter ended Jun. 30, 2011, to 3.5 percent as of Sept. 30 and 3.1 percent through Dec. 31, 2011. Continuation of this trend should guarantee a 25 basis point reduction in the RBA’s cash rate to 4 percent in May.

Recent indicators seem to confirm a sense of weakness Down Under, as recent sentiment readings from consumers and business registered near-term lows.

A widely watched survey of Australian consumers sponsored by Westpac Banking Corp (ASX: WBC, NYSE: WBK) and the Melbourne Institute was down 5 percent to 96.1, its lowest level since December. This survey of 1,200 Aussies was taken Mar. 5 through Mar. 9 and released Mar. 13.

Consumers have noticed the Big Four banks’ decision not to pass on the RBA’s recent cuts, which has left mortgage rates above 7 percent and they’re aware of turmoil abroad and its potential impact on jobs, if it isn’t already being felt.

And business confidence fell to its lowest level since September. The index based on a National Australia Bank Ltd (ASX: NAB, OTC: NAUBF, ADR: NABZY) survey of more than 500 companies taken Feb. 20-24 and released in Sydney Mar. 12, fell to 1 from 4 in January.

What had been a persistently strong Australian dollar had leaders from most sectors concerned, as did the RBA’s decision to pause its easing cycle after cash-rate cuts Nov. 1 and Dec. 6 took the benchmark to its present level of 4.25 percent.

But the business conditions gauge, a measure of hiring, sales and profits, rose to 3 from 2. And though it ticked up in February for the first time since December, Australia’s unemployment rate remains the envy of the developed world at 5.2 percent.

The biggest picture is less bullish than it was in say, 2006. Gross domestic product (GDP) expanded by 2.3 percent in 2011, below the 10-year average of 2.9 percent and more in line with the 2.5 percent pace since what the Aussies refer to as the Great Financial Crisis (GFC) began taking hold in mid-2007.

The RBA and Governor Glenn Stevens acknowledged in their announcement that though there are strong individual sectors Australia is growing slower than forecast in 2012.

“The Board judged the pace of output growth to be somewhat lower than earlier estimated,” read the Apr. 3 statement, “but also thought it prudent to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy.”

Australia’s official interest rate is still among the highest in the developed world.  Official equivalents to the RBA’s 4.25 percent cash rate are 1 percent in Europe, 1 percent in Canada, 0.5 percent in the UK and 0.25 percent in the US.

OneSteel Will Be Arrium

OneSteel Ltd (ASX: OST, OTC: OSTLF, ADR: OSTLY), Australia’s second-largest steel manufacturer and among those negatively impacted by the persistent strength of the aussie, will take another step in transition into an iron ore company when it changes its name, assuming shareholder approval is granted in a May 3 vote, to Arrium on Jul. 2.

“The name Arrium provides a better association with the company’s current mining and materials businesses, as well as better accommodating its strategic growth focus on mining and mining consumables,” the company noted in a statement announcing the next step in a transition the company highlighted during its fiscal 2012 first-half conference call in February.

OneSteel stock has captured the imagination of the market, running from below USD0.75 before the mid-February conference call to USD1.29 as of this writing on the Australian Securities Exchange (ASX).

OneSteel is paying a AUD0.03 per share dividend, down 50 percent from the AUD0.06 it paid for the first half of fiscal 2011. The stock is yielding nearly 6 percent at current levels, even after its five-week run.

Promising results from its mining operations for the recent period suggest management is on to something; the forecast is for “significant improvement” in fiscal 2012 second-half results.

Down Under Digest

The 20 stocks that now comprise the Australian Edge Portfolio generated an average total return in US dollar terms of 12.39 percent during the first quarter. The S&P 500 was up 12.59 percent, while the S&P/ASX 200 Index added 10.22 percent and the MSCI World Index 11.73 percent.

The average return taking account of different holding periods for the recommendations added to the AE Portfolio in January, February and March was 9.49 percent. The Great Eight–the eight original members of the Portfolio–generated an average total return of 8.84 percent.

Since its Sept 26, 2011, inception the AE Portfolio has generated an average return of 15.69 percent. The Great Eight are up an average of 27.79 percent. APA Group (ASX: APA, OTC: APAJF) leads the way with a total return in US dollar terms of 41.65 percent, while Australia & New Zealand Banking Group Ltd (ASX: ANZ, OTC: ANEWF, ADR: ANZBY) is up 37.15 percent.

Global engineering and environmental services firm Cardno Ltd (ASX: CDD, OTC: COLDF) posted the best total return for the first quarter, 42.88 percent. The company reported company-record net profit after tax (NPAT) of AUD36.1 million for the first half of fiscal 2012, 14 percent higher than the prior corresponding period and better than management guidance. Strong performance for Cardno’s US operations, improving conditions in Australia and contributions from recent acquisitions drove the improvement.

Revenue was up 2.1 percent to AUD445.5 million, while basic earnings per share (EPS) rose 5.6 percent to AUD0.3274. Earnings before interest, taxation, depreciation and amortization (EBITDA) were up 12.3 percent to AUD65.5 million. Operating cash flow was up 18.7 percent from the prior corresponding period to AUD47.3 million.

Cardno reported a debt-to-equity ratio of 42.5 percent and cash on hand of AUD80.4 million as of Dec. 31, 2011. The board approved and management declared an interim dividend of AUD0.18 per share, up from AUD0.17 from a year ago.

The Roundup

Here’s a company-by-company look at first-quarter market performance as well as total return generated since the stock’s addition to the Portfolio through Mar. 30, 2012. Return data are based on the perspective of a US investor who purchased on the ASX, not accounting for fees and expenses.

Included as well is information on the next date of relevance, whether results will be reported, an annual general meeting will be held or an investor presentation will be made.

Conservative Holdings

AGL Energy Ltd (ASX: AGK, OTC: AGLNF, ADR: AGLNY), an original member of the AE Portfolio, is up 14.09 percent since inception. During the first quarter it generated a total return of 6.38 percent. AGL will report fiscal 2012 (end Jun. 30, 2012) final results on Aug. 22, 2012.

The stock, currently yielding 4 percent, is a buy under USD16 on the Australian Securities Exchange (ASX) or the US over-the-counter (OTC) market.

AGL’s American Depositary Receipt (ADR) represents one ASX-listed share and is also a buy under USD16.

APA Group (ASX: APA, OTC: APAJF), also one of the Great Eight stocks that formed the AE Portfolio on Sept. 26, 2011, is up 41.65 percent since that date. It also posted a 14.94 percent total return for the first quarter.

APA, which will report fiscal 2012 final results on Aug. 21, 2012, is a buy under USD5.50.

Australand Property Group Ltd (ASX: ALZ, OTC: AUAOF), added to the Portfolio in the March issue, is down 2.37 percent during this short period in US dollar terms, as the aussie has weakened sharply since late February, but has also lagged Australian financials and the S&P/ASX 200 Index.

Australand will host its annual general meeting on Apr. 19, 2012. The A-REIT will report fiscal 2012 first-half (end Jun. 30, 2012) results on Jul. 26, 2012. It reports according to the calendar year.

Australand, yielding more than 8 percent on the dip, is a buy under USD2.80.

Australia & New Zealand Banking Group Ltd (ASX: ANZ, OTC: ANEWF, ADR: ANZBY), a member of the Great Eight, is up 37.15 percent since inception and returned 14.65 percent during the first quarter. It was the top performer among Australia’s Big Four banks.

The bank will report fiscal 2012 first-half (ended Mar. 31, 2012) results on May 2, 2012. The stock is currently trading above its USD22 buy-under target, which is applicable to the ASX-listed share, the OTC-traded share and the US ADR. The ADR is worth one ASX listed share.

Cardno Ltd (ASX: CDD, OTC: COLDF) is up 39.49 percent in US dollar terms since joining the AE Portfolio on Nov. 11, 2011. The acquisitive engineering firm continues to expand, including in the US, where its CardnoUSA unit is among the fastest-growing engineering firms in the country. The stock popped 42.88 percent in the first quarter, as management reported strong results, boosted the dividend by double digits and issued bullish guidance.

Cardno is trading above its recently raised buy-under target of USD7. The company presented at the Apr. 3 UBS Emerging Companies Conference; it will report fiscal 2012 final results on or about Aug. 16, 2012.

CSL Ltd (ASX: CSL, OTC: CMXHF, ADR: CMXHY), among the first two stocks added to the AE Portfolio after the introduction of the Great Eight, is up 20.64 percent since Oct. 14, 2011, the date of the second issue of the advisory. The stock was good for 14.71 percent in the first quarter.

The global pharmaceutical, which will begin reporting in US dollar terms in fiscal 2013, will report fiscal 2012 final results on Aug. 21, 2012. CSL is currently trading above its USD35 buy-under target.

Envestra Ltd (ASX: ENV, OTC: EVSRF) has been among the best performers in the AE Portfolio, posting a 35.3 percent total return since debuting as a member of the Great Eight on Sept. 26, 2011. The stock generated a first-quarter total return of 13.87 percent.

Envestra–a buy when it trades under USD0.80–will report fiscal 2012 final results on or about Aug. 27, 2012.

M2 Telecommunications Group Ltd (ASX: MTU, OTC: MTCZF), up 32.34 percent from Dec. 16, 2011, through Mar. 30, 2012, did most of its work during the first quarter, posting a total return of 34.38 percent.

The rapidly growing telecom will post fiscal 2012 final results on or about Aug. 29, 2012. M2 Telecommunications is trading well above its USD3 buy-under target as of this writing.

Telstra Corp Ltd (ASX: TLS, OTC: TTRAF, ADR: TLSYY), which has resolved the regulatory issues as well as negotiations over customer and infrastructure transfer fees with the National Broadband Network (NBN), has yet to reveal what it will do with the estimated AUD11 billion it will eventually receive as part of this deal.

It’s still trading above its USD3.20 buy-under target, which applies to the ASX-listed share as well as the OTC share. The US ADR, which represents five ASX-listed shares, is a buy under USD16. The stock is up more than 20 percent since Sept. 26, 2011, but its momentum stalled a bit in the first quarter; it posted a gain of 4.19 percent.

Transurban Group (ASX: TCL, OTC: TRAUF), a recent addition to the Conservative Holdings, is down 2.11 percent since Feb. 10, 2012, as a major shareholder reduced its position as part of a larger effort to diversify its asset base, which had included an overweight allocation to toll roads.

Australia-based fund manager CP2 announced the sale of a 7.9 percent stake in the company on Mar. 20 at AUD5.51 per share. The stock immediately sold off but is trading around AUD5.60 as of this writing. Transurban will provide a fiscal 2012 third-quarter (ended Mar. 30, 2012) sales and revenue update on Apr. 11. Management will report fiscal 2012 final results on Aug. 2, 2012. The stock, currently yielding 5.2 percent, is a buy under USD6.

Aggressive Holdings

BHP Billiton Ltd (ASX: BHP, NYSE: BHP), another member of the Great Eight, is up 10.41 percent since AE debuted on Sept. 26, 2011. BHP, whose guidance in March contributed to the deepening, warranted or not, of concern about Australia because of the outlook for Chinese consumption, posted a total return of 3.2 percent in the first quarter, lagging the S&P 500, the S&P/ASX 200 Index and the MSCI World Index, which all posted double-digit gains during the period.

BHP, which will report fiscal 2012 final results on Aug. 22, 2012, is a buy for the long term under USD40 on the ASX. The NYSE-listed ADR, which is good for two ASX listed shares, is a buy under USD80.

GrainCorp Ltd (ASX: GNC, OTC: GRCLF), a member of the Great Eight, spiked from AUD7.85 on Mar. 7 to above AUD9 in early April on speculation that it, too, might catch a bid from a bigger agribusiness player in the aftermath of Glencore International Plc’s (London: GLEN, OTC: GLNCF) USD6.2 billion deal to acquire grain-handling and marketing outfit Viterra Inc (TSX: VT, OTC: VTRAF). The stock is up 47.2 percent since the Portfolio’s inception and rose 16.66 percent overall in the first quarter.

GrainCorp will report fiscal 2012 first-half (ended Mar. 30, 2012) results on May 22, 2012. The stock is a buy under USD9.

Iluka Resources Ltd (ASX: ILU, OTC: ILKAF, ADR: ILKAY), added to the Portfolio in the March issue, rallied to post a 4.97 percent total return by Mar. 30, 2012. Overall the stock was up 19.9 percent during the first quarter, including the time it wasn’t a Portfolio Holding.

The stock has sustained the loftier perch it’s reached based on the reasonability of its long-term plan to grow with China’s middle class.

Iluka Resources is a buy when it trades under USD18 on the ASX; the OTC-traded F-share is a buy under USD18 as well. The US ADR–symbol ILKAY– represents five ASX-listed shares and is a buy under USD90. The company will provide a fiscal 2012 first-quarter sales, revenue and production report on Apr. 12, 2012. It will host its annual general meeting May 23, 2012.

Mineral Resources Ltd (ASX: MIN, OTC: MALRF) has generated a total return of 11.14 percent since Dec. 16, 2011, when it joined the Portfolio. During the first quarter the stock was up 12.75 percent.

The company will provide a quarterly activities report for the three months to Mar. 30, 2012, around the end of April and will report fiscal 2012 final results on or about Aug. 20, 2012. The stock is a buy under USD13.

Newcrest Mining Ltd (ASX: NCM, OTC: NCMGF, ADR: NCMGY) is the worst-performing stock in the AE Portfolio, having shed 17.26 percent since its Oct. 14, 2011, inclusion. Though the stock has come back again following further problems at a key mine, the first quarter was 1.87 percent to the positive in total return terms.

Newcrest will provide an update on first-quarter activity on Apr. 24, 2012. It remains a buy under USD40 on the ASX and the US OTC market. The US ADR is worth one ASX listed share and is also a buy under USD40.

New Hope Corp Ltd (ASX: NHC, OTC: NHPEF) has cooled since its self-proclaimed auction came to an end with no satisfactory bid forthcoming. The stock is up a respectable 16.5 percent overall since its debut as a member of the Great Eight on Sept. 26, 2011, but generated a loss of 3.2 percent in the first quarter.

We’ll have a full report on New Hope’s fiscal 2012 first half (ended Jan. 31, 2012) in the April issue of Australian Edge, which will be published Apr. 13. In the meantime the stock remains a buy under USD6.

Oil Search (ASX: OSH, OTC: OISHF, ADR: OISHY) has generated a total return of 7.14 percent since being added to the Portfolio in the Jan. 13, 2012, issue of AE.

The company will host its annual general meeting May 11, 2012; it reports results for the first half of fiscal 2012 on Jul. 24, 2012. Oil Search is a buy under USD8 on the ASX on the US OTC market. The US ADR is worth 10 ASX-listed shares and is a buy under USD80.

Origin Energy Ltd (ASX: ORG, OTC: OGFGF, ADR: OGFGY), which joined the AE Portfolio with the Nov. 11, 2011, issue, has generated a loss of 4.35 percent during our holding period. During the first quarter the stock posted a 3.13 percent gain. Origin will provide its quarterly sales, revenue and production report on Apr. 30, 2012.

The stock remains a buy under USD15; the US ADR is worth one ASX-listed share.

Rio Tinto Ltd (ASX: RIO, NYSE: RIO) has generated a total return of 2.43 percent since joining the AE Portfolio in the January issue. Management will provide a quarterly sales, revenue and production update on Apr. 17, and the company will host its annual general meeting on May 9. Rio remains a buy under USD75.

WorleyParsons Ltd (ASX: WOR, OTC: WYGPF, ADR: WYGPY) is down 0.66 percent in US dollar terms since Feb. 10, 2012, but it’s up 2.2 percent in price-only terms on the ASX, reflecting both the esteem in which the company is held as well as the steep decline in the Australian dollar since the February issue of AE was published.

The company will report fiscal 2012 final results on Aug. 29, 2012. The stock is a buy under USD30.