ASX Movers and Shakers

September  2022

Benjamin Khouri

Mr. Benjamin Graham – The famed ‘father’ of Value Investing – once said;
‘Price is a creature of the market’s mood. In booms, it is set by the greediest buyer; in busts by the most fearful seller’

Whilst this was said over half a century ago, it remains incredibly relevant today and speaks volumes on the extent to which human emotion and psychology plays in the Stock Market.

And the past two years have been evidence of that, with global pandemics, geopolitics, inflation and central bank policy shifts certainly testing the markets’ ability to price financial assets.

But in global markets that can often jolt at the very slight glimpse of uncertainty, how are investors able to understand the very industries that have experienced periods of elevated or depressed levels of Wealth Creation (Share Price Growth Plus Dividends Per Share)?

The most conventional way this is conducted globally is via the GICS (Global Industry Classification Standard), the industry classification system jointly developed by MSCI and S&P that is used for the major global stock market indices.

Whilst GICS is an industry classification system that has been globally adopted and standardized, and therefore enables investors to conduct forms of ‘like for like’ sector analysis, it does come at the cost of narrow industry definitions.

It is why (and for reasons outlined in our Importance of Proper Classification Insight), the Ruthven Institute has conducted its analysis of the top ASX companies in this insight on an ANZSIC (Australian and New Zealand Standard Industrial Classification) basis.

2020 – COVID-19 Pandemic

Prior to 2020, it was inconceivable to think a government would lockdown its economy and citizens. However, 2020 was the year that saw some of the most unprecedented and controversial policy’s enacted in order to alleviate the spread of COVID-19.

The effects of such policy’s (whether real or perceived) on the top ASX companies in 2020 certainly varied by industry.

Biggest Movers

Whilst the Accommodation and Food Services industry division was the biggest mover, it was only composed of takeaway pizza operator Domino’s Pizza, a company that took the approach of expanding further globally during this stark period. This was followed by the Manufacturing industry division, with the primary beneficiaries of this industry being the manufacturers of Medical and Surgical Equipment, as well as of Pharmaceutical products; industry’s that both reaped the benefits of elevated demand during the initial year of the COVID-19 global pandemic.

Biggest Shakers

The Adminiatrantion and Support Services industry division was the biggest shaker, with Travel Agents and Tour Arrangement Services operators enduring a period where global tourism was all but at a standstill.
This was followed by the Finance and Insurance industry division, with the nations banks being some of the biggest shakers – where market anxiety and uncertainty was strife – that is until unprecedented levels of fiscal and monetary stimulus were enacted.

2021– Market Recovery and Excessive Exuberance
In a year where markets were able to rationalize the effects of the COVID-19 pandemic on the consumer and business environments, the global markets were largely in a state of recovery.

By the middle of 2021 – with unprecedented levels of fiscal and monetary stimulus flowing through to both the ‘real’ economy and financial markets – both the US and Australian stock markets were reaching excessive heights.

And what was the effect on the top ASX companies?

Biggest Movers

The Wholesale Trade industry division was the biggest mover, where Plumbing Goods, as well as Medical and Scientific Equipment wholesale operators certainly enjoyed a period of elevated returns.
The Admin and Support industry division was the second highest, with the aforementioned Travel Agents and Tour Arrangement Services operators recovering some lost ground.

Biggest Shakers

Whilst still in the positive, the Transport, Postal and Warehousing industry division was the lowest yielding wealth creator of the 19 industry divisions, where infrastructure-based companies, such as Airports, Toll Road operators and logistics companies did not enjoy the exuberant returns as the other industry divisions did.

The Electricity, Gas, Water and Waste Services industry division was marginally higher, though still much lower than the performance of the other industry divisions, with the Fossil-Fuel and Gas-Supply energy generators being the predominant laggards. Although, companies that have been increasing their focus on more ‘greener’ means of energy generation enjoyed some elevated returns within this industry division.

2022 – Inflation, War and Rate Hikes

Where 2021 was a year of ample market recovery, 2022 has been the polar opposite of just that thus far.

Amidst burgeoning inflation, war, and an abrupt reversal of monetary stimulus by the world’s central banks, global markets have been in a state of freefall.

The tech-laden NASDAQ is in technical bear-market territory, with the commencement of a rate-hiking cycle by the Federal Reserve seeing a plunge in the indexes interest rate sensitive tech-stocks.

Over in Europe, an energy crisis emanating from the Russo-Ukrainian war has dampened both the continents equity markets, as well as their levels of consumer sentiment.

Back home in Australia, the higher concentration of mining companies on the nations bourses has lessened the impact of the downturn, when compared to its global counterparts. Nonetheless, the nation’s benchmark index remains almost 8% down year on year.

Parting Words – Thinking Long-Term
Whilst we as humans are innately sensitive to what is immediately facing us in the present, it is helpful – and reassuring – to consider the long-term perspective.

Over the 200+ year history as a British colony and nation, the Australian economy has endured numerous recessions and depressions.

Further, if we look at the history of the nation’s stock market, it too has experienced numerous bouts of recessions/depressions, wars, as well as market shocks.

This is a telling lesson; what may be considered as a significant movement in the present is all but a momentary blip in history.

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