Stockmarket heroes have lost their Covid shine: what to do now

Stocks that were Covid darlings now look crook, and investors are being urged to revisit their shareholdings. SEE THE LIST

Covid created sharemarket winners last year but since then some of Australia’s well-known businesses have appeared extremely ill.

Dozens of companies have lost at least a quarter of their value, and some more than halved despite the overall market climbing 14 per cent in the past year.

Online retail, medical supplies and pizza are among the struggling sectors, and analysts and advisers say people should review their investments but stick to their long-term strategy and avoid panic selling or buying.

Shaw and Partners senior investment adviser Jed Richards said stocks that benefited from surging pandemic-related demand were overbought in 2020, and some had been oversold in 2021.

Among the Covid darlings was online retailer Kogan, which increased five-fold between March and October 2020 but has dropped 63 per cent since then.

“Online shopping went through the roof, but Australians have all replaced their TVs and now many will be spending on going out again,” Mr Richards said.

Jessica Amir from Saxo Capital Markets says quality investments will climb long-term. Picture: Supplied

Ansell, which produces protective equipment such as medical gloves, doubled between 2019 and 2020, but has dropped 25 per cent in recent months despite the pandemic lingering.

Dominos Pizza Enterprises had trebled over 18 months but has dropped 25 per cent since September as its sales were hit by key markets reopening.

Even traditional retailers Woolworths and Coles have dropped close to 10 per cent.

“Both Woolworths and Coles had a really good run when everybody was home cooking for themselves, but as soon as the doors opened everybody ran off to eat at restaurants,” Mr Richards said.

“You have to be selective at the moment,” he said.

Saxo Capital Markets Australian market strategist Jessica Amir said it was important to re-evaluate investments but people should remember that fluctuations were a normal part of investing and that quality investments would rise long term.

“If the stock you have invested in still has a strong outlook, if it’s still in a leading position or has strong market share and is continuing to win business, I would think twice about selling,” she said.

Buy now, pay later (BNPL) stocks were market darlings in 2020 but sector leader Afterpay is down 25 per cent since earlier this year and fellow BNPL player Zip Co has more than halved.

“What has affected some of last year’s heroes like Afterpay and Zip is that retail spending has fatigued, plus people are a bit more hesitant to shop online due to the global shipping delays,” Ms Amir said.

She said revenue and cashflow growth drove share price growth, and if a company’s long-term outlook had weakened she would consider taking profits and putting the money into more promising opportunities – such as climate change-friendly lithium and rare earths stocks.

Rising Tide Financial director Matt Hale said now was a good time to reflect on your investments while understanding that “ups and downs” were normal.

“All investment decisions need to be based around what your goals are,” he said.

“You don’t want to be making a decision on a whim. Revert back to your plan and get an objective opinion before making rash decisions.”

Shaw & Partners senior investment adviser Jed Richards says the economy’s reopening has triggered sharp share price moves. Picture: Supplied

STRUGGLING STOCKS

Kogan: The online goods and services company boomed early in the pandemic but has dropped more than 60 per cent amid inventory issues.

Appen: Shares in the machine learning company doubled during 2020 but have plunged 74 per cent since then as AI spending slowed.

Domino’s Pizza Enterprises: Was going gangbusters until September before falling 26 per cent, including an early November crash after a poor trading update.

Ansell: The makers of medical gloves and other personal protective equipment has come off the boil by 25 per cent as PPE demand dwindled.

AGL Energy: Weakness started before the pandemic but has continued through Covid; down 74 per cent since early 2020.

AMP: Share price started sinking 15 years ago, and since mid-2020 AMP has lost another 39 per cent.

The a2 Milk Company: Since mid-2020 the infant formula company’s shares have slumped 69 per cent amid worries about Chinese customers.

Zip Co: Buy now, pay later stocks surged as online shopping boomed in 2020 but are now battling cashed-up competitors, with Zip down 54 per cent since February.

Originally published as Stockmarket heroes have lost their Covid shine: what to do now