Where you should consider putting your money in 2016 after a turbulent year for the ASX

DEMOTIONS from a key ASX index have been bad news for several companies this year. So this is where you should consider putting your money in 2016.

A man takes a photograph of an information board showing share prices at the Australian Stock Exchange in Sydney on Monday, Dec. 14, 2015. The ASX market has tumbled at the open, with falls across the board following a 2pct slide on Wall Street last Friday. (AAP Image/Paul Miller) NO ARCHIVING

WELL-KNOWN companies have been among the casualties on the sharemarket this year as demotions and promotions helped shape where Australians invest their money.

A News Corp Australia analysis has found that 86 companies were demoted from four key stock exchange indices: the All Ordinaries index and the S & P ASX 50, 100 and 200 indices.

Struggling electronics retailer Dick Smith Holdings was one of the most volatile. It was promoted to the ASX 200 index in March, only to be booted out this month as its share price slid 83 per cent over the year.

CMC Markets chief market analyst Ric Spooner said Dick Smith faced industry-wide challenges in retail. “But it would have to be said their response to those challenges has not been as good as some of their competitors like JB Hi-Fi and Harvey Norman,” he said.

The All Ordinaries and other indices provide a benchmark for investment and superannuation fund managers, while the fast-growing exchange traded fund sector offers investments that track a given index.

Bad run ... Dick Smith electronics was struck off the Australian share market's (ASX) top 200 companies list just as its stores launch a mammoth clearance sale. Picture: AAP

A company’s share price can be negatively affected when it is demoted because fewer fund managers may see a need to hold it.

Resources companies featured heavily in the demotions in 2015, including Beach Energy being dropped from the S & P/ASX 100 and Iluka Resources falling from the S & P/ASX 50. Other casualties included law firm Slater & Gordon and Metcash, which distributes to IGA stores.

Not all sharemarket losers suffered demotions. Among the top 20 stocks, five slumped more than 20 per cent including BHP Billiton, Woolworths and Origin Energy, which may find its spot in the top 20 under pressure from now-larger companies such as AGL and Ramsay Health Care.

On the flip side, corporate success saw several companies promoted up the index rankings.

Domino’s Pizza Enterprises was added to the ASX 100 index and its strong growth may see it soon join the top 50 as it expands globally.

Riding high ... Don Meij, the CEO of Domino's pizza. Picture: David Kelly

“It’s often said investors are nervous about Australian companies expanding geographically, but there are a lot of success stories. Domino’s is one,” Mr Spooner said.

The nation’s largest infant formula provider, Bellamy’s Australia, joined the All Ordinaries index amid surging demand from China, while Medibank Private’s float saw it added to the four key indices.

CommSec chief economist Craig James said 2015 was the second year running that mid-cap companies outperformed the big blue chips, which could further reshape indices.

“Top stocks like BHP Billiton have been hit hard by the low iron ore price, low coal price and low oil price,” he said, prompting investors to look at other shares.

Mr James said a company’s value was just one factor in an ASX index. Share liquidity and its performance relative to the rest of the index were others, he said. “The company may be doing fine but other companies may be doing a lot better.”

DEMOTIONS

Dick Smith Holdings

Slater and Gordon

Metcash

Beach Energy

Iluka Resources

PROMOTIONS

Domino’s Pizza Enterprises

Medibank Private

Bellamy’s Australia

Seek

Spotless Group