Big names join the delinquent list as small caps exact their revenge

The small-cap sector is easily outperforming the supposedly rock-solid pillars of the market.

For the first time in your columnist’s admittedly unreliable memory, the small-cap sector is easily outperforming the supposedly rock-solid pillars of the market.

Since the start of the calendar year, the 197 constituent stocks of the small-cap index have gained just under 1 per cent.

The ASX 50 index — replete with the banks and the Telstras and the big miners we know and used to love — is 9 per cent off the pace and getting worse by the day.

The worst performers — Origin Energy (ORG, down 56 per cent) and Santos (STO, down 52 per cent) have raised billions of capital in the wake of the oil price swoon which turned all the worse late in the week.

But Woolworths (WOW, -22 per cent), ANZ Bank (ANZ, -17 per cent) and online pioneer Seek (-21 per cent) are seldom on the delinquent list. BHP shares have lost almost one-third and yesterday fell below $20 a share. Considering the big miner is far from any whisper of balance sheet or cashflow stress, buying below $20 might be a once-in-a-decade opportunity. But reflecting the unfolding nature of the Brazilian disaster, our long-term buy moves to a speculative buy.

Santos shares, meanwhile, are trading perilously close to the $3.85 a share level at which the rights issue has been struck.

For retail investors, participating in the issue is lineball. But given the institutional component was well supported we would on balance suggest doing so. The best small-cap performer, by the way, was not that purveyor of white gold Bellamy’s (BAL) — but “real” gold producer St Barbara (SBM) with a 1070 per cent gain.

Infant food maker Bellamy’s has climbed almost 500 per cent, while similarly China-focused vit­a­mins maker Blackmores (BKL) takes third place with a 370 per cent gain. Reflecting turmoil in the mining services sector, the worst two small-cap stocks have been Bradken (BKN) and MMA Offshore (MMA), down 86 per cent and 80 per cent respectively.

JC International (not yet listed)

The latest Chinese entity to brave a local listing is the oriental equivalent of labour wrangler Skilled Group (now Programmed Group) and vocational training provider, not that either are flattering comparisons at the moment.

There’s more than a passing comparison with Skilled in that JC’s chairman is former Skilled ­director John Dixon.

JC is a one-stop contractor for large construction projects undertaken by Chinese state-owned entities, increasingly outside of China. It also runs China’s biggest training school at its HQ in Maanshan, 350km west of Shanghai.

JC was founded by local carpenter John Tang, China’s equivalent of Skilled founder Frank Hargraves, in 2003. Projects to date include Kuwait’s Olympia Towers and a sugar plant in Guyana, Algerian apartments and a facility for Kuwait university and, closer to home, PNG’s Waigani National Courts Complex. Dixon says the listing imbues the credibility for JC to compete more widely in the SOE sector.

The Weekend Australian accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser. The author holds shares in BHP, Woolworths and Programmed Group.