Winners and losers from ASX may surprise you

Many of the market’s blue chips came to the party in the last 12 months along with the Car Group and TechnologyOne.

TechnologyOne, headed up by Edward Chung, has been an excellent and consistent performer. Picture: Mark Cranitch.

In 2023 the big bear market did not arrive, nevertheless the last 12 months has still managed to disappoint most. We’ve seen rallies, and retreats, discussions and debates, the public arrival of AI, but ultimately this year will be characterised by low volumes, low conviction, lots of trading and very little in sustainable gains.

Performances from indices and general impressions are not every investor’s game, and if we dig deeper below the surface of the ASX – up around 2 per cent year to date – there are plenty of positive surprises to be found.

Take the banks, for example, prime point of attention for just about everyone in Australia.

Banks

The regionals haven’t performed well; luckily they pay franked dividends. Sector laggards ANZ Bank (ASX:ANZ) and Westpac (ASX:WBC) have more or less kept track with the resources heavyweights BHP Group and Rio Tinto (ASX:RIO) in generating between high single digit and low double digit share price appreciation for the past three years (in total, not per annum).

All have paid out above-average dividends to shareholders, no doubt yet again highlighting the importance of dividends to many an investor.

It might come as a surprise, however, share prices of National Australia Bank (ASX:NAB) and CommBank (ASX:CBA) are up circa 24 per cent and 26 per cent respectively since 1st January 2021. Add six half-yearly dividends and the return from the outperformers can only be described as “excellent”, in particular when placed in the context of all that has happened over the past three years.

Note: CommBank shares, despite being the most “expensive” and least liked (pretty much as a standard setting) have once again crowned themselves as the best performer in the Australian banking sector. It’s by no means a one-off experience.

What NAB and CBA are suggesting is that investing in the post-Covid era is dominated by share market polarisation and thus investment returns are heavily influenced by which stocks in particular are included in the portfolio, and – equally important – which stocks are not.

Misses

Avoiding major disasters from a2 Milk (ASX:A2M), AMP (ASX:AMP), Bega Cheese (ASX:BGA), Chalice Mining ASX:CHN), Cromwell Property Group (ASX:CMW), Healius (HLS), Iress (ASX:IRE), Lendlease (ASX:LLC), Link Group (ASX:LNK), and the likes would have gone a long way to achieving decent return from the share market, and with less headaches too.

The experience of the FNArena/Vested Equities All-Weather Model Portfolio pretty much mirrors that of the broader market; many portfolio constituents have been lagging, for a variety of reasons, while others have outperformed expectations.

Winners

As for winners: Car Group (ASX:CAR), previously known as Carsales, has been an outstanding performer, even though rising bond yields in 2022 proved the obvious headwind. Participating in the capital raise earlier in the year was a no-brainer.

TechnologyOne (ASX:TNE) has been an excellent and consistent performer too. No other constituent is able to match TechOne’s consistency, but 2023 has given plenty of opportunity to shine to the likes of Aristocrat Leisure (ASX:ALL), Goodman Group (ASX:GMG), NextDC (ASX:NXT), even Wesfarmers (ASX:WES).

The decision to permanently have some exposure to gold, and to increase that in 2022, has also contributed positively this year.

Equally important, when mayhem hit global markets throughout 2022, the Portfolio moved a large chunk into cash, which limited losses last year. In 2023, some of the new allocations have proved quite fortuitous, including in Dicker Data (ASX:DD), HUB24 (ASX:HUB), REA Group (ASX:REA), and WiseTech Global (ASX:WTC).

Some of these allocations were made near the bottom of share prices in October, in line with my Weekly Insights at the time.

The results

The Portfolio is not always able to time its decisions as perfectly as in October. Apart from the positive contributions to this year’s performance, we’re delighted to once again own a piece of some of the most robust and reliable growth stories on the ASX.

Moving to a safer cash buffer in 2022 meant we had to let go of companies we’d like to own longer term. As the saying goes: no omelette can be made without breaking some eggs. In hindsight, all we had to do was stay true to our conviction, remain disciplined along the way, and wait for market volatility to give us opportunities.

Did we have doubts along the way? You bet. The end outcome is but a tiny piece of this story. Then again, we should always remain cognisant we are running a marathon, not a 60m indoor sprint.

Next month we’ll be celebrating holidays and the start of a new calendar year, but there are no guarantees the quarters ahead will be any easier. Ask any economist, and they all are bracing for slower economic momentum ahead.

On the other hand, falling inflation and lower bond yields offer support for equities generally, all else remaining equal. As per always, none of this will move in a straight line.

Meanwhile, the biggest mistake for investors to make is to assume real opportunity in the share market only presents itself in the form of a subdued PE ratio; see AMP, Iress, and the likes.

The February results season will once again prove just that.

Rudi Filapek-Vandyck is editor at the investment service FN Arena.