ASX at record highs masks share price struggles of some of Australia’s major companies

While tech and banking stocks drive the ASX to new heights, more than half of Australia's top 50 listed companies remain at least 10 per cent below their records.

Resources stocks have struggled in recent years, but optimism remains. Picture: BHP

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More than half of Australia’s 50 largest listed companies are sitting at least 10 per cent below their record-high share price, despite the overall stockmarket trading near its peak.

An analysis of share price performance by The Australian shows several key companies are 20, 30 per cent or more off their peaks: including BHP, Fortescue, Woodside Energy, Woolworths, QBE, Santos and Scentre Group.

This month the S&P/ASX 200 index hit a record 8776.4 points but has since slipped back about 1 per cent. It is 8.6 per cent higher over the past 12 months, although resources stocks remain well below their glory days.

BHP is 20 per cent below its record, Fortescue is down 40 per cent, and oil and gas group Santos – currently under a takeover offer – is 56 per below its peak struck way back in 2008.

Ten Cap’s Jun Bei Liu says investors have focused on winners. Picture: Nikki Short

Analysts say banking and tech stocks lifted the market to record highs, but big resources and healthcare companies now offer the best value for investors.

Shaw and Partners senior investment adviser Jed Richards said his team saw many negative share price graphs despite the strong overall market.

“It goes to show there’s only a handful of stocks which have accounted for these record highs,” he said. “The index is not a fair representation of our entire market at the moment.”

Mr Richards said this was “the first time I can remember in 30 years that we have got a lot of negative stocks even though the market’s at record highs”.

“The job of a good adviser today is what you avoid, not what you buy,” he said.

“Things are moving quickly, and stock selection and asset allocation are more important than ever.”

Mr Richards said he was currently buying BHP and Fortescue as he believed in Chinese iron ore demand.

“I’m buying CSL,” he said. “I feel like the health care sector has been left out of this rally. Ramsay and CSL are great companies that are currently low so I think that’s an area that’s worth investing in – I think there will be money rotating there.”

Ten Cap founder and portfolio manager Jun Bei Liu said resources and CSL offered good value.

“CSL is an easy one – that’s underperformed so much … but analysts have now all downgraded so the earnings is looking OK, plus they’re going to cut R&D costs next year meaningfully,” she said.

“It seems like this company is turning the corner in terms of beating analysts’ expectations.”

Ms Liu said investors had been concentrating on companies beating earnings expectations.

“That’s why you saw tech companies continue to go higher,” she said.

Tariff uncertainty was not good for resources companies, Ms Liu said.

“People wanted to be more defensive so they would keep buying the same winner, but interestingly in the last month or so you’ve started seeing that changing,” she said.

“The rally is now broadening out. This is a positive sign for the sharemarket because it means there’s a bit more confidence.”

Moomoo Australia market strategist Michael McCarthy said CBA and other big banks explained the market’s record highs.

“Because CBA is the biggest one on the index and has got such a huge weight, it’s dominating the performance,” he said.

“Throw in three more big four banks, and you’ve got the dominant performers in the index.”

Mr McCarthy said “a slow-burn turnaround” was under way in resources, which now offered standout value.

“There’s no need for investors to outsmart themselves at the moment,” he said. “Keep it simple and go for the global players – there the ones with the cash flow, the balance sheet, the opportunities.”

Picking stocks remains difficult for investors.

“It’s one of the reasons why we are seeing an increasing concentration in ETFs,” Mr McCarthy said. “People are nervous about the outlook, they’re nervous about individual stocks, but they’re also being driven by a fear of missing out.”