What Worked Australia - 01 Apr 2016 - Short term momentum reverting, long term doing better

What Worked – 1 month momentum continued its reversion this week, while the longer term 12 month momentum signal came through strong. Value was off once again, but nowhere near the levels of last week. On the short term reversal front, Evolution Mining (EVN, +1.7%), Sirtex Medical (SRX, +2.4%) and Caltex Australia (CTX, +1.1%) all finished up on the back of poor returns for the last month, while SIMS Metal (SGM, +0.6%), Premier Investments (PMV, -5.7%) and Worleyparsons (WOR, -9.1%) all reverted to finish down.

On the long term momentum front, Origin Energy (ORG, -2.9%), Ansell (ANN, -6.2%) and ANZ Bank (ANZ, -4.7%) all weakened further off a poor run over the last year, and Regis Resources (RRL, +2.3%) and CIMIC Group (CIM, +0.9%) increased returns this week of a solid previous 12 months.

Who Moved – Volumes still remained weak with only 3 names posting higher than normal volumes this week. On the negative side of things, Premier Investments (PMY, -5.7%) and Sigma Pharma (SIP, -0.5%) finished weaker, while Recall Holdings (REC, +8.3%) closed up on stronger than normal volumes.

Summary

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What Worked Australia - 25 Mar 2016 - Value comes off hard, move into Profitable Growth names

What Worked – Values run has finally come to an end, and in a big way. While PBR has been one of the strongest performing signal over the last 2 months, if came off particularly hard this week, generating an IC just shy of -40%. These kind of numbers are usually restricted to the more volatile signals like Beta and 1 week/month reversal signals. Low PBR names erasing gains this week included Origin Energy (ORD, -5.8%), Seven Group Holdings (SVW, -7.8%) and Fortescue Metals (FMG, -6.5%). PBR was largely a one-sided affair however, with the gains on the high PBR names not as spectacular of the losses from the low PBR names.

Sales Growth and ROE fared better this week, with high growth, high ROE names like Cochlear (COH, +2.1%), Aristocrat (ALL, +3.8%) and TPG Telecom (TPM, +9.3%) finishing the short week well up over the index.

Who Moved – For a short week there was some good volume around. 27 Names from the index posted higher than normal volumes for the week. Of those finishing up on volume for the week, Ardent Leisure (AAD, +15.7%), Premier Investment (PMV, +15.2%) and Paladin Energy (PDN, +13.6%) all finished up very strongly, while Evolution Mining (EVN, -12.8%), Independence Group (IGO, -12.1%) and Karoon Gas (KAR, -11.8%) rounded out the losers for the week.

Summary

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What Worked Australia - 18 Mar 2016 - Long term momentum coming off, Value still strong

What Worked – Long term momentum came in week once again as the laggards for the last 12 months continued to climb, while the winners were off a little, albeit largely in the small cap space. Origin Energy (ORG, +6.6%), Mesoblast (MSB, +15.6%) and News Corp (NWS, +8.4%) among those 12 month underperformers that came back strong this week, while Regis Resources (RRL, -6.1%), Sirtex Medical (SRX, -7.7%) and Aristocrat (ALL, -5.5%) all off this week after a strong run over the last year.

Value continued its run, extending its winning performance out to 6 weeks. Genworth Mortgage (GMA, +5.6%), Myer Holdings (MYR, +7.7%) and Fairfax Media (FXJ, +8.9%) all up on the back of looking cheap on PBR.

Who Moved – Volumes came off this week with only 10 names producing higher than normal volumes. Independence Group (IGO, +8.8%), Sigma Pharma (SIP, +8.8%) and SKY Network (SKT, +8.3%) producing positive returns on significant volumes, while Resmed (RMD, -6.4%), Northern Star Resources (NST, -5.3%) and Monadelphous Group (MND, -4.3%) all coming off.

Summary

Australia Factor Performance

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What Worked Australia - 11 Mar 2016 - Value the only real story

What Worked – Value continued its strong run this week, and not much else saw any movement. While Div Yield managed to make it positive this week, PBR was the strongest signal by far this week generating an IC of +26%, and a quintile spread of +7.3%. Low PBR names have done particularly well over the last month, driven in large part by resources names, while the higher valued names have only come off slightly. PBR has produced positive returns for 7 of the last 8 weeks.

In the sub 1.0x Book value space this week, Bluescope Steel (BSL, +2.1%), Fortescue Metals (FMG, +6.2%) and Primary Health Care (PRY, +6.6%) where among the best performers. ROE did see a slight sell-off, in what was an almost mirror image of PBR in terms of performance. OP Growth also managed to produce a positive return for the week, with names like Alumina Limited (AWC, +6.9%) and Qantas (QAN, +6.6%) returning some strong results this week.

Who Moved – Volumes are still looking reasonable, with 29 names producing higher than normal volumes for the week. The smaller names this week produced the bulk of names trading on significantly higher volume this week. In the winner’s circle saw Mount Gibson Iron (MGX, +7.9%), Retail Food Group (RFG, +7.7%) and Premier Investments (PMV, +7.5%) all up, while Worelyparsons (WOR, -12.3%), Sandfire Resources (SFR, -7.3%) and OZ Minerals (OZL, -4.6%) all finished lower on high volume.

Summary

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What Worked Australia - 04 Mar 2016 - A good week to be a value investor in Australia

What Worked – While Div Yield did quite poorly this week, other value metrics produced some outstanding results. While the quintile spread came through with lack-luster numbers, PER came through for the fourth week in a row. Driven largely by a strong pickup in the cheaper names, the more expensive end of the market was also up,. Value, for the first time in almost two years, is net positive for the last 3 months. PBR was however the standout this week, generating a 40% IC, and is proving to be a stronger value indicator than PER at the moment in the Australian market. Origin Energy (ORG, +20%), Glenworth Mortgage (GMA, +8.7%) and Santos Limited (STO, +21.4%) all low PBR names that produced strong returns for the week.

On the other side of the coin, 12 Month momentum produced some disastrous results for the week. While the 12 month winners were off slightly, it was a pickup in the laggards that generated these numbers for the week, and largely in energy related names. Independence Group (IGO, +23.5%), BHP Billiton (BHP, +13.8%) and Worleyparsons (WOR, +54.4%) all generating strong returns after a very poor run over the last year

Who Moved – Volume continues to be strong, with 35 names trading on substantially higher than normal volumes for the week. The winners circle saw Mesoblast (MSB, +43.4%), Sims Metal (SGM, +23.0%) and UGL Limited (UGL, +15.2%) all up on strong volume, while Slater & Gordon(SGH, -55.4%) led the losers down on the back of some poor news around a pending deadline from their creditors. 

Summary

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What Worked Australia - 26 Feb 2016 - Value 2 for 2, slow down in momentum sell-off

What Worked – Value made it 2 for 2 this week, the main difference being that Dividend Yield also came along for the ride, the notable exception here is the high yielding financials that took a hit. Nine Entertainment (NEC, +4.8%), CSR Limited (CSR, +0.9%) and Spotless Group (SPO, +11.5%) among the highest yielding non-financials that posted positive returns for the week. Momentum all managed to be in the red this week, although the numbers are getting smaller each week, almost looking about time for the reversion to cease. While Size produced good results for the week, this was largely on the back of a sell-off in the large cap space rather than a swing into the smaller names. Commonwealth Bank (CBA, -3.8%), Westpac (WBC, -4.2%) and BHP Billiton (BHP, -6.2%) all dropping significantly. Of thew top 10 biggest names in the ASX 200 only one managed to finish the week higher this week.

Who Moved –  Volume continues to be reasonably heavy during these wild swings, and this week was no different. 33 names moved on significantly higher than normal volumes this week. In the winner’s circle, Altas Iron (AGO, +40.0%), UGL Limited (UGL, +20.4%) and Whitehaven Coal (WHC, +18.3%) all up very strongly, while Cover-More Group (CVO, -12.4%), Automotive Holdings (AHG, -7.1%) and Independence Group (IGO, -6.7%) finished the week lower on high volumes. 

Summary

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What Worked Australia - 19 Feb 2016 - Value strong, but smaller names the winners

What Worked – For the first time this year value has managed to come in with an IC above our “threshold” of 10%. All value metrics (ex dividend yield) posted very strong numbers this week, the strongest in fact since the week before Christmas. Seven West Media (SWM, +12.7%), Seven Group Holdings (SVW, +5.6%) and Spotless Group (SPO, +16.9%) all amongst the sub 10x PER names that posted better than the index returns for the week. Momentum on the other hand reversed as the names that had run (and become more expensive) flat-lined for the week against the index, and the cheaper names took the lead. Momentum was negative across the board, driven not by profit taking, but a run into index laggards.

Size came into play this week also, having it worst performing week in almost a year. While the large cap names remained in-line with the index, the smaller names saw a dramatic pickup. Mount Gibson Iron (MGX, +5.7%), Cardno Ltd (CDD, +12.5%) and AWE Ltd (AWE, +17.7%) amongst the smallest names in the index that all saw significant returns for the week. All in all, only 8 names in the sub- 1bn AUD market cap range posted a loss for the week.

Who Moved – Strong week for volume as 39 names from the 200 in the index posted significantly stronger than usual volumes. On the winning end were a lot of the smaller names, including Beadall Resources (BDR, +33.3%), Whitehaven Coal (SHC, +26.7%) and GWA Group (GWA, +22.8%), while the other end of the list saw Arrium (ARI, -74.1%), Cover-More Group (CVO, -14.3%) and Atlas Iron (AGO, -9.1%) all come off on the back of very strong volumes.

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What Worked Australia - 12 Feb 2016 - Momentum back in Favour

What Worked – In what has been a pretty terrible week for equity markets around the globe, Australia has not been spared by any means. Momentum fared well for the week, driven equally by a sell-off in the laggards, and a good helping of outperformance in the winners. All guises of momentum saw good headline numbers this week, although it was the shorter term (1 Month Price Momentum and 1 Month Earnings Revision Momentum) that took the show. With a slew of negative interest rate talk around, the finance sector took the worst of it this week, although likely more of a contagion affect from their European and US cousins than any real threat of it happening in Australia. Already the focus of a good sell-off, Magellan Financial (MFG, -9.1%), Macquarie Group (MQG, -8.3%) and Henderson Group (HGG, -12.5%) where amongst the worst affected, while the miners rebounded – Northern Star Resources (NST, +16.7%), Evolution Mining (EVN, +22.4) and Independence Group (IGO, +17.7%) were are the top of the list.

 

Who Moved – 27 names posted substantially higher than normal volumes this week, and for the most part ended the week lower than they started. OzForex (OFX, -39.2%), Bank of Queensland (BOQ, -16.9%) and Computershare (CPU, -13.9%) faring the worst, while Evolution Mining (EVN, +22.4%), Ansell Limited (ANN, +13.4%) and Cochlear (COH, +11.7%) all came out on top.

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