What Worked Australia - 24 Mar 2017 - Beta and all momentum hurt

What Worked

This week saw a swing away from Beta and low Quality names, and a move away from Momentum, both price and earnings revisions. In terms of “What Worked”, well, nothing did. Not a single factor managed to post a Rank IC above our working threshold of 10%. While Value signals were also off, this was largely due to the reversal in momentum, with more expensive names becoming more expensive, while the cheaper end of the market remained relatively flat. While the higher beta names stayed in line with the benchmark, it was the low beta names that really rocketed this week. Among these were ResMed (RMD, +1.3%), Viva Energy REIT (VVR, +2.5%) and Growthpoint Properties (GOZ, +2.5%).

Lower Quality names, measured by higher Debt-To-Equity, came off this week. Names hurt included Navitas Limited (NVT, -0.7%), Telstra (TLS, -3.5%) and James Hardie Industries (JHX, -0.1%). In terms of Sectors, Finance names took a beating this week, with most of the banks down compared to last week.

Who Moved

22 names managed to move on volume this week, and the spikes were distributed across the sectors. On the negative side of things, Fletcher Building (FBN, -11.5%), Evolution Mining (EVN, -8.9%) and Harvey Norman (HVN, -7.9%) were amongst the hardest hit, while Spotless Group (SPO, +46.6%), Blackmores Limited (BKL, +19.4%) and SKY Network Television (SKT, +7.8%) rounded off this week's winners end up on significant volume.

Summary

PDF Report available here: Download


What Worked Australia - 17 Mar 2017 - 12M Momentum continues its see-saw

What Worked

12 Month momentum bounced back this week, continuing its near 2 month run of on-then-off again. The big difference this week – the better performing names managed to beat the benchmark, and value ran right along with it. Higher performing names that shone this week included Fortescue Metals (FMG, +11.8%), Resolute Mining (RSG, +17.1%) and Galaxy Resources (GXY, +10.0%). The other side of that trade however did not fare so well. Bellamy’s Australia (BAL, -3.5%), iSentia Group (ISD, -3.9%) and Estia Health (EHE, -3.5%) top out the list of the worst performers over the last 12 months, and this week just saw them digging that hole a little deeper.

Forward PER has over the last two weeks taken a battering, and on a quintile return basis the least expensive names had dropped -4.2% against the benchmark index. This week saw a big correction in this signal, with the cheapest names on a Forward PER coming back producing just over +3.1% of outperformance this week. This was largely the driver behind the terrible numbers in the short term momentum and technical signals, all showing a sharp reversal. Cheap names that bounced back this week included Seven West Media (SWM, +0.7%), St. Barbara (SBM, +15.4%) and Nine Entertainment (NEC, +3.3%).

Who Moved

Volumes continue to look better, with 27 names this week moving on higher than normal volumes. To the downside, Ramsay Health (RHC, -6.0%), Myer Holdings (MYR, -5.3%) and SKY Network Television (SKT, -5.0%) all off backed by significantly higher than normal volumes, while Evolution Mining (EVN, +12.6%), Mineral Resources (MIN, +5.6%) and Fairfax Media (FXJ, +5.2%) all finished the week higher on string volume.

Summary

PDF Report available here: Download


What Worked Australia - 10 Mar 2017 - Both Value and Growth off, ROE Positive

What Worked

In an odd week both Value and Growth metrics came off this week. Value, except for Dividend yield, has seen a lot of low PE names hit hard over the last couple of weeks, all in stark contrast to the excellent run over the previous 3 months. Cheap names on a forward PER basis that came off this week were also the ones that were hurt last week, and as with last week the more expensive names tended to remain in line with the market, while the cheaper ones came off sharply again. The Resources names were among the most impacted this week, and continue to get cheaper on a forward PER basis, namely Whitehaven Coal (WHC, -7.3%), Saracen Mineral Holdings (SAR, -10.8%) and Northern Star Resources (NST, -5.2%).

Names ranking highly in terms of forward OP growth were also hit this week, and once again the focus was on Resources. Iluka Resources (ILU, -3.6%), Whitehaven Coal (WHC, -7.3%) and BHP Billiton (BHP, -5.4%) are all among the names with the highest forecast OP growth, and all among the hardest hit this week. On the positive side of things, ROE did see positive numbers in terms of Rank IC, yet this was in large part driven by the middle ground rather than the top and tail of the market. Both the top and bottom quintile of ROE names were off against the benchmark this week.

Who Moved

Only 14 names managed to move on significant volume this week, a small downtick from the previous weeks that have seen a lot of names moving around backed by volume. On the losing side of the market Resolute Mining (RSG, -9.2%), OZ Minerals (OZL, -7.6%) and Evolution Mining (EVN, -6.1%) filled the bottom three positions, while Qube Holdings (QUB, +6.9%), Costa Group Holdings (CGC, +4.4%) and Breville Group (BRG, +2.3%) all finished the week in the black and above the benchmark.

Summary

PDF Report available here: Download


What Worked Australia - 03 Mar 2017 - PE comes off, and drags low beta names along with it

What Worked

PER finally took a week off, and came in quite negative this week with a very large down-swing in the cheapest names in the market. The lowest PER names (i.e. highest earnings yield) dropped almost -4% against the benchmark, while the more expensive names remained relatively flat. Some of the worst hit included Resolute Mining (RSG, -15.9%), Spotless Group Holdings (SPO, -14.4%) and Retail Food Group Limited (RFG, -10.6%). While 12 month momentum appeared to show positive results this week, the top and tail of 12 month momentum names both lost out to the benchmark, and the IC was in large part driven by middle three quintiles. 12 month momentum, either if you are for or against it, is not playing nicely for anyone focusing on this signal, and has not been a team player for close to three months.

Beta was a good mover this week, however like 12 month momentum, the IC was largely driven by the middle ground. That being said, low Beta names took a big hit this week, with the sharp drop in the last quintile (lowest beta) names looking about a sharp as drop in low PE names. Newcrest Mining (NCM, -7.6%), St. Barbara Limited (SBM, -7.4%) and Macquarie Atlas Roads (MQA, -1.8%) are among the lowest Beta names in the Australian market, and all off this week. On the other side, high beta names as a group also dropped against the benchmark, albeit not as heavily.

Who Moved

Volumes are still looking strong with 42 names from the benchmark moving this week on higher than normal volumes. Among the winners, Worelyparsons (WOR, +29.7%), Breville Group (BRG, +11.7%) and South32 Limited (S32, +10.6%) all finished the week higher with higher than normal volumes. On the other side, Orocobre (ORE, -17.6%), Healthscope Limited (HSO, -3.9%), Harvey Norman Holdings (HVN, -3.8%) and Cromwell Property Group (CMW, -3.5%) all ended weaker.

Please take a look and let me know if we can do anything else.

Summary

PDF Report available here: Download


What Worked Australia - 24 Feb 2017 - Dividends strong with ROIC, 12M Momentum still off

What Worked

While Trailing PER managed to stay in the positive this week, Forward PER just ticked over into the positive, but still provided +2.5% on a long/short basis, compared to the market being down -1.2%. Looking at the individual quintiles for forward PER, the top and bottom went in the direction a value investor would hope they would – cheaper names going up, more expensive names down. The lack of IC strength this week was primarily driven by the middle ground of PER, throwing off the correlations. At midday today, there was not a lot of factor driven direction in the market, however a pick up into the end of the day saw the emergence of some clarity.

Forward Dividend Yield and ROIC (Trailing PER just made it…) were the only signal this week to push into our “worth looking at” territory of ±10.0%. It was a pretty even-sided bet this week in the Dividend yield space, with lower yielding names under-performing almost as much as the higher yielding names out-performed. Higher yielding names doing well this week included Nine Entertainment (NEC, +6.2%), Crown Resorts (CWN, +6.7%) and Asaleo Care (AHY, +10.4%). Lower yielding names were punished, among them Aconex (ACX, -10.8%), Australian Agricultural Company (AAC, -3.3%) and Galaxy Resources (GXY, -3.7%). The numbers for ROIC were being largely driven by the middle ground, although the top and tail did show an uptick in the higher return names, it was the low ROIC names that really drove the numbers.

Who Moved

Volumes still getting stronger around reporting in the Aussie market, with 36 names from the benchmark moving on significantly higher than normal volumes. Those closing the week lower included iSentia Group (ISD, -39.9%), Ardent Leisure Group (AAD, -22.8%) and WorleyParsons (WOR, -18.7%). On the other side, Seven Group Holdings (SVW, +10.4%), Monadelphous Group (MND, +10.0%) and Tassal Group (TGR, +9.5%) all finished the week in the positive and well outperforming the index.

Please take a look and let me know if we can do anything else.

Summary

PDF Report available here: Download


What Worked Australia - 17 Feb 2017 - Forward PER showing good results

What Worked – PER has been providing some solid outperformance over the last 2 months (since mid-December 2016), and continued into this week. Although the last couple of weeks this signal has been somewhat ignored, the cheapest names in the market by forward PER have generated more than 5% outperformance, while the most expensive names have generated -3.2% excess returns over the benchmark. Forward PER had a horror run through 2015, and was a bit of a roller-coaster ride through 2016, but the trend seems to be to the positive at the moment.  Low PER names doing well this week included Qantas Airways (QAN, +3.0%), Whitehaven Coal (WHC, +2.9%) and St. Barbara Limited (SBM, +4.3%), while the more expensive side saw a number of names posting losses for the week - NextDC (NXT, -5.6%), Nanosonics (NAN, -1.9%) and Domino’s Pizza (DMP, -12.3%) among them.

 While very short term momentum (the generally reverting kind) was flat this week, 3M month momentum continued to be sold off this week, making it the worst performing over the last month. While the 3M laggards hovered around the benchmark, it was the winners over the last 3 months that have sold-off heavily. Over the last month the top names measured by trailing 3M momentum have lost out -3.8% to the benchmark. Names down this week include Galaxy Resources (GXY, -7.8%), DUET Group (DUE, -2.1%) and Bega Cheese Limited (BGA, -3.9%). 12-Month momentum on the other hand has been providing some solid performance figures over the last month, and continued to do so this week with Resolute Mining (RSG, +7.2%), Fortescue Metals (FMG, +6.3%) and Mineral Resources (MIN, +1.6%) all continuing to maintain their spots at the top of the index’s 12 month winners table.

Who Moved – A lot of names moved this week on volume – 29 out of the 200, one of the biggest percentages of the market in a while. Names off this week backed by significantly higher than normal volumes include Primary Health Care Limited (PRY, -16.2%), Domino’s Pizza (DMP, -12.3%) and IOOF Holdings (IFL, -7.6%); while in the winner’s circle South32 Ltd (S32, +5.9%), SIMS Metal Management (SGM, +3.9%) and Computershare (CPU, +4.1%) topped off the names in the black on volume this week.

Please take a look and let me know if we can do anything else.

Summary

PDF Report available here: Download


What Worked Australia - 10 Feb 2017 - Beta and Momentum still off

What Worked – This week saw the longer term momentum signals continue to peel off returns made over the 3-12 months, while names that lost over the last week bounced a little, the winners from last week also saw additional gains. While names up opver the last three months did see a slight uptick, the numbers this week were being driven in large part by a pickup in the names down over the last 3 months – with bottom of the market picking up +3.0% outperformance this week. Names down over the last 3 months that saw market beating returns this week included Bellamy’s Australia (BAL, +11.9%), Aconex (ACX, +6.8%) and Mayne Pharma (MYX, +9.8%). Names up over the last 3 months that sold-off this week included Galaxy Resources (GXY, -7.6%), QBE Insurance (QBE, -2.8%) and Downer EDI (DOW, -2.3%).

Earnings Revisions also saw very negative numbers this week – not driven by a sell-off in the higher revision names, but rather buying into the names with poor revisions, over both the 1 month and 3 month periods. Names showing terrible forecast earnings revisions over the last month that picked up this week included Transurban Group (TCL, +5.1%), Resolute Mining (RSG, +7.5%) and Saracen Mineral Holdings (SAR, +9.6%). High beta names also saw selling pressure this week, going against the positive direction of the market overall. High beta names such as Santos Limited (STO, -3.5%), Beach Energy (BPT, -4.0%) and BHP Billiton (BHP, -3.0%) all finished the week lower.

Who Moved – 12 names managed to move on substantially higher than normal volumes this week – back up in line with the long term norm. On the positive side, Seven Group Holdings (SVW, +16.4%), CIMIC Group (CIM, +10.7%) and Premier Investments (PMV, +8.5%)  all finished higher backed by strong volume, while Genworth Mortgage (GMA, -17.4%), Tabcorp Holdings (TAH, -7.7%) and James Hardie (JHX, -5.0%) all finished off weaker.

Please take a look and let me know if we can do anything else.

Summary

PDF Report available here: Download


What Worked Australia - 03 Feb 2017 - Short term reversal, Beta hit

What Worked – This week saw most of the values signals flat and without direction, bringing the average performance for value metrics over the first month of 2017 to slightly down, but not much off flat. While momentum has had a reasonable run for the start of the year, this week saw a reversal in the shorter-term momentum metrics, while long term (12 Month) momentum continued to run, producing a compound return spread over the last month of +4.6%, compared to the benchmark return of -1.9%. Names up strongly last week that reverted this week included Sandfire Resources (SFR, -2.5%), Orocobre Limited (ORE, -13.6%) and Altium (ALU, -2.0%). This was a little one sided though, with names down last week also not faring well this week. This contrasted with the long-term momentum names who continued their run this week. Amongst these were Resolute Mining (RSG, +8.4%), Fortescue Metals (FMG, +2.0%) and Downer EDI (DOW, +9.4%).

Size also performed well this week, although it was driven by an underperformance in the small cap space rather than larger end of the benchmark doing anything special. OFX Group (OFX, -23.3%), Virtus Health (VRT, -16.7%) and Aconex (ACX, -48.3%) all down heavily this week. Beta also saw a selloff this week, but not really being driven by the small cap space. Some big, high beta names also took a hit this week, amongst them were Santos Limited (STO, -2.9%), Whitehaven Coal (WHC, -2.4%) and Origin Energy (ORG, -2.5%). On the other side of that trade though, low beta names produced more positive returns than negative this week.

Who Moved – 14 names from the benchmark moved on volume this week, and only one of those managed to end the week higher. Woolworths Limited (WOW, +0.5%) was the only name that inched higher on significantly higher than normal volumes, while the other side of the market was somewhat more brutal. Aconex (ACX, -48.3%), Virtus Health (VRT, -16.7%), Orocobre Limited (ORE, -13.6%) and Ansell Limited (ANN, -9.9%) all lost big this week, and all backed by very high volumes.

Please take a look and let me know if we can do anything else.

Summary

PDF Report available here: Download


What Worked Australia - 27 Jan 2017 - A good week for Value AND Momentum investors

What Worked – This was one of those rare weeks in which both Vale and Momentum metrics all worked. Forward-looking PER managed to post its largest week since October last year. The more expensive side of the market saw a relatively big selloff, returning all market relative gains made from the start of the year, while the cheaper names continued their outperformance that has been consistent since the beginning of December 2016. Expensive names that underperformed the index this week included Transurban Group (TCL, -1.5%), Domino’s Pizza (DMP, -6.4%) and Technology One (TNE, -1.3%), while the other end of the PER scale provided winners in the form of Genworth Mortgage (GMA, +1.6%), Fortescue Metals (FMG, +7.2%) and Sandfire Resources (SFR, +9.4%).

 Momentum in all its forms, both Price and Earnings Forecast, and over all time frames, produced strongly positive results for the week. The standout performer was 12 Month momentum, with names that have been battered over the last 12 months coming off further, including Bellamy’s Australia (BAL, -5.0%), Sirtex Medical (SRX, -6.2%) and Mantra Group (MTR, -2.4%). Names up over the last 12 months continued to provide positive returns this week, and it was largely the resources and related industries space that filled this group. Mineral Resources (MIN, +6.4%), South32 Limited (S32, +7.1%) and Bluescope Steel (BSL, +4.5%) all provided returns well above the index this week.

Who Moved – Not a particularly strong week for volumes, with only 4 names from the index posting significantly higher than average volumes, and worse still when considering that the bulk of the last 65 trading days were filled with the lead up to the holidays and the end of year holidays themselves, a traditionally very weak volume period. All 4 names posted negative returns this week - Brambles Limited (BXB, -13.5%), Mantra Group (MTR, -2.4%) and Western Areas Limited (WSA, -1.2%) and CSL Limited (CSL, -2.0%).

Please take a look and let me know if we can do anything else.

Summary

PDF Report available here: Download


What Worked Australia - 23 Dec 2016 - Size the flavour for the end of the year

What Worked – Size came in with a strong IC this week, largely driven by a sell-off in the smaller end of the market rather than a buy into the larger cap names. OFX Group (OFX, -5.7%), Virtus Health (VRT, -1.5%) and Japara Health (JHC, -4.8%) all taking a hit this week, while their larger brethren largely stayed inline with the market.

The end of year momentum sell-off slowed this week, with the mid-term momentum signals still felling the sting, but the longer term stabilizing. In the 3-month momentum quintiles, there was a sell-off in the worst performing names, but the IC was largely driven by a reversal in the best performers over the last 3 months. Among the best performers over the last 3 months that took a hit this week were Galaxy Resources (GXY, -3.9%), SIMS Metal Management (SGM, -3.3%) and Origin Energy (ORG, -1.5%).

Who Moved – 12 names managed to move on very strong volumes this week. Finishing the week in the black included Mayne Pharma (MYX, +6.2%), Independence Group (IGO, +3.5%) and Iron Mountain (INM, +3.4%), while Sydney Airport (SYD, -6.4%), Flexigroup Limited (FXL, -5.6%) and Seven West Media (SWM, -1.8%) all finished up lower.

Summary

PDF Report available here: Download