INVESTORS experienced an unhappy anniversary this week — exactly nine years since Australia’s sharemarket last hit a record high.
The All Ordinaries index of 500 companies is still almost 25 per cent below where it was in November 2007, but a near-decade of frustration for millions of mum and dad investors and super fund members has masked a few sparkling performances from sharemarket gems.
A handful of healthcare, food and consumer-focused companies have tripled their share prices or better since just before the Global Financial Crisis. Stock analysts say there will be future gems, but warn that it’s tough to find them before everyone else jumps on.
They say sectors to start looking at include tourism, food exports, healthcare and businesses that introduce innovation. Don’t expect to find them among Australia’s top 20 companies.
Baker Young Stockbrokers managed portfolio analyst Toby Grimm said biotechnology giant CSL had been the only top 20 stock to stand out.
“It’s been an absolute belter,†he said. “Healthcare in general has been spectacular.â€
Pizza company Domino’s has increased its share price more than 20 times over since November 2007, while realestate.com.au owner REA Group and hospital company Ramsay Health Care both are up fivefold. Vitamins company Blackmores is up 410 per cent thanks to surging Chinese demand, but those who bought it at last year’s peak have since watched their investment halve.
“There will be more gems because money will continue to flow into the market. Companies will innovate to create new markets and China will continue to grow and provide markets,†Mr Grimm said.
“You probably need to look into some of the smaller, mid-cap stocks for those types of companies. They are not easy to find — otherwise everyone would, and the early bird gets the worm.â€
Many mum and dad investors and retirees are still waiting for their overall portfolios to return to 2007 levels.
“There’s no doubt that frustration is a good word for it,†Mr Grimm said. “But what people generally don’t realise is that the market does track earnings.†Australian company profits had not yet recovered back to their pre-GFC levels, while US companies — whose stockmarket hit fresh record highs this year — had eclipsed their 2007 profits.
Australian companies pay higher dividends than those overseas, so many analysts direct investors to total returns rather than just the share price.
Australian Stock Report head of research Chris Conway said looking at total returns “makes people feel a little better — it doesn’t hurt quite so badâ€.
He said companies that exported quality foods into China would remain an investment winner, as would tourism, services and innovation. “Tourism is an industry that really should escalate.â€
Mr Conway said picking the next wave of winners would require plenty of reading and research.
“It’s more theme based rather than specific stocks because you don’t know who will control the technologies and who will bring them to market,†he said.
“Once an idea becomes mainstream, every analyst in town will jump all over it. Think about what opportunities are out there.â€
SPARKLING DESPITE THE GFC
Company Business Share price rise since Nov. 2007
Domino’s Pizza $2.80 to $66.30 (2260%)
REA Group realestate.com.au $7.21 to $47.88 (560%)
Ramsay Health Care Hospitals $10.84 to $70.64 (550%)
Blackmores Vitamins $21.80 to $111.49 (410%)
ARB Corporation SUV accessories $3.79 to $16.35 (340%)
CSL Biotechnology $34.55 to $98.66 (185%)
FUTURE GEMS?
Food exports
Tourism
Services exports
Automation
Innovation