Despite the rally over the past month, the ASX200 Accumulation Index remains a little under 25% off the market’s recent all-time highs from 20th February 2020.
During a time of market volatility and decline, it is always interesting to see which sectors of the markets and individual stocks are doing the best. Often in times such as this, where the selling is widespread, it is essential to limit losses as best we can to protect capital for when the longer-term uptrend eventually resumes.
Before we get down to the performance of individual stocks, we wish to begin this investigation by looking at performance at the sector level. To do so, we have assessed the performance of the 11 major ASX sector since 20th February, a list of which can be seen below. For this purpose, we are using the accumulation indices, meaning that the performance reflects both the price movements as well as any dividends received. In the case of the sectors, the fact that no sector is higher over this period means that we need to assess the best performers in a relative sense; in other words, focus on the ones that have fallen the least.
As shown below, despite the overall ASX200 Accumulation Index declining by 25%, the degree of declines across different market sectors has been stark. To the better performers, listed at the top of the table, we can see that three sectors have managed to limit the damage to single digits, being the Utilities (-6.32%), Health Care (-7.82%), and Consumer Staples (9.24%). Considering each of these three sectors and it should be no surprise, as all three are ‘defensive’ in nature. The performance of utilities is less linked to economic growth, whereas both healthcare and consumer staples companies sell products that remain stable despite changes in disposable income.
At the other end of the spectrum, the worst-hit sectors over the past six weeks have been the Energy (-39.36%), Financials (-36.15%) Real Estate Investment Trusts or A-REITS (-35.33%) and Consumer Discretionary (-29.16%) sectors. The energy sector has taken a double hit of plunging crude oil prices as well as economic activity. In contrast, the financials and REITS sectors are heavily linked to commercial and residential real estate. Finally, companies within the consumer discretionary sector are those that sell non-necessity goods, which people are first to do without in times to economic uncertainty.
Drilling down to the stock level, the below tables shows a complete list of ASX200 companies which have gained in price since the 20th February, the day that the index made its peak. With only 19 companies on the list, less than 10% of ASX200 stocks have rallied over this time. The companies highlighted in grey all are members of one of the top three performing sectors. The reason we highlight this is that a typical investment approach is to buy the top-performing stocks from the top-performing sectors. In addition to the top three sectors mentioned above, we can also see quite a few materials stocks, most of them gold mining stocks. Again, not that surprising when one considers the defensive nature of gold.
Having identified our top performers at both the sector and stock levels, over the coming weeks, we will dig deeper in some of the individual names to provide a recommendation of 5 top stocks be to holding at the current time.
