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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