What Worked Australia - 05 May 2017 - Short term momentum hurts value and growth alike

What Worked

Value, growth – did not matter this week as a swing into short term momentum hit both value and high growth names alike. While names like Bellamy’s (BAL, +12.3%), Flight Centre Travel (FLT, +9.7%) and BT Investment (BTT, +1.8%) are among the best performing names over the last month that added to gains once again this week. On the other side however, Vocus Group (VOC, -29.4%), Fortescue Metal (FMG, -6.4%) and Mayne Pharma Group (MYX, -11.5%) all underperformers for the month that closed the week lower.

While momentum ran, Value took a dive – cheap names on a forward PER basis such as Resolute Mining (RSG, -6.2%), Flexigroup (FXL, -12.4%) and Mineral Resources (MIN, -9.1%) all names that are trading at less than 10x forward earnings, and all were hit hard this week. On the other side of that trade saw NextDC (NXT, +3.8%), Sydney Airport (SYD, +3.5%) and APA Group (APA, +3.2%) all becoming more expensive. Looking over history, using forward PER as the sole basis for a strategy would have yielded almost the same return whether you bought the cheapest or the most expensive group over the last 2 years.

Who Moved

With most of the Asia Pac region having holidays in one form or another this week, Australia seemed to pick up a little of slack in trading volumes. 21 names from the benchmark index moved on significantly higher than normal volumes this week. On the positive side, Qantas Airways (QAN, +4.2%), ARB Corp (ARB, +3.9%) and CSR Limited (CSR, +3.7%) all finished the week higher backed by volume, while Mayne Pharma (MYX, -11.5%), Independence Group (IGO, -8.0%) and Alumina Limited (AWC, -7.3%) all finished lower.


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