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.


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