What Worked Australia - 24 Feb 2017 - Dividends strong with ROIC, 12M Momentum still off

What Worked

While Trailing PER managed to stay in the positive this week, Forward PER just ticked over into the positive, but still provided +2.5% on a long/short basis, compared to the market being down -1.2%. Looking at the individual quintiles for forward PER, the top and bottom went in the direction a value investor would hope they would – cheaper names going up, more expensive names down. The lack of IC strength this week was primarily driven by the middle ground of PER, throwing off the correlations. At midday today, there was not a lot of factor driven direction in the market, however a pick up into the end of the day saw the emergence of some clarity.

Forward Dividend Yield and ROIC (Trailing PER just made it…) were the only signal this week to push into our “worth looking at” territory of ±10.0%. It was a pretty even-sided bet this week in the Dividend yield space, with lower yielding names under-performing almost as much as the higher yielding names out-performed. Higher yielding names doing well this week included Nine Entertainment (NEC, +6.2%), Crown Resorts (CWN, +6.7%) and Asaleo Care (AHY, +10.4%). Lower yielding names were punished, among them Aconex (ACX, -10.8%), Australian Agricultural Company (AAC, -3.3%) and Galaxy Resources (GXY, -3.7%). The numbers for ROIC were being largely driven by the middle ground, although the top and tail did show an uptick in the higher return names, it was the low ROIC names that really drove the numbers.

Who Moved

Volumes still getting stronger around reporting in the Aussie market, with 36 names from the benchmark moving on significantly higher than normal volumes. Those closing the week lower included iSentia Group (ISD, -39.9%), Ardent Leisure Group (AAD, -22.8%) and WorleyParsons (WOR, -18.7%). On the other side, Seven Group Holdings (SVW, +10.4%), Monadelphous Group (MND, +10.0%) and Tassal Group (TGR, +9.5%) all finished the week in the positive and well outperforming the index.

Please take a look and let me know if we can do anything else.


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