What Worked Australia - 03 Mar 2017 - PE comes off, and drags low beta names along with it

What Worked

PER finally took a week off, and came in quite negative this week with a very large down-swing in the cheapest names in the market. The lowest PER names (i.e. highest earnings yield) dropped almost -4% against the benchmark, while the more expensive names remained relatively flat. Some of the worst hit included Resolute Mining (RSG, -15.9%), Spotless Group Holdings (SPO, -14.4%) and Retail Food Group Limited (RFG, -10.6%). While 12 month momentum appeared to show positive results this week, the top and tail of 12 month momentum names both lost out to the benchmark, and the IC was in large part driven by middle three quintiles. 12 month momentum, either if you are for or against it, is not playing nicely for anyone focusing on this signal, and has not been a team player for close to three months.

Beta was a good mover this week, however like 12 month momentum, the IC was largely driven by the middle ground. That being said, low Beta names took a big hit this week, with the sharp drop in the last quintile (lowest beta) names looking about a sharp as drop in low PE names. Newcrest Mining (NCM, -7.6%), St. Barbara Limited (SBM, -7.4%) and Macquarie Atlas Roads (MQA, -1.8%) are among the lowest Beta names in the Australian market, and all off this week. On the other side, high beta names as a group also dropped against the benchmark, albeit not as heavily.

Who Moved

Volumes are still looking strong with 42 names from the benchmark moving this week on higher than normal volumes. Among the winners, Worelyparsons (WOR, +29.7%), Breville Group (BRG, +11.7%) and South32 Limited (S32, +10.6%) all finished the week higher with higher than normal volumes. On the other side, Orocobre (ORE, -17.6%), Healthscope Limited (HSO, -3.9%), Harvey Norman Holdings (HVN, -3.8%) and Cromwell Property Group (CMW, -3.5%) all ended weaker.

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


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