What Worked Australia - 30 Jun 2017 - PER very strong on the back of momentum reversal

What Worked

PER, both forward and trailing, were the standout factors for this week in the Aussie market, mounting a huge positive reversal on Low PER names after nearly 2 months of strong negative ICs. While the more expensive names in the market took a break this week, finishing largely in line with the benchmark, it was the cheaper names that took the show. Flexigroup Limited (FXL, +8.0%), Whitehaven Coal (WHC, +6.9%) and Seven West Media (SWM, +3.6%) all ended the week up, and yet still trading at sub-10x forward earnings.

While ROIC and ROE have gotten a couple of mentions over the last few weeks, ROIC finally dropped into the negative IC space, albeit only just. ROE still provided some returns, with almost equal performance in the top and bottom quintiles – high ROE names did well, low ROE names did not. As a factor, these signals are still looking overstretched and primed for a reversal. There was also a reasonably strong reversal in the mid-term momentum space, notably 3- month came off this week. While name up over the last 3 months still managed to outperform the index, it was the laggards that came out on top. Amongst the names down over the last 3 months that finished this week up were Sigma Healthcare (SIG, +3.8%), Galaxy Resources (GXY, +1.5%) and Greencross Limited (GXL, +10.6%). All of these names still have a way to go to break even after losses over the trailing 3 months

Who Moved

14 names in the benchmark S&P ASX 200 managed to move on volume this week, with an even spread between the losers and winners. On the losing side, Aveo Group (AOG, -8.9%), Crown Resorts (CWN, -3.8%) and Regis Healthcare (REG, -1.5%), while the winners circle included names such as Mineral Resources (MIN, +18.2%), SIMS Metal Management (SGM, +11.2%) and Bega Cheese (BGA, +9.7%).


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