Giants still stuck in post-GFC rut
ALMOST half of Australia’s 20 largest companies are worth less today than a decade ago.
Investors who stuck with corporate giants through the Global Financial Crisis may be disappointed by their slow recovery, suggests analysis by News Corp Australia, publisher of the Advertiser, but there have also been some surprising fail-safe stocks.
Nine of the top 20 shares, including BHP Billiton, Woolworths, Telstra and Westfield, have shrunk, while big stocks such as AMP, Brambles and QBE Insurance lost enough market value to drop out of the top 20.
But the major banks, plus healthcare, utilities and infrastructure companies have grown.
“You wouldn’t think so, but the banks have done very well despite the fact that they were the crux of the crisis 10 years ago,” Australian Foundation Investment Company managing director Ross Barker said.
Next week marks a frustrating milestone for many investors — it will be 10 years since the All Ordinaries index of 500 major companies reached its last record high.
The patchy performance means the index must rise another 13 per cent to reclaim its record of 6872 points.
Yesterday it was trading just below 6000. But without the performance of the banks it would be in worse shape.
AMP Capital head of investment strategy Shane Oli- ver said banks had benefited from government guarantees, paying high dividends while interest rates were low, and their continuing record profits.
But headwinds, such as tougher regulation and a slowing housing market, could create future pressure, he said.
Health stocks have been stars. Biotech giant CSL’s value is up 212 per cent to more than $63 billion, while Ramsay Health Care and Cochlear also grew strongly.
Dr Oliver said Australian shares’ slow recovery from the GFC was largely because they had boomed before the GFC, while other countries’ markets “spun their wheels”.
Mr Barker said investors should judge share returns on growth plus dividends, which were twice as high here than in other countries.
“We are paying very high yields. In some ways Australian companies have given way more back to shareholders,” he said.
“The challenge for the current market is if you look at the very large companies in Australia — the banks, the retailers, the resource companies — all of them have had pretty significant headwinds.”