HITS AND MISSES

The share­mar­ket has had its big hits ... and its misses

The Weekend Australian - - BUSINESS REVIEW - JAMES KIRBY WEALTH ED­I­TOR

Which stocks hit the tar­get?

The Aus­tralian share­mar­ket’s un­wanted rep­u­ta­tion as a tech-light, min­ing-heavy zone has been chal­lenged this year when we look at the best per­form­ers over the past 12 months.

For once there are few min­ers. Rather, the list is chock full of in­no­va­tive com­pa­nies that have brought home the big re­turns de­spite the mar­ket slide over re­cent weeks.

With just a hand­ful of trad­ing days to go the num­bers may move a lit­tle from here, but they are un­likely to change too much.

At the very top of the win­ners list is Nearmap, a map­ping tech­nol­ogy com­pany that has man­aged pow­er­ful re­turns every year for the past four but in 2018 ex­celled it­self with a re­turn of about 169 per cent. The group is thriv­ing off ris­ing de­mand, es­pe­cially from in­fra­struc­ture projects.

Con­sumer fi­nance star After­pay is also at the top, bring­ing a gain of nearly 115 per cent this year af­ter an in­cred­i­ble take-up of the “buy now, pay later” ser­vice, which has re­cently an­nounced it is to ex­pand off­shore.

One of the mar­ket’s best known IT com­pa­nies, elec­tron­ics soft­ware group Altium, also makes it into the win­ner’s en­clo­sure with a re­turns of 65 per cent.

With tech­nol­ogy stocks the most pop­u­lar choice for Aus­tralians buy­ing stocks off­shore, it is clear now there is also lo­cal sup­port for strong IT com­pa­nies when they emerge on the ASX (as op­posed to list­ing off­shore, which oc­curred in the case of su­per­star com­pany At­las­sian).

Gam­bling-re­lated stocks fea­ture among the best and worst stocks this year. In the top 10 per­form­ers is Jumbo in­ter­ac­tive. The dig­i­tal re­tailer of jack­pot and char­ity lot­ter­ies is very much an on­line oper­a­tion: it gained 145 per cent over the year.

In con­trast, Cam­bo­dian casino group Donaco took its place among the worst per­form­ers with a de­cline of 84 per cent.

This con­trast in for­tunes within one sec­tor sug­gests out­per­for­mance among shares comes from bot­tom-up de­tails such as man­age­ment and fi­nan­cial qual­ity, as op­posed to top-down is­sues such as in­dus­try op­por­tu­nity.

Biotech­nol­ogy, which has once again of­fered its fair share of losers this year, has one out­right win­ner in Clin­u­vel — the skin spe­cial­ist com­pany has pow­ered ahead by 105 per cent over the year.

In­no­va­tion can spark out­per­for­mance be­yond the ob­vi­ous spheres of IT and biotech­nol­ogy: Free­lancer, the on­line mar­ket­place for free­lance work­ers, has rock­eted higher in the se­cond half of the year af­ter an­nounc­ing “Freight­lancer’’, an am­bi­tious global ser­vice of­fer­ing free­lance ser­vices to the ship­ping and truck­ing in­dus­try. Free­lancer is up 86 per cent over the year.

Also in the mix at the top this year is Hutchi­son Tele­com (up 85 per cent) a thinly traded wing of the global group be­hind the re­cent merger with TPG and the Ac­cent Group, the re­tailer be­hind The Ath­lete’s Food that at $1.38 this week gained 64 per cent over the year, though this is pri­mar­ily a re­cov­ery story. The Ac­cent group was worth more than $1.80 two years ago.

De­spite the wider re­sources re- bound, with bet­ter prices for iron ore and coal this year, only one min­ing stock pops ups in the top 10: Aure­lia Me­tals, a highly re­garded gold miner that has man­aged a stun­ning 160 per cent lift over the pe­riod.

Mange­ment woes

Look­ing at the 10 worst stocks of the year there is no ob­vi­ous loser sec­tor, rather the over­ar­ch­ing theme is clearly “man­age­ment trou­ble’’ across a spec­trum of ac­tiv­ity that in­cludes food, fran­chis­ing, so­cial me­dia, blockchain and biotech­nol­ogy.

It is worth re­mem­ber­ing that the list of the worst stocks has an el­e­ment of what they call “sur­vivor­ship bias” — these stocks have at least sur­vived, rather than those that col­lapsed com­pletely, as in RCR Tom­lin­son and oth­ers.

In a year when the wider mar­ket is look­ing at a flat re­turn, among the worst is blockchain spe­cial­ist Yo­jee, which has man­aged a down­turn to ri­val the nose­dive of bit­coin it­self over the last 12 months with a drop of 77 per cent.

Biotech, which of­fered a string of shock­ers this year in­clud­ing Me­soblast, puts for­ward Im­ped­imed as the clunker of the sea­son, drop­ping 78 per cent for the year and demon­strat­ing just how volatile biotechs can be.

Im­ped­imed, which spe­cialises in di­ag­nos­tics in ar­eas such as body flu­ids, lost al­most half its value mid-year when it dropped from 53c to 27c, then re­cov­ered to 51c and since Au­gust has plunged again to 24c. All up, that’s a 78 per cent drop from Jan­uary to De­cem­ber.

Also in the sin bin is the one­time me­dia mon­i­tor­ing dar­ling Isen­tia, which re­mains in the me­dia in­tel­li­gence busi­ness but has lost its so­cial me­dia sparkle while fall­ing 78 per cent.

Among the sur­prise ca­su­al­ties this year is Sil­ver Chef, a big favourite among small-cap in­vestors for many years and one of the first small caps to man­age a cor­po­rate bond.

Those days now seem dis­tant for the strug­gling restau­rant equip­ment leas­ing group, where the num­bers have been go­ing the wrong way for months — the stock is down 79 per cent this year.

Uranium miner Berke­ley En­er­gia might have been the first com­pany to open a uranium mine in Europe, ex­cept the Span­ish gov­ern­ment never granted it a li­cence.

This piece of news hit Berke­ley hard in­deed — it is look­ing like the worst-per­form­ing miner of the year with a drop of 82 per cent.

Dom­i­nat­ing the very worst stocks of the year are three scan­dal-plagued op­er­a­tors each with its own grisly story.

RFG, the food fran­chise group that in­cludes Brumby’s Bak­ery, has fallen 85 per cent af­ter a me­dia in­ves­ti­ga­tion ques­tioned the fea­si­bil­ity of the com­pany struc­ture and whether fran­chises could ac­tu­ally make money.

Get Swift, a “soft­ware as a ser­vice” stock, also fell in the wake of me­dia ex­am­i­na­tion of the group’s oper­a­tions and dis­clo­sure — as a stock, Get Swift limps on af­ter fall­ing 88 per cent this year.

Third among this trou­bled trio is Blue Sky Al­ter­na­tive In­vest­ments — down 93 per cent.

When eco­nomic his­to­ri­ans chron­i­cle the ar­rival of in­dus­tri­al­strength short­ing ac­tiv­ity on the ASX, a mile­stone will be the at­tack by the US-based Glau­cus group on Blue Sky, a hedge fund and prop­erty group that man­aged to at­tract main­stream in­vestors un­til rev­e­la­tions of ac­count­ing dis­crep­an­cies shat­tered its cred­i­bil­ity.

All three com­pa­nies — RFG, GetSwift and Blue Sky — are now fac­ing class ac­tions.

The worst stock of the year is a biotech AirX­pan­ders Inc-CDI. For now, it takes the wooden spoon with a drop of 95 per cent.

Source: Bloomberg

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