Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 57

What’s going on in Australian equities?

Managing a diversified equity portfolio is sometimes similar to being a farmer in that at any stage you are likely to be ‘harvesting’ or selling good stocks that are now over-valued and ‘planting’ or buying companies that appear undervalued.

When you look at the collection of stocks in any portfolio, it is both unlikely and probably undesirable to face a situation where all the stocks are dramatically ahead of the index and also ahead of our valuations. This turn of events would probably indicate a lack of selling discipline by the fund manager. Furthermore if this was the case, the following month or quarter could show those very same stocks all down simultaneously as well.

Over the last 12 months the ASX 200 has given investors a total return (price appreciation plus dividends) of +12.5%. As you can see from the chart there has been a significant dispersion of returns amongst the 11 sectors that make up the ASX.

In this piece we present an overview of the sectors in the market, as well as looking at those securities that have performed well over the last 12 months and those that have lagged.

What's working?

Telecoms have been the best performing sector over the past year with heavyweight Telstra (+17%) finally increasing dividends and capturing mobile market share. This performance from Telstra was eclipsed by the second tier players such as TPG (+105%) and iiNet (55%) which have benefited from strong customer growth.

Consumer Discretionary has benefited from investors looking to capitalise on a recovery in Australian consumer spending. However, unlike telecoms there has been a wide dispersion in returns amongst this sector. Previous market darlings like The Reject Shop (-43%), Wotif.com (-43%) and Myer (-20%) have struggled over the year. Alternatively investors have bid up RealEstate.com (+77%) and Harvey Norman (+19%) to take advantage of a housing market recovery.

Financials continued their run of providing solid returns to investors mainly due to falling bad debts boosting bank profits. Bank returns were understandably tightly clustered as they are influenced by similar dynamics with ANZ (+20%) the leader and Westpac (+18%) bringing up the quite respectable rear. Sizzle in the Financials sector was provided by companies like Henderson (+97%) and Macquarie (+63%) whose profits are directly linked to bullish equity markets.

What's lagging

Consumer Staples was the worst performing sector in the market as reasonable performances from Woolworths (+10%) and Wesfarmers (+7%) were dragged down by a collection of other companies like Treasury Wines (-34%), Metcash (-30%), Graincorp (-25%) and Coca-Cola (-19%) which fell due to a range of stock-specific issues.

After being the glamour sector in 2012, Listed Property has turned in a rather pedestrian performance, essentially tracking the sector's distribution yield. If an investor’s focus is on owning trusts whose earnings come from collecting recurring rents such as IOF (+11%) and SCA Property (+6%) rather than development profits, they should be happy with this. Some portfolio returns were assisted by the takeover of Commonwealth Office (+18%).

As a sector, Utilities returned 5% over the last year. Regulated utilities like electricity and gas distributors SP Ausnet (+15%), Envestra (+15%) and Spark (+9%) were generally higher due to tariff increases. Electricity retailers like AGL (flat) struggled during the year due to elevated levels of competition for customers and discounting eroding margins.

What's missing?

Typically any piece discussing the ASX mentions the rock diggers, as this is a large part of the index and for Australian equity fund managers, correctly picking the resources over or underweight is a key determinant of relative performance. Whilst as a sector over the last year, Materials trailed the index returning 6%, the main miners, BHP (+12%) and Rio Tinto (+13%), have mostly matched the index.

 

Hugh Dive is Head of Listed Securities at Philo Capital Advisers.

 

  •   11 April 2014
  •      
  •   

 

Leave a Comment:

RELATED ARTICLES

What were the big stockmarket listings in record 2021?

What drives Australian versus global equity performance?

Bounce back delivers super second-half for IPOs

banner

Most viewed in recent weeks

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Four best-ever charts for every adviser and investor

In any year since 1875, if you'd invested in the ASX, turned away and come back eight years later, your average return would be 120% with no negative periods. It's just one of the must-have stats that all investors should know.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Our experts on Jim Chalmers' super tax backdown

Labor has caved to pressure on key parts of the Division 296 tax, though also added some important nuances. Here are six experts’ views on the changes and what they mean for you.        

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Latest Updates

Investment strategies

LICs vs ETFs – which perform best?

With investor sentiment shifting and ETFs surging ahead, we pit Australia’s biggest LICs against their ETF rivals to see which delivers better returns over the short and long term. The results are revealing.

Retirement

The growing debt burden of retiring Australians

More Australians are retiring with larger mortgages and less super. This paper explores how unlocking housing wealth can help ease the nation’s growing retirement cashflow crunch.

The ASX is full of broken blue chips

Investing in the ASX 20 or 200 requires vigilance. Blue chips aren’t immune to failure, and the old belief that you can simply hold them forever is outdated. 

Shares

Buying Guzman Y Gomez, and not just for the burritos

Adding high-quality compounders at attractive valuations is difficult in an efficient market. However, during the volatile FY25 reporting season, an opportunity arose to increase a position in Mexican fast-food chain GYG.

Investment strategies

Factor investing and how to use ETFs to your advantage

Factor-based ETFs are bridging the gap between active and passive investing, giving investors low-cost access to proven drivers of long-term returns such as quality, value, momentum and dividend yield. 

Strategy

Engineers vs lawyers: the US-China divide that will shape this century

In Breakneck, Dan Wang contrasts China’s “engineering state” with America’s “lawyerly society,” showing how these mindsets drive innovation, dysfunction, and reshape global power amid rising rivalry. 

Retirement

18 rules for ageing well

The rules to age successfully include, 'the unexamined life lasts longer', 'change no more than one-eighth of your life at a time', 'nobody is thinking about you', and 'pursue virtue but don’t sweat it'.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.