Morning Report Tuesday 29 April 2014
If you had invested in Australian large resource stocks over recent years the picture is very bleak, even during a commodities boom (the smaller stocks have generally faired worse!). Below illustrates their clear underperformance against the banks since the highs of 2007- 2008, ignoring any dividend returns that clearly favour the banks. Chart 1 illustrates the massive divergence that has occurred over the last few years:
BHP Billiton (BHP) -24%, RIO Tinto (RIO) -50%, Fortescue Mining (FMG) – 61%.
CBA Bank (CBA) +28%, ANZ Bank (ANZ) +9.5%, National Australia Bank (NAB) -17%, and Westpac (WBC) +14.5%.
However, trends do not go on forever, I recall saying whilst working at Macquarie, why not sell RIO close to $80 and buy Telstra (TLS) around $2.65? I was laughed at as I probably would have been anywhere, BUT what a trade that turned out to be! Everybody hated Telstra then like they love the banks today, the pack mentality is clear to see. Like all market trends it will not last forever, but are the resources showing value yet?
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