The ASX imploded on Monday. Tough luck if you’re a listed company releasing price sensitive news. There were just a few hours on Monday to make any trades. Even then some reports are the stocks were staggered, and not everything was tradeable.
In the current market environment it will have shaken the confidence of many mainstream investors. And boy did the mainstream press jump all over this calamity.
This situation only goes further to highlight the extremes that investors have to deal with day to day in the markets.
The Bank of Japan and US Federal Reserve also held meetings overnight. The overall market cautiously tiptoes along, waiting to see what will happen.
Of course, it really matters very little. Well, it matters very little if you’re investing in stocks that don’t care about these extremes.
But if you’re an investor in ‘everyday’ stocks, then you should be worried. And if the mainstream coverage of the market is anything to go by, then I’ve got no idea how the average punter makes heads or tails of anything.
Darlings of the ASX? I don’t think so
I wonder if you saw this article on the Australian Financial Review website this morning?
The title was, ‘ASX tips: Darlings and deadbeats of the Australian sharemarket’.
Truth be told my guess is a lot of people saw this. And a lot probably read it. And a lot of those people have never seen a Money Morning essay in their life. Many of them probably won’t.
Those people tend to be your more ‘mainstream’ investor. Confident that tips in the AFR will provide them with the guidance they need to build a strong portfolio.
The article goes on to look at the ‘bull and bear cases for some of the ASX’s most well-known darlings and deadbeats’.
It kicks off with a look at Woolworths [ASX:WOW]. On one side of the coin, global share fund Magellan likes WOW. They have a ‘small’ stake in it, and like the strategic direction the company is taking.
On the other side are UBS analysts. They think there’s risk of further earnings and price downside. They don’t like it so much.
Then there’s Flight Centre [ASX:FLT]. The UBS analysts like Flight Centre’s management, and say the recent weight on profitability is only temporary.
But team over at Qato Capital disagree. Chief Investment Officer, Ben Silluzio says, ‘Flight Centre is slowly dying.’ His view is the travel agent is one of the last indulgences of the baby boomer generation. I actually tend to agree with him there.
Silluzio then goes on to say he also dislikes Blackmores [ASX:BKL]. He’s of the view there’s, ‘significant negative earnings risk that has not been priced in.’
But, you guessed it, the analysts at Credit Suisse think Blackmores could be a ‘super bull’.
The outcome to all this is these ‘ASX Tips’ aren’t really tips at all. It’s highlighting the positive and negative views of just three ASX listed stocks.
These stocks are all large-cap stocks, too. Woolworths has a market cap of $29.13bn, Flight Centre $3.06bn and Blackmores $2.05bn. In fact there’s nothing ‘darling’ or ‘deadbeat’ about any of these stocks.
I don’t see how this helps at all. If anything, it’s outright confusing. As for ‘darlings’ well, no, not anymore.
If you look at the 10-year price history of Woolworths, it’s made a total capital return of just 11.34%.
Flight Centre has fared considerably better. In 10 years it’s returned 188%. And then there’s Blackmores. In 10 years Blackmores has seen a gain of 735%.
Admittedly Blackmores was an ASX ‘darling’, but that was last year. This year it’s not so darling-like.
In 2015 it went from $35 to a high of $220.90. That’s an impressive 531%. But a stock like Blackmores isn’t going to gain another 531% in 12 months, is it? If Blackmores added another 531%, its stock price would be around $744. Its market cap would be $12.9bn.
That’s the problem with stock like these. Once they become large-cap stocks, the potential for extraordinary gains diminishes. Investors in these kinds of stocks can still make gains. But more likely double digit gains over a number of years. Maybe triple digital gains over a decade or more.
The real gainers are the unknown stocks
Separately in the AFR, another article, ‘ASX trades cautiously ahead of BoJ and Fed meetings’ highlights the best and worst stocks by percentage.
This Tuesday market roundup shows Western Areas [ASX:WSA] was up 5.79%, NextDC [ASX:NXT] was up 5.60% Whitehaven Coal [ASX:WHC] up 4.82%, and a few more.
Solid returns. But unfortunately these aren’t even close to the best performers on the ASX on Tuesday.
The real ‘ASX darlings’ on Tuesday were,
Fastbrick Robotics [ASX:FBR] up 40%,
Mount Burgess Mining [ASX:MTB] up 40%,
Alice Queen Ltd [ASX:AQX] up 35.1%,
Kneomedia Ltd [ASX:KNM] up 33.3%.
There are far more stocks that saw double digit gains on Tuesday. Too many to list here though.
These are the kinds of stocks that the mainstream has no idea about. Or choose to ignore, because the mainstream investment houses and analysts simply don’t cover them.
It’s amazing to me that investors ignore so much of the ASX because they simply don’t know about it. I can understand it, after all how can you begin to invest in something you know little about? But I’m amazed they don’t seem to want to know more. So many investors are simply missing out on unbelievable companies, and returns that companies like Woolworths, Flight Centre and even Blackmores could only dream about.
I know this for a fact because every day across my investment advisory services, Australian Small Cap Investigator, Revolutionary Tech Investor and Microcap Trader, I look at stocks making 20%, 30%, or 40% returns in a day.
I know the potential of these ‘unknown’ stocks because in May I tipped a stock that’s now up 536%. Another I tipped just a month ago is already up 51%. And another (we recently advised to sell half of) was up a total 1,053%.
That’s why over the weekend I released a special report highlighting four special ‘Water Bear’ stocks that could hold similar potential in an extreme market — which, as you can see from the first AFR article, doesn’t know whether it’s up or down.