EOFY: How did small-caps fare against their large-cap counterparts?
As markets weathered the market crash caused by the impact of the COVID-19 pandemic, how did the small-cap space fare against their large-cap counterparts?
During the 2019/20 financial year, there were strong returns in the first half of the year as the ASX 200 continued its bull run. However, there was market chaos in the second half as the COVID-19 pandemic led to a market crash in mid-March and increased uncertainty and volatility.
In the small-cap space, the ASX Small Ordinaries lost 6% during the year compared to losses of 8% by the ASX 200 but performance by the utilities sector, in particular, far outpaced the large-cap sectors with returns of 98% during the year, according to FE Analytics.
Small-caps tend to underperform large caps in times of crisis as they are perceived as being more risky and more vulnerable to market shocks.
Overall, four sectors in the small-cap space reported positive returns during the year, this was the same number as in the large-cap space but they were different sectors.
The small ordinaries utilities sector returned 104% while healthcare returned 16.6%, materials returned 6.6% and technology returned 6.3%.
The utilities sector was led by returns from Infigen Energy which returned 107% during the year, the firm is a windfarm operator and was subject to a bidding war which was expected to be concluded by the end of July.
In healthcare, the leader was Fisher and Paykel Healthcare (a stock that also sits in the ASX 200) which returned 117% and pharmacy network Sigma Healthcare which returned 12%.
The worst-performing small ordinaries sector was the energy sector, in line with its large cap counterpart, which lost 39.8% over the year compared to losses of 32% for the large-cap energy sector. This was caused by the lack of travel as a result of border restrictions caused by the COVID-19 pandemic.
Viva Energy was down 10.9% while Carnarvon Petroleum was down 68% and FAR was down 85%. Oil refiner Viva Energy was helped as the firm decided to start a share buyback, although it noted demand for its products remained weak in the market environment.
The communication services sector was also down 27% and industrials were down 25%.
AUTHOR
Laura Dew
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