Plenty more to go for value
Value stocks saw a strong Q4 in 2020 and that trend should continue into 2021, after what has been a weak decade for value stocks compared to growth, according to boutique fund managers Maple-Brown Abbott (MBA).
Dougal Maple-Brown, MBA head of Australian equities, said the number one question which clients and consultants had asked them over the last couple of weeks was whether this was it for value or was it part of a sustained turn as part of a market rotation.
“Not surprisingly, we think it’s the latter – after a strong quarter, the [ASX 300] index was up about 14% and most of our funds did 4-5% better than that,” Maple-Brown said.
“The traditional growth stocks went nowhere; the poster child [of growth stocks], CSL, was flat over the quarter, down 1%.”
The firm saw value stocks finish the year with a strong run, led by Sims Metal Management (SGM) returning 77.4%, Link Administration Holdings (LNK) returning 48.8% and Janus Henderson (JHG) returning 43%.
“Probably even more scary were the hyper-growth stocks, led by Polynovo (PNV), Afterpay (APT), EML Payments (EML) and Xero (XRO),” Maple-Brown said.
“They had unbelievable runs for the earlier six to nine months, then also kept running through December.
“The hyper-growth stocks didn’t go flat like growth stocks, they actually went on with it.”
Stock total returns in Q4 2020
Source: IRESS; Maple-Abbott Brown
Maple-Brown said it had been a “pretty miserable” decade for value against growth as value had underperformed by roughly 50% over the last decade.
“There was a blip in the last quarter at the end of the last year, in fact, December was not so good for value so frankly it was only October and November,” Maple-Brown said.
“But in the context of 50% underperformance over a decade, while the last quarter was pleasing and it’s continued into January as well, we think there’s still plenty more to go for value.
“That’s both on the valuations themselves and the underperformance that we’ve suffered to date.”
According to FE Analytics, of the five Australian equity MBA funds, all outperformed the ASX 300 with four outperforming it by at least 4%, during Q4 of 2020.
The Australian Geared Equity fund returned (34.58%), followed by Sharemarket (18.9%), Australian Share (18.57%), Australian Equity Trust (18.5%) and Responsible Investment (16.34%).
However, over the year each fund lost 21.46%, 3.06%, 4.87%, 3.51% and 3.36%, respectively, while the ASX 300 returned 1.73%.
Performance of MBA Australian equity funds during Q4 2020
AUTHOR
Chris Dastoor
Recommended for you
Lonsec and SQM Research have highlighted manager selection as a crucial risk for financial advisers when it comes to private market investments, particularly due to the clear performance dispersion.
Macquarie Asset Management has indicated its desire to commit the fast-growing wealth business in Australia by divesting part of its public investment business to Japanese investment bank Nomura.
Australia’s “sophisticated” financial services industry is a magnet for offshore fund managers, according to a global firm.
The latest Morningstar asset manager survey believes ETF providers are likely to retain the market share they have gained from active managers.
