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In her monthly review, Julia discusses:

  • Small end of the market doing the heavy lifting (0:20)
  • Stand out stocks gaining more than 200% (0:47)
  • Stocks stuck in a downgrade cycle (1:30)
  • Which sectors are seeing double digit gains (1:46)
  • Upgrades & downgrades this confessions season (2:42)

With the end of the financial year, the Australian sharemarket has managed to clock up another year of positive gains.

We have seen the ASX200 up by 9% and including dividends, that’s a gain of 13.5%. It is however the small end of the market that has been doing a lot of the heavy lifting. The top 20 blue chips on the market, they are only up by 5.9%, but the small ordinaries index is up 22.7% for the financial year and the mid cap index up by 12.2%.

In terms of individual stocks, there has been some impressive performances. In the ASX200 index, the top 3 performers gained more than 200% for the year. These stocks included Appen (APX), which was up by 242% and both Afterpay (APT) and Beach Energy (BPT) up by 210%. These three companies haven been stuck in an upgrade cycle and continue to benefit from it.

On the bottom, Telstra (TSL) was down 35.7%, G8 Education (GEM) was down 34.6% and AMP down 29.9%. Both Telstra and AMP have been stuck in a downgrade cycle, which has been impacting on share prices.

Looking at sector performances, most of them have seen double digit gains for the financial year. The only sectors which haven’t are those related to the bond market. The areas seen as bond proxies or defensive sectors include telecom, utilities as well as the banking space, which is where we have seen some negative returns for the year.

On the flip side, energy is up by 34.5%, with oil being a typical late cycle investment that does well. Technology up by 32.9%, despite it being a smaller sector of the Australian sharemarket. Lastly, healthcare continues to do well, up by 28.4%, driven by CSL, which has been on a upgrade cycle.

June is often known as confession season. This confession season we have seen upgrades coming through from several companies including CSL, Qantas, ARB, as well as Aristocrat Leisure. We’ve seen downgrades coming through from AMP, Amcor, Ausdrill, Greencross, JB Hi-Fi, InvoCare, Gateway, Ramsay Healthcare, Telstra, as well as Technology One.

So, what should you do in terms of strategy? Looking at the globe, there is going to be plenty of noise coming through with the escalation of trade tensions between the US and China. The volatility this creates also creates an opportunity in 2018 for quick investors. There is still plenty of liquidity around in this market and we are still seeing inflation come through and that should be a positive backdrop for shares going into the new financial year.