Top 10 ASX by market cap - November changes

                 Nov 9th         Nov 30th

1.   CBA     130b              136b

2.   WBC    100b              107b

3.   ANZ     74b                79b

4.   NAB     74b                78b

5.   TLS      64b                66b

6.   BHP     70b                59b

7.   CSL     44b                46b

8.   WES    43b                43b

9.   WOW   30b                30b

10. MQG    27b                28b

• The big four banks have all increased their market cap over the last three weeks.
• ANZ has just edged ahead of NAB
• BHP has lost 11b in market cap in the last three weeks
• WES and WOW both remain unchanged.

Monthly WPL chart

Source: Yahoo Finance

• Traded roughly in a range of $30-$40 for over four years.
• Dividend yield 9.1%
• Market cap 25b
• PE 9.4

Monthly MQG chart

Source: Yahoo Finance

• Increased four fold since 2012
• Dividend yield 4.4%
• Market cap 28b (10th largest on ASX)
• PE 12.5

TLS since 2002

Source: Yahoo Finance

Impressive run in TLS doubling in price from $3 to $6 in only four years.
Reached its peak in February and has since closed lower every month since with the exception of Jul.
Perhaps worth remembering the negative sentiment with TLS for such a long period of time.  Its shares drifted lower for 12 years from $9 to less than $3.
However if bought and held at almost any point since 2002 (apart from this year) there is a capital gain of anywhere between 0-100% and the descent dividend that comes by every six months.

Some readers may be aware of the investment strategy Dogs of the Dow.   I often wondered whether TLS was an exception to this strategy as it drifted lower over many years.  Perhaps it does fit the strategy when looked at over a much longer time frame.

15 year return on BHP, ANZ and WOW

Three different companies in three completely different sectors: Mining, banking and retail.  All currently experiencing their own headwinds and difficulties.  Which has performed best over the long term?

ANZ

Source: Yahoo Finance

WOW

Source: Yahoo Finance

BHP

Source: Yahoo Finance

If measured from the year 2000 then Woolworths (WOW) is a long way ahead of ANZ and BHP.
WOW has increased its share price five fold and don't forget the dividends as well.  ANZ and BHP have increased their share price roughly half as much as Woolworths (WOW)

When measured from 2005 the results are much the same.  Woolworths (WOW) has risen 60% where as ANZ and BHP have only risen 30%.

From 2010 everything has changed.  ANZ is up a bit, WOW is down a bit and BHP is down a lot.

Highs and lows of ANZ since 2000

Source: Yahoo Finance 

From 2000 it took seven years for ANZ to triple in price from $10 to $30 (pre GFC high)

From 2009 (GFC low) it only took six years to triple in price from $12 to $36.

Hardly surprising there has been a pull-back from the highs seen earlier in the year.

S&P/ASX 200 up almost 5% for the week

The week for S&P/ASX 200 - up almost 5%

The week for Wesfarmers (WES) - up almost 7%

The week for ANZ - up over 7%

WES and WOW - Internet traffic for Big W, Target and K-Mart

Woolworths (WOW) and Wesfarmers (WES) reported their first quarter sales a few weeks ago.  WOW same store sales for food and liquor was down 1% where as WES was up 3.6%.

But the discount department stores was where the divergence was even greater with Big W same store sales down 8.1% and K-Mart up 8.6%.  Target even managed a 3.2% rise.

We are now half way through the second quarter and the all important Christmas trading period is in full swing.

Each Christmas there is a significant spike in internet traffic for the search terms "Big W", "K-Mart" and "Target".  Big W saw the most searches from 2011 to 2014.  Last year Target just edged out BigW.

And this year...  K-Mart is currently leading for the first time, ahead of Target and then Big W.

Source: Google Trends

The spike in July represents the mid-year sales (toy sale in particular) for which Target is always a clear leader.

7 year returns on BHP, FMG and RIO

Trevor Sykes writing for the Fin Review yesterday suggested that BHP is a red hot buy.  His main argument centred on cashflows and that its investing outflows are largely voluntary.  He states that if BHP stopped investing altogether for a year they would be "knocked over by the wall of money."

Not that the market seems that interested this morning.  With the spot price of iron ore down again they are drifting around the $20 mark.

Seems like the main game everyone is playing is trying to "pick the bottom" of the BHP share price.  Seven years ago in the depths of the GFC the share price briefly touched the $20 mark before doubling in price over the next few years.  That low was also at the end of November almost seven years ago to the day.

Here is a chart showing where the share price has gone since.

Source: Yahoo Finance

So where would we be today if we invested in some resources companies seven years ago.  Pretty much back where we started.  This chart shows how your returns on BHP, RIO and FMG would have fluctuated over the seven year time frame.

Source: Google Finance

With FMG you would still be slightly ahead and there would have been plenty of opportunities to sell out at a 200% or more return.

BHP, despite their current woes, has consistently outperformed RIO on the seven year time frame.

4 year chart of WES and WOW

Here's a chart of Wesfarmers (WES) going back four years.

Source: Yahoo Finance

And here's the same chart of Woolworths (WOW) going back four years.

Source: Yahoo Finance

From 2012 to 2014 the graphs are remarkably similar.  From April 2012 to April 2013 they both increase their share price by roughly 50%.  Not bad for a one year return.

For the next year and a half (April 2013 to October 2014) they go sideways which is not unexpected given the rapid rise they had.

October 2014 is where the two charts start to diverge.  It would appear the market was getting nervous with Woolworths (WOW) several months before the board did.  Former chairman Ralph Waters admitted earlier in the year that the board was not fully aware of the extent of the downturn in sales in December and January.  The board thought sales were "a bit soft"

The market was seeing something however as WOW lost over 10% of its value this time last year where as WES was still holding steady.

And so the plunge has continued for WOW this year with its share price returning to 2012 levels.

WES has largely held up however its share price has begun slipping under $40 in the second half of this year.  It has previously traded within a range of $40 to $45 since July 2013.  Could the market be getting a bit nervous about WES as it did with WOW this time last year?

BHP - still above $20 for now

Source: Yahoo Finance

BHP over the last three trading days.
Opens well down and then shows some steady gains during the day.

Meanwhile BusinessDay is reporting that commodity markets are "too pessimistic."  It notes that the recent declines in the prices of metals have been much smaller than that experienced earlier in the year.

Buy and hold Westpac?

With the slide in the share price of BHP the big four banks take out the top four positions of largest companies on the ASX measured by market capitalisation.  And by a fair bit too with Commonwealth Bank (CBA) being twice the size of Telstra (TLS).  That's despite some decent falls in their share prices since April.  And that's all everyone wants to talk about "How far they've fallen since April." Not that this isn't important but what if we look further back.  Much further back.

Take Westpac (WBC) for example.  Here's a monthly chart going back to the beginning of 2009.

Source: Yahoo Finance

Since March 2013 (roughly two and a half years) they have been going sideways trading between a range of $30 to $35.  There was a descent spike out of this range at the beginning of the year with the price almost touching $40.  Everyone seems to conveniently forget that the falls in April, May and June were matched by gains of a similar magnitude at the beginning of the year.  So the only people nursing descent capital losses are those who bought in February, March and April.

The period from July 2009 to September 2012 also saw plenty of sideways movement trading between roughly $20 and $25.  That's a bit over three years.  After that 11 consecutive monthly gains saw the price shoot from $20 to $30.

So what does this all mean.

Despite the hysterical headlines its business as usual for the Westpac share price.  Despite a capital raising and recently going ex dividend the share price remains above $30 within its two and a half year range.

With sentiment currently poor one would expect it to stay in this range for some time.  However if you believe that Australia will avoid a recession, that unemployment will remain around 6% and economic growth is going to pick up you would have thought there is more upside than downside in the share price.

BHP vs FMG since July 1st

Source: Google Finance

Since July 1st FMG is up 23% and BHP is down 23%.

Who would have thought!

S&P/ASX 200 correction similar to 2011

Weekly S&P/ASX 200 going back to 2011.

Source: Yahoo Finance

There are some striking similarities between the correction of 2011 and the correction of this year.

2011
Peak in April and trough in October
1000 point drop from 5000 to 4000.
Steep falls in August

2015
Peak in April and trough in October
1000 point drop from 6000 to 5000.
Steep falls in August

S&P/ASX 200 going back 20 years

Here's a monthly chart of the S&P/ASX 200 going back to 1995.

Source: Yahoo Finance

In the decade from 1995 to 2005 the index went from 2000 to 4000.
Then from 2005 to the beginning of 2015 it went from 4000 to 6000.
So perhaps we can pencil in 8000 for 2025??

From the GFC low of 3000 in 2009 it only took six years to make it up to 6000.

So nine years should be plenty of time to get from the current 5000 to 8000 ;-)

ANZ dividend yield up to 7.2%

Plenty of doom and gloom around the markets this morning as the S&P/ASX 200 hovers marginally above the 5000 point level.  Many blue chips are offering impressive dividend yields.

ANZ for example has a dividend yield of 7.2% fully franked and a PE ratio of only 9.3.  Many will point to whether its dividend is sustainable and the lack of earnings growth to justify the numbers.

Bargain buy or dividend yield trap?

Monthly CSL chart

Source: Yahoo Finance

• Since February 2012 there have been 32 monthly "rises" and only 13 "falls"
• Market cap continues to gain - now 7th largest on ASX at 44b

Top 10 ASX by market cap

1. CBA 130b
2. WBC 100b
3. NAB 74b
4. ANZ 74b
5. BHP 70b
6. TLS 64b
7. CSL 44b
8. WES 43b
9. WOW 30b
10. MQG 27b

• The big four banks still easily account for the bulk of the market.
• ANZ has slipped the most of the four banks
• BHP has fallen from 2nd to 5th in a year (share price down 30% in a year)
• Macquarie (MQG) the biggest gain (share price up 30% in a year)
• CSL continues to move up (share price up 20% in a year)

BHP dividend yield creeps up to 7.4%

BHP shares are once again testing new lows.  After rising above $25 last month they are now back around $22.  Consequently the dividend yield is up to 7.4% fully franked.  No doubt debate will once again continue on the sustainability of their progressive dividend policy.  If the share price continues to fall then it's a very clear signal that market participants are losing faith in the policy.

Here is a monthly chart of BHP going back to 2009.

Source: Yahoo Finance

• The solid bull run after the GFC saw its shares peak in April 2011 at $46.
• The next 15 months to June 2012 saw 12 monthly "falls" and 3 monthly "rises"
• The following 2 years sees the price edge up from $30 to $35.

The next fall from August 2014 looks rather similar to the previous one just described.

• The next 15 months up to today sees 11 monthly "falls" and 4 monthly "rises"

The scale of the two falls are also quite similar.

• April 2011 to June 2012 sees the decline from $45 to $30
• August 2014 to today sees the decline from $35 to $22

While history does not dictate future share price movements it can provide a useful guide to keep things "in perspective".   If the current price falls mirror the declines of 2011/12 then perhaps the downside risks are starting to become limited.

When did Woolworths last trade below $23?

Monthly chart of Woolworths going back to 2010.

Source: Yahoo Finance

Very briefly traded below $23 in November 2011 otherwise we look back to July 2008.

So from the $23 low in November 2011 it was 29 months to the peak in April 2014.

From here the fall has been far swifter taking just 19 months to return to where we are today.
 

TLS approaching a new low

Telstra (TLS) is currently trading at $5.33 just a shade above its 52 week low of $5.27.  It has now lost about $1.40 since its peak in early February.

PE ratio of 15 and its dividend yield is creeping up to 5.7% fully franked.

So a pretty ordinary 9 months for TLS but perhaps worth remembering they've had a good run over the last four years.  Here's a monthly chart going back to 2011.

Steady gains most months saw the share price more than double over a four year period from Feb 2011 to Feb 2015.

Also worth noting that the steep declines of August and September are almost matching the steep rise of December 2014 and January 2015.

Source: Yahoo Finance

ANZ NAB WBC ex dividend dates approaching

With the full year results finished for three of the big four banks that means ex-dividend dates are fast approaching.  As has been noted previously there has been no run up in their share prices this year as return on equity slips, dividends remain stable and margins come under pressure.

Clancy Yeates and James Eyers writing for BusinessDay have summarised it all pretty neatly this morning.  They've included a few useful graphs looking at return on equity, net interest margins and bad debt expenses going back a number of years.

ANZ
Ex dividend date 5th Nov 2015
PE ratio down to 10
Dividend yield 6.7% fully franked

NAB 
Ex dividend date tomorrow (4th Nov 2015)
PE ratio 12
Dividend yield 6.6% fully franked

WBC
Ex dividend date 10th Nov 2015
PE ratio 13
Dividend yield 6% fully franked

ANZ continues to offer the best value and some would argue the higher risk.
Unless ANZ has a bit of a bounce today or tomorrow its share price could be testing its 52 week low later in the week.

Woolworths hitting new lows

No good news for the WOW share price today with the intra day low representing a new 52 week low.  On Friday we mused that $23 could be a key resistance level.

Here's a graph of the S&P/ASX 200 and Woolworths over the last two years.  Both going sideways for most of 2014 and then it's down for WOW exactly 12 months ago...

Source: Google Finance

Westpac results - No surprises here

Westpac today rounds off the full year results after ANZ and NAB last week.

• Cash earnings $7.82 billion up 3%
• Final dividend 94c per share fully franked
• Return on equity 15.8% down 57 basis points

No surprises as most of the results were released two weeks ago when it announced the equity raising.

On Friday we had a look at how the share prices of ANZ and NAB were responding to their respective results.  They each lost 2% on the day the results were announced and then had steeper falls the following day.  And today Westpac is following the same formula being down 2%.  Maybe some steeper falls tomorrow?


Despite this, their shares are still trading comfortably above the retail entitlement offer price of $25.50.

Final musing:  Return on equity may be down a bit but 15.8% is still pretty healthy.