FNArena’s Weekly Insights – October 17 2022
In this week’s Weekly Insights:
-Investing In Non-Profitable Companies
-Corporate Updates: Early Signals
-Peak Resources?
-FNArena Talks
By Rudi Filapek-Vandyck, Editor FNArena
Investing In Non-Profitable Companies
The 2022 patience-testing, volatile bear market for global equities has shown investors risk is not simply a four letter word; it should be properly managed, or else the damage can be stomach-churning if not soul-destroying.
A few share market truths that have shown themselves in spades throughout the year:
-history is not a perfect guide
-small cap companies are riskier than large cap companies
-beyond macro and sectors, individual, company-specific characteristics ultimately matter
-risk-off bear markets punish more and more harshly than risk-on periods
-Lossmaking companies are among the riskiest options overall
As per usual, there are always a plethora of exceptions, but each of the above general statements would be backed up by detailed stats and data-analysis.
Consider, for example, during the extreme volatile month of September large cap stocks in Australia lost -5.4% in share price value but small caps retreated by -11.2% over the month.
Then again, look underneath the share market’s bonnet, and we discover many of the best performing stocks over the three months past are small cap companies, including Tyro Payments ((TYR)), Liontown Resources ((LTR)), Life360 ((360)), Paladin Resources ((PDN)), IPH Ltd ((IPH)) and Mesoblast ((MSB)).
For good measure: virtually all of the worst performers from the past three months are small cap companies, including Appen ((APX)), EML Payments ((EML)), Ramelius Resources ((RMS)), Codan ((CDA)), Imugene ((IMU)) and Pointsbet Holdings ((PBH)).
And just to prove that generalisations are seldom without exceptions on the share market: as at last Friday, the S&P500 is down -22% year-to-date and -14.5% from twelve months ago while the S&P Small Cap 500 is down -19.39% and -16.24% respectively.
Yes, indeed, life as an investor is only simple and straightforward when sitting in cash on the sidelines (but only for a while).
