FEATURE: Tech-related stocks make up half of this year’s top 10 TSR performers, but resources stocks feature prominently over the longer term.
Tech-related stocks make up half of this year’s top 10 TSR performers, but resources stocks feature prominently over the longer term.
It says a lot about the sickly state of the resources sector, and new-found investor interest in technology stocks, that six of the top 10 in this year’s Morningstar total shareholder return survey are technology related – or have recently made a technology investment.
MyATM, a business originally based on renting automated teller machines and now looking to buy an internet business called iWebgate Technology, was winner of the wooden spoon in last year’s survey with a negative score (-98 per cent).
It makes a comeback this year as winner of the one-year category with a positive return of 1,971 per cent; a rating that says much about price movements off a low starting point.
Other tech-related stocks at the top of the one-year TSR list are: Bone Medical, a business developing anti-osteoporosis drugs (second); OBJ (see Tech drives OBJ's magnetic attraction), and Structural Monitoring Systems, a business developing technology to warn against metal fatigue and cracking in aircraft and other forms of critical transport and infrastructure such as road and rail bridges.
However the stocks to really stand out on the latest TSR list are those that remind observers of the dot.com boom of the 1990s when there was a stampede among miners to convert to technology.
• White Star Resources: Eighth in terms of TSR, and a business with copper exploration tenements in Chile but in the process of acquiring a three-dimensional geographic imaging company called Spookfish.
The remaining four of the top 10 are resources linked, with Liquefied Natural Gas ranked third thanks to investor interest in its plans to develop an LNG project in Queensland and the US, Northern Mining (sixth) with a diverse portfolio of gold and base metal exploration assets, Paringa Resources (seventh) with US coal interests, and Gold Road Resources (ninth), with a promising gold project east of Kalgoorlie.
Overall, the latest TSR report points to the improvement in stock market conditions during the past 12 months.
Of the 707 companies surveyed by Morningstar, 311 (44 per cent) produced a positive return; and while that means 56 per cent of the companies surveyed cost investors money thanks to their negative return, it was much better than the miserable 17 per cent in positive territory in last year’s survey.
While interesting, the return of technology stocks as the top performers will be sending a mixed message, especially to investors old enough to remember what happened to tech stocks in the dot.com boom of the 1990s.
While picking winners is not the purpose of Morningstar’s TSR data, it does provide a lead to stocks with interesting stories to tell, such as that of OBJ and the fourth best performer on this year’s list, Structural Monitoring Systems, which also ranks seventh on the five-year TSR list.
An unusual business in that it is British registered (with a PLC designation), Structural Monitoring is ASX listed but with has of the management and product development team based in Canada and the US.
The technology behind Structural Monitoring, which can best be described as ‘crack detection’, has attracted the attention of several US airlines, with one of the biggest, Delta, fitting the system to seven of its Boeing 737 aircraft.
Elevating the technology, dubbed CVM, out of laboratory conditions into real-time use is a major step forward for Structural Monitoring, which is receiving a steady flow of results back from Delta.
Structural Monitoring chief executive Toby Chandler said the CVM technology offered genuine safety and cost benefits to users.
“It has the potential to be of major benefit to airlines because it permits constant, non-intrusive, monitoring of critical aviation components,” he said.
“Currently, the only way cracking can be detected is by close visual and electronic testing, which takes a plane out of service while being conducted.
“Our technology, which measures differential pressure between fine galleries containing a low vacuum alternating with galleries at atmospheric pressure, is a simple and highly efficient way of detecting cracking.”
The way the system works is that if a crack develops underneath the self-adhesive polymer sensors with alternating vacuum and atmospheric galleries a transducer detects the fluid flow and an alarm is sounded.
The potential market for the CVM technology is huge, with aviation the starting point, but with Structural Monitoring also looking at the civil engineering sector where critical elements such as welds, joins and rivets on installations such as bridges are ideal candidates for close monitoring.
The TSR measures, looked at on longer time horizons, keep resource stocks on top. On a three-year basis, nickel project developer Sirius Resources is the winner, while on a five-year returns basis the prize goes to the gold-project developed, Papillon Resources.