Latest TSR data shows major performance

14/07/2014 - 13:15

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FEATURE: Takeovers are a powerful way of delivering short-term returns to investors, as the Total Shareholder Return data released by Morningstar and applied to 700 companies on the Business News BNIQ database.

Latest TSR data shows major performance

Takeovers are a powerful way of delivering short-term returns to investors, as the Total Shareholder Return data released by Morningstar and applied to 700 companies on the Business News BNIQ database.

Aquila Resources was one beneficiary of this phenomenon, as are numerous smaller stocks that have shone in recent months, often with a technology twist via a backdoor listing of new consumer based idea.

As interesting as these TSR measures are, many of the companies at the top (and more so from the bottom) of the one-year rankings are insignificant from an investment perspective.

A more important test is to see how Western Australia’s top locally listed stocks, as measured by stock market value, performed; that’s where Aquila fits in.

Ranked the 10th biggest WA stock (and 143rd nationally), Aquila was a clear winner in terms of TSR among the major local companies with a 12-month return of 90 per cent, thanks largely to receiving (and eventually accepting) a $3.40-a-share takeover bid from China’s Baosteel.

Second-best TSR performer in WA’s top 10 (see list) was Fortescue Metals Group with a score of 49 per cent while the third-ranked stock, Navitas, will be looking very different today after being heavily sold-off after June 30 thanks to a hefty asset-value write down.

At June 30, the TSR cut-off, Navitas was showing a positive return of 27 per cent thanks to a closing June 30 share price of $7.13. As this story was being written Navitas had just suffered a painful fall of $2.47 (35 per cent), taking its share price down to $4.57, flipping it from a positive to a negative return.

The Navitas fall is an example of the importance of timing in any measure of stock market performance and while it shifted from positive to negative in early July another stock would have done better a few days after the cut-off date.

Iluka Resources, the only member of the WA top 10 to deliver a negative return in the 12 months to June 30, enjoyed a modest share price bounce in early July, rising from the cut-off price of $8.13 to $8.42. Iluka would still be a negative performer on the new price, but it was trending up.

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