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Resource stocks take over

THE past 12 months has provided a dramatic illustration of just how quickly investment markets can change.

This time last year, tech stocks were hot property and resource stocks were struggling to gain investor attention.

It is well known that tech stocks have taken a dive, but what is equally surprising is the extent to which major resource stocks have roared ahead.

With companies like Rio Tinto, BHP and WMC leading the way, the S&P/ASX 200 Resources index gained 8.3 per cent in the month of February and 37.8 per cent over the year. The support for these stocks has been boosted by the lower dollar, which lifts export earnings, and the prospect of higher commodity prices.

In contrast, the S&P/ASX 200 Industrials index lost 1.4 per cent in February and gained just 5.8 per cent for the year.

Most investors in managed funds will see limited benefit from the surge in resource stocks. The average manager in the InTech Growth Funds Performance Survey had about 5 per cent of their money invested in resource stocks, broadly in line with the index weighting. Perpetual and Maple-Brown Abbott had the highest allocation to resource stocks and not surprisingly they achieved the top returns for the past 12 months.

The trend for share investors to shun smaller stocks in favour of more defensive large stocks was highlighted by the 9.5 per cent fall over the year in the S&P/ASX Small Ordinaries index whereas the top 50 stocks on the ASX rose by 12.4 per cent.

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