2016 has been a wild ride so far!
I was surprised to read on the weekend that you could have taken a short trip to the moon for the first three months of the year and returned to find out that your shares were valued roughly the same amount as when you left.
While you were away you would have missed out on the mayhem of a 10% market plunge between January 1 and February 15, but you would have been even more surprised to see which stocks were on the 'top performers' list on the ASX 200!
Check it out:
- Fortescue Metals Group Limited (ASX: FMG) – up 47%
- South32 Ltd (ASX: S32) – up 47%
- Cimic Group Ltd (ASX: CIM) (formally Leighton Holdings) – up 46%
- Newcrest Mining Limited (ASX: NCM) – up 34%
- Medibank Private Ltd (ASX: MPL) – up 29%
What's going on?
There's quite an obvious trend here that mining stocks have staged a remarkable recovery. For Fortescue, its recovery is a function of the revival in the iron ore price, while South32 has announced some plans to get on-track to make more money. Newcrest is a similar story, the gold price has improved as global turmoil in financial and non-financial markets has steadily increased and the Australian dollar has fallen, improving our exporters' profits.
Cimic and Medibank on the other hand, are potentially turnaround stories. Cimic's share price has improved significantly since it released its results for the year to 31 December 2015. It returned to profitability and gave a pleasing outlook regarding work in hand and also the amount of work up for tender this year. Shareholders liked it despite the company operating in a tough market.
Medibank has taken me by surprise. Its share price surge has taken place due to two very distinct pieces of information released to the market. The first was when the group increased its full-year earnings guidance by 27%, despite lower-than-expected new sales during the first half, and the second was the announcement of a 5.6% increase in premiums for the coming year.
Is it sustainable?
For the miners? No one knows, analysts seem to believe that the iron ore jump is a result of restocking in China, while South32 will actually have to perform from here to maintain its share price.
Medibank remains a concern for me, private health cover is becoming a commodity and an ever-more-expensive one at that. I wonder how long it can maintain its pricing model before Australians start to drop off or switch to online-only cheaper providers.
