Sometimes you can learn a lot about how the stock market is reacting to events by just looking at the 52 week stock price highs and lows for a range of companies spread in a few different sectors. Normally in addition to looking at stocks I hold, I also look at the prices of stocks I am interested in and also add a few random picks as well just to get a good spread of companies.
So let’s have a look at some stock prices using this approach and try to see what messages we can pick up.
The Traditional Banks
Commonwealth Bank (CBA) High – $62.16 Low – $37.02 Fall 40%
National Australia Bank (NAB) High – $44.84 Low – $23.39 Fall 48%
Westpac Banking Corp (WBC) High – $31.32 Low – $18.36 Fall 41%
ANZ Banking Group (ANZ) High – $31.74 Low – $15.32 Fall 51%
The big four banks have all been hit by the fallout from the credit crunch and the general lack of appetite investors have for stocks in the financial sector these days. ANZ and NAB have been hit harder than the other two banks because of specific issues that have eroded confidence in their management.
The Investment Banks
Macquarie Group (MQG) High – $83.59 Low – $39.99 Fall 52%
Babcock and Brown (BNB) High – $31.08 Low – $1.96 Fall 93%
Investment banks were always seen as more risky than the traditional banks and so it follows that their shares are sold off more sharply when investors flee financial stocks in general. BNB in particular has seen it’s share price savaged as their business model comes under severe pressure and their management seem lost at sea.
You could probably say 20% or so of the BNB share price drop is all about the lack of confidence people have in the company rather than anything to do with fundamentals as such. But in bear markets when investors get nervous they tend to sell and nothing makes people more nervous than when a company has to keep revising forecasts etc.
Platinum Asset Management (PTM) High – $6.99 Low – $2.60 Fall 62%
Wilson Investment Fund (WIL) High – $1.19 Low – $0.685 Fall 42%
Perpetual Limited (PPT) High – $78.97 Low – $37.25 Fall 41.72%
Here are I picked a few different types of financial related stocks just to get a feel for the sell off that has taken place in this sector. We can see that again anything in the financial services area has been hit hard and you start to get the feeling that around a 40% share price hit in the sector is almost a default value.
So what does this exercise in looking at the 52 week high and low prices tell us?
1. Most of the stock mentioned above are currently trending upwards from their 52 weeks lows although a few (like MQG, BNB and ANZ) are not far away from their lows. Perhaps the worst is over?
2. It is pretty clear to see that investors have fled stocks in this sector en masse. A 40-50% stock price hit seems almost normal unless the company has “issues”, in which case there seems no limit to how far the share price will fall.
3. I can understand why the investment banks have been hit hard, but my thinking is the major banks have been over sold. They are still very profitable businesses unlike many of their U.S counterparts. I also get the feeling a lot of other companies in the financial sector have been oversold but there is no doubt that downside risks probably outweigh the upside risks at the moment.
Please remember the above points are just my conclusions, and you may take a different view of what the high and low prices are indicating. (Please feel free to let me know your thoughts on this subject)
In any case, in Part 2 of this look at 52 week prices I will discuss some companies outside the financial sector and see how they have been performing.