In Part 1, I looked at the 52 week high and low prices for a few financial stocks and of course, these companies have seen their stock prices slashed. But surely if the market is being hit by issues related to the credit crisis then there must be some sectors, like food for example, that have held up rather well. (as long as the company involved does not have large amounts of debt)
So let’s move away from the financial stocks listed on the ASX and check the 52 week stock price high and lows for some other companies.
Goodman Fielder (GFF) High – $2.65 Low – $1.27 Fall 52%
Domino’s Pizza (DMP) High – $3.70 Low – $2.55 Fall 23%
Virgin Blue Holdings (VBA) High – $2.50 Low – $0.45 Fall 82%
Telstra Corporation (TLS) High – $4.95 Low – $4.04 Fall 18%
BHP Billiton (BHP) High – $50.00 Low – $31.00 Fall 38%
Australand Property Group (ALZ) High – $2.65 Low – $0.58 Fall 78%
Fairfax Media (FXJ) High – $4.99 Low – $2.57 Fall 48%
Woolworths Limited (WOW) High – $35.05 Low – $22.85 Fall 35%
What the data above tells me it that there has been an across the board exit from the stock market and although the financial stocks tend to be getting a lot of bad press, there are plenty of other companies that have also been hit just as hard.
Take Virgin Blue (an airline) for example, down 82% from it’s 52 week high to it’s 52 week low and yet I have not read much written by financial journalists etc saying that the VBA business model is broken or that is was never sustainable. Yet Babcock & Brown (an investment bank) which took a 93% hit from it’s 52 week high to low price has been the subject of almost endless criticism in the media.
Both companies have bit hit by some unexpected events, but why is it that the market commentators tend to directing their venom mainly at the financial stocks? Perhaps they should disclose what stocks they own then they write articles?
What we can also see from the stocks prices mentioned above is that even good old defensive stocks like Domino’s (pizzas), Goodman Fielder (supplier of groceries and food staples), Telstra (telecommunications) and even reliable Woolworths have had a hard time.
So it appears rather than investors moving money into so called defensive stocks, they seem to be just getting out of shares altogether at the moment. (although there would be some movement into defensive stocks I would suspect)
If the conclusion is that the stock market is being hit by a broad sell-off, then the question is where is the money going? Certainly it does not look like it is into property as property prices seems to be flat to weak in most major Australian markets..so where? The answer I suspect is that the proceeds from the sale of stocks is being used mainly to pay down debt or put into cash deposits.
There is no doubt that many assets have lost value and stocks have been hit hard, but there still must be quite a bit of cash out there in investor land parked in cash and looking for a home.
This leads me to believe that when the market does rally it will be quite a ride up and broad in nature. By this I mean something like a 15%+ move upwards over a month or so driven by a flow of money back into the market from the sidelines.
Anyway we should see how wrong I am over the next 6 months or so.