Author Topic: The bottom section of the ASX index  (Read 3819 times)

englyn

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The bottom section of the ASX index
« on: August 20, 2012, 09:08:52 PM »
I was poking around on the ASX website's charting tool and noticed something interesting.
The indices peaked in late 2007 and haven't recovered since the end 2008 dip. But the big "reliable" stocks, the banks, woolworths, bhp and so on, never fell as far as the index and so haven't moved much since end 2008.
This makes sense. The money has to go somewhere and I would expect it to go into reliable stocks, keeping their prices up in the process, during a bear market.
So, is there some kind of an index fund that buys the top 200 stocks MINUS the top 10 or so? Seems this would have further to gain in a more optimistic environment?

Obviously I'm talking about the Australian market, but I would be surprised if a similar effect doesn't happen elsewhere.
Also, I am just beginning to learn about this, so please do challenge my assumptions.

arebelspy

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Re: The bottom section of the ASX index
« Reply #1 on: August 20, 2012, 10:20:17 PM »
So, is there some kind of an index fund that buys the top 200 stocks MINUS the top 10 or so? Seems this would have further to gain in a more optimistic environment?

I don't know about the Australian market, but it seems to me you're cutting off your high flyers.  Imagine not buying into Apple around those timeframes, one of the top performers here.

Over thinking and trying to outguess the market has led to many a return underperforming it.
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englyn

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Re: The bottom section of the ASX index
« Reply #2 on: August 20, 2012, 11:40:09 PM »
Very interesting! So the Aussie market is quite different. Our top 10 are all blue chip: mining giants, banks, supermarkets, telecom. No IT or industry.
Was Apple in the top 10 of S&P500 10 years ago? I can't find a list, but I suspect not. If not that would (anecdotally) support my theory.


arebelspy

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Re: The bottom section of the ASX index
« Reply #3 on: August 21, 2012, 02:26:33 PM »
Sounds like you like the idea of growth over value stocks.
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AdrianM

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Re: The bottom section of the ASX index
« Reply #4 on: August 21, 2012, 06:48:57 PM »
What you are looking for is the S&P/ASX SMALL ORDINARIES (XSO)

I have added in a comparison of the XJO with XSO so you can see the changes

Just for Shits and Giggles I have listed the ASX 20 and their dividend yields.

AMP - 6.2% - Insurance
ANZ - 5.8% - Banks
BHP - 3.2% - Materials
BXB - 3.9% - Commercial Services & Supplies
CBA - 5.9% - Banks
CSL - 2.0% - Pharmaceuticals & Biotechnology
MQG - 5.4% - Banks
NAB - 7.1% - Banks
NCM - 1.4% - Materials
ORG - 3.9% - Energy
QBE - 6.8% - Insurance
RIO - 2.9% - Materials
STO - 2.5% - Energy
SUN - 4.5% - Insurance
TLS - 7.6% - Telecommunication Services
WBC - 6.4% - Banks
WDC - 5.0% - Real Estate
WES - 4.7% - Food & Staples Retailing
WOW - 4.3% - Food & Staples Retailing
WPL - 3.2% - Energy

Enjoy
AdrianM


englyn

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Re: The bottom section of the ASX index
« Reply #5 on: August 21, 2012, 08:51:36 PM »
Aha! XSO. So now I know what to google for, I discover that of course much more knowledgeable people have noticed the same thing, pointed to the same reason, but come to a different conclusion:
http://adriantout.blogspot.com.au/2012/08/using-divergence-to-gauge-sentiment-xjo.html

(tl;dr: xso and xjo in lock step most of the time but have diverged recently as large investors go for the more secure top stocks and this means small ordinaries are more risky plus their dividends are poor.)

Thanks for the chart Adrian, where did you get it? I can't seem to find one that goes back >10years.

Interestingly, small ordinaries have done horribly over the 5 year timeframe but well in the last month. So have midcaps, only worse than small over both timeframes!

So, if the overall opinion of economic outlook steadily improved, would we expect small caps to recover to match the asx200, or merely run in parallel as xjo improves? Looking at the 10 year graphs would seem to suggest a) recover, but about a year later.

As for growth vs. value: I currently think growth stocks have a place as a smallish portion of investment, but this is just an exercise in me learning what a growth stock and a value stock are and starting to form some opinions. And all academic anyway as I don't have any stocks and likely won't for another 2 years until my 6% house mortgage is paid off :-)

AdrianM

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Re: The bottom section of the ASX index
« Reply #6 on: August 22, 2012, 07:23:56 AM »
Thanks for the chart Adrian, where did you get it? I can't seem to find one that goes back >10years.

Google Finance
http://www.google.com/finance
Just search for INDEXASX:XJO then on that page, you then put INDEXASX:XSO into the Compare box and click ADD, then select your time frame 10Y and there you have it.

Hope that makes sense.

grantmeaname

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Re: The bottom section of the ASX index
« Reply #7 on: August 24, 2012, 08:12:05 AM »
Useful tip: you can actually link whatever you're viewing. There's a little chainlink a little left of the center of this graph, followed by the words "link this view".

Here's the above comparison for the last decade, for example.