SMSFs load up on blue-chip bargains amid market rout
Self-managed super funds have heeded calls to keep calm in the face of last year’s global market rout, finding pockets of opportunity among blue-chip stocks at bargain prices.
Self-managed super funds have heeded calls to keep calm in the face of last year’s global market rout, finding pockets of opportunity among blue-chip stocks at bargain prices.
SMSF investors reacted to the second-half 2018 global market downturn by buying quality stocks that were considered expensive, according to CommSec's bi-annual SMSF Trading Trends Report.
"Their focus has been on finding quality at a reasonable price, rather than just 'cheap' stocks," the report says, noting a 14 per cent fall in the ASX200 between August and December.
Stocks in the sights of SMSF investors included: biotech CSL (ASX: CSL) – with the volume of trading up 80 per cent, financial giant Macquarie Group (ASX: MQG) – up 31 per cent, and implant specialist Cochlear (ASX: COH) – up 85 per cent.
Trading in all these stocks showed a strong “buy bias”, according to the report.
CSL fell from highs of $232.23 in early September to lows of $175.35 come December – a 24.5 per cent drop.
Macquarie Group similarly sold well below its September peak of $129.35, bottoming out at $104.82 at the end of December.
Macquarie has since shot back up, trading around $125.50 today. However, it remains 7.5 per cent shy of Morningstar equity analyst David Ellis's $135 fair value estimate.
Tech stocks lose their shine
Several of Australia's so-called WAAAX stocks continue to pique the interest of SMSFs investors. These included software plays such as WiseTech (ASX: WTC) and Altium (ASX: ALU), Xero (ASX: XRO), payments companies such as Afterpay (ASX: APT), and machine-learning AI developer Appen (ASX: APX).
However, the focus of their activity turned from buying to selling, especially in the weaker second quarter.
Market favourite Afterpay led the way, with trades increasing 236 per cent by value, followed by Appen, up 50 per cent, and Altium, up 26 per cent.
CommSec says it remains to be seen if this sell-off continues into 2019 or represents a "flight to safety" that will be reversed if markets improve.
Interest in other former market darlings A2 Milk (ASX: A2M) and Telstra (ASX: TLS) continued to wane, with trading volumes falling 57 per cent and 28 per cent respectively.
A2M featured among Morningstar’s October Global Best Ideas list but was removed last month as it has moved closer to its fair value estimate. It was trading at $13.72 mid-afternoon on Wednesday.
SMSFs dashed to dump Telstra, with sells making up 60 per cent of trades. This represents a dramatic fall in favour among the company's traditionally stalwart investor base.
Morningstar values the stock at $4.40. It was trading at $3.23.
The most traded stocks over the half by value were CBA, NAB and Westpac. Macquarie and Afterpay moved into the top 10, while Fortescue Metals and A2 Milk fell.
ASX20 back in favour
SMSFs investors are showing renewed interest in key ASX20 and ASX50 stocks including miners BHP (ASX: BHP) and Rio Tinto (ASX: RIO), with trades rising 12 and 6 per cent in value respectively.
Strong buy bias was also recorded in banks Westpac (ASX: WBC) and NAB (ASX: NAB), despite value of SMSF trading in major banks falling 11 per cent. Bargain opportunities helped lift insurer AMP (ASX: AMP) and financial services supplier IOOF (ASX: IFL), both affected by the Hayne royal commission.
In a previous report, CommSec found the traded value of ASX20 had fallen considerably as a proportion of total SMSF trading. Today's report shows this trend slowing.
SMSFs continued to ride the healthcare stock wave over the six months, increasing their trades by value from 6.8 to 8.3 per cent.
"In the past, SMSFs have been criticised for not having enough exposure to these stocks – now it appears they were simply biding their time," the report says.
SMSFs remain wedded to the big four banks, BHP, Telstra, Wesfarmers (ASX: WES) and Woolworths (ASX: WOW) – all of which appear in the top 10 CHESS Holdings beside BHP, CSL, Telstra and Macquarie.
Top 10 traded stocks by value, 2019 H2
- CBA (5.41pc)
- NAB (3.66pc)
- WBC (3.60pc)
- BHP (3.21pc)
- CSL (2.97pc)
- TLS (2.69pc)
- ANZ (2.39pc)
- MQG (1.95pc)
- APT (1.86pc)
- RIO (1.82pc)
Source: CommSec SMSF Trading Trends Report - March 2019
SMSFs pause international share trading
International share trading among SMSFs slowed significantly over the half, with the value of direct shares trades by SMSFs increasing only 9.7 per cent.
This compared to previously reported "explosive growth" in direct international share trading by SMSFs, with trades surging 57 per cent over the preceding 12 months.
SMSFs shunned Asian stocks – particularly bank and tech stocks – contrary to CommSec's expectations. While Chinese online giant Alibaba kept its place as the most traded and held stock, online retailer JD.com fell out of favour. Investors instead turned to Alibaba rival Tencent after a big price fall in between January and October.
Chipmaker Taiwan Semiconductor also figured in the top 20 traded stocks. This comes amid global interest for semiconductor companies, with US-based AMD also among the most traded and held stocks.
SMSFs’ direct international shares holdings are still relatively concentrated in household American names.