Monday, 23 February 2009
60% of Singapore-listed firms yield positive 10-year returns
Looking at three categories of companies - those with a market cap of $1 billion or more, those in the $100 million-$1 billion range, and those in the sub-$100 million bracket - the biggest have consistently done better over the past one, three, five and 10 years.
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60% of Singapore-listed firms yield positive 10-year returns
By TEH HOOI LING
23 February 2009
(SINGAPORE) Here’s the good news if you’ve stayed invested in Singapore stocks for the past 10 years: Six out of 10 stocks yielded positive returns from Feb 1, 1999 until the end of last month.
And here’s the not-so-good news: The average return of the 175 stocks with at least 10 years of trading history is a measly 0.31 per cent per annum. The median is slightly better at 2.4 per cent, according to data from Bloomberg.
Still, if you were lucky or smart enough to spot Noble Group when it was a company with a market capitalisation of just about $50 million back in 1999, you’ve had it made. $10,000 invested in the stock 10 years ago is worth just over $700,000 today, despite the carnage of 2008.
Cosco Corp, too, has been a super performer, notwithstanding its roller-coaster ride in the past couple of years. $10,000 invested in it a decade ago has a market value of $221,000 today.
Jardine Matheson and Jardine Strategic have also done well, boosting investors’ funds about 10 times, from $10,000 to $110,000 and $100,000 respectively.
On the other hand, if you put $10,000 into Lindeteves-Jacoberg in 1999, when it was deemed a promising medium-sized company with a market cap of about $400 million, you would have nothing to smile about today. Your $10,000 would have shrivelled to just $177. Such is the unpredictability of the stock market.
Overall, despite the massive crash last year, 56 stocks here still managed to return 8 per cent a year to investors over the past 10 years. That’s about one in three stocks - not too bad odds. The flip side is you have roughly the same odds of seeing your money diminish by at least half.
As a group, SingTel, DBS Group, UOB, OCBC, Singapore Airlines, CapitaLand, Keppel Corp and ST Engineering - the biggest of the local companies - returned a decent 8.4 per cent a year over the past 10 years to end Jan 31.
In business, perhaps size does matter. Bigger companies, barring those that aggressively gear up their balance sheets at the wrong moment, are generally seen as better able to weather a downturn. Analyses of shareholders’ returns over different holding periods bear out this theory.
Looking at three categories of companies - those with a market cap of $1 billion or more, those in the $100 million-$1 billion range, and those in the sub-$100 million bracket - the biggest have consistently done better over the past one, three, five and 10 years.
But surprisingly, the average and median returns of companies with a market cap of $100 million or less almost matched the returns of those in the $1 billion club for the various holding periods. The only exception was for a five-year holding period, where the smaller companies did slightly worse.
Their median return during that period was -5.6 per cent compared with bigger cap companies’ return of 1.1 per cent a year. In contrast, those with market caps of $100 million to $1 billion slumped by 18.4 per cent a year in the last five years.
Hence stocks with a market cap of $100 million or less can be a fertile ground for stock-picking. But the problem is, there are a lot of them to choose from. And the wrong choice can be disastrous.
Companies with market caps of between $100 million and $1 billion turned in the worst performance over all time frames.
‘Perhaps this is an indication that companies in this category are more prone to be hyped by analysts and the market,’ said an observer. ‘Also, having grown from a small size, many may not have put in place a proper management system. So when conditions turn, they are hit the hardest, both in terms of market sentiment and business operations.’
As we all know, much of the destruction of shareholder value occurred in the past 18 months. So how bad is it? Well, in the 12 months to last Friday, only 10 stocks in the entire market managed to chalk up any return for investors. Those in the distinguished lot are Singapore Food Industries, Enporis Greenz (formerly Seksun, now a shell company), Old Chang Kee, Sihuan Pharmaceutical, Colex, SPDR Gold Trust, JK Yaming, Singapore Bond Index, Dairy Farm and Riverstone. Five managed a return of 10 per cent or more.
The average decline of all Singapore-listed stocks has been a whopping 55.5 per cent. The median decline is 57.8 per cent. One point to note about the ranking though is that only stocks which were traded last Friday had their return captured.
Hence stocks such as Hersing and Sim Siang Choon, which did well from 2004 until now, were not captured in the table.
Companies with market caps of between $100m and $1b turned in the worst performance over all time frames.
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