THE great thing about the sharemarket at the end of the year is that you can look back and see everything you should have done because 2011 is now crystal clear.
So let's torment ourselves with some of the things we didn't know in 2011 that, had we known, or guessed, could have retired us prematurely and gloriously, or at least saved us from poverty:
The market is going down. This has not been a great year. As I write the ASX 200 is down 12.7 per cent since January 1. In the ASX 200 25 per cent of the stocks went up and 75 per cent went down. Half the ASX 200 fell more than 15 per cent. Ten per cent rose more than 15 per cent. That means you had a 50-50 chance of losing 15 per cent of your money in stocks and the odds of making money were 3 to 1 against.
Sell China, sell resources. The Chinese sharemarket fell 20 per cent this year. The resource sector fell 24 per cent, twice as much as the market and four times as much as banks and industrials. The Chinese economic miracle softened and all that about China decoupling from the world was little more than resource-sector propaganda along the lines of "Stronger Forever". China was more important than Europe for Australia. BHP down 22 per cent. Rio down 28 per cent.
Avoid steel stocks. Sorry, but you can't sell steel made in Australia and priced in Australian dollars into the international markets and expect to compete and make a profit. BlueScope Steel (down 77 per cent) and OneSteel (down 70 per cent) both now have their lives in their hands. Sims Metal Management down 38 per cent as well.
Avoid iron ore stocks. The Chinese steel mills have had enough of falling demand and rising input prices. Ultimately the iron ore price bubble burst. Fortescue down 30 per cent, Mount Gibson down 44 per cent, Gindalbie Metals down 65 per cent. Atlas Iron survived to fall only 4 per cent.
Avoid uranium stocks. The Japanese earthquake and tsunami destroyed the previously compelling outlook for uranium. Paladin down 68 per cent. ERA down 82 per cent.
Print media is stuffed. APN down 63 per cent, Fairfax down 46 per cent. Seven West Media 47 per cent.
The internet is going to kill the retailers. Billabong down 52 per cent. David Jones down 38 per cent. Myer down 34 per cent. Harvey Norman down 28 per cent. JB Hi-Fi down 16 per cent.
That rare earths fad won't last. Lynas Corp up 274 per cent in 2010. Down 44 per cent in 2011.
Buy mineral sands. Iluka up 75 per cent. The second best performing stocks in the ASX 200.
Buy QR National despite the fact everyone bagged the IPO. Up 27 per cent. The ugly duckling turned into a swan.
You are not going to believe what the Qantas CEO gets compared with shareholders. Qantas down 39 per cent. CEO pay up 71 per cent.
Stem cell research has legs. Mesoblast up 66 per cent.
Specialist mining services companies will kick butt. Campbell Brothers up 25 per cent. NRW Holdings up 26 per cent. Monadelphous up 11 per cent.
Defensive stocks will actually perform. Including dividends, Ansell up 19 per cent, Coca-Cola up 13 per cent.
Foster's will be bid for. Now that wasn't that hard. Up 35 per cent.
Stick with healthcare stocks. Ramsay Healthcare up 7 per cent. Sigma Pharmaceuticals up 129 per cent. NIB Holdings up 32 per cent.
One-product healthcare stocks are riskier than normal healthcare stocks. ResMed and Cochlear down 30 per cent.
Boring income stocks will be treasured as alternatives to term deposits and Find out what a hybrid is. Including dividends Telstra was up 27 per cent. MAp Group up 22 per cent. Envestra up 46 per cent. Telecom NZ up 28 per cent. Spark Infrastructure up 26 per cent, APA up 16 per cent. This was the really big miss this year, selling income stocks along with the rest of the market. Instead, income went to a premium as interest rates peaked and term deposit returns peaked with them.
Still, you can't know everything. Next week: The Post It notes for 2012.
Frequently Asked Questions about this Article…
What happened to the ASX200 in 2011 and how did the market perform?
In 2011 the ASX200 fell about 12.7% from January 1. Only around 25% of ASX200 stocks rose while 75% fell; half the index’s stocks dropped more than 15% and only about 10% rose more than 15%.
Why did resource stocks and China‑exposed companies struggle in 2011?
The Chinese sharemarket weakened in 2011 (down about 20% for the year) and the resource sector fell roughly 24%, hitting big miners such as BHP (down ~22%) and Rio Tinto (down ~28%). The article notes China mattered more than Europe for Australia that year, so slower Chinese demand weighed heavily on resources.
Should everyday investors avoid steel and iron‑ore stocks after the 2011 experience?
The article cautions against steel stocks because Australian‑priced steel struggled to compete internationally—examples include BlueScope Steel (down ~77%) and OneSteel (down ~70%). Iron‑ore producers were also battered as the price bubble burst, with Fortescue down ~30% and several smaller iron‑ore names falling sharply, so these sectors were high‑risk in 2011.
How did the Japanese earthquake and tsunami affect uranium stocks in 2011?
The article says the Japan disaster destroyed the previously compelling outlook for uranium. Uranium miners were hit hard—Paladin fell about 68% and ERA fell about 82% in 2011—illustrating sector sensitivity to major geopolitical and safety events.
Which sectors or companies performed well in 2011 despite the overall market decline?
Some defensive, income and specialist names outperformed in 2011. Mineral sands Iluka was up about 75%; QR National (the IPO that many doubted) rose ~27%; specialist mining services like Campbell Brothers (+25%), NRW Holdings (+26%) and Monadelphous (+11%) did well. Boring income/utility stocks including Telstra (+27% with dividends), Envestra (+46%), Telecom NZ (+28%) and Spark Infrastructure (+26%) also performed strongly.
Was the rare‑earths boom a reliable investment strategy in 2011?
No — the article calls rare earths a fad. Lynas Corp, for example, jumped about 274% in 2010 but fell about 44% in 2011, showing high volatility and risk for investors chasing that theme.
What does the article say about income stocks and hybrids as alternatives to term deposits?
The article argues that boring income stocks became valuable alternatives to term deposits as interest rates and term‑deposit returns peaked. Investors who sold income stocks in 2011 missed out—examples include Telstra (+27% including dividends), MAp Group (+22%) and Envestra (+46%). The piece suggests looking into hybrids and income stocks for yield.
Are healthcare stocks a safe defensive choice, and what are the risks?
The article recommends sticking with healthcare as a defensive sector—Ramsay Healthcare rose ~7%, Sigma Pharmaceuticals jumped ~129% and NIB Holdings was up ~32%. However, it warns that single‑product healthcare companies can be riskier: ResMed and Cochlear both fell about 30% in 2011.
Call 1300 880 160
Start a chat
Schedule a call
