Last week I revealed how the 'ten most tipped stocks' from our reader survey have recorded a +50% average total gain for the year.
There was also a second group of stocks, which were in positions 11-20 in terms of votes cast, the 'Ten more most tipped'.
This second tier was a diverse group, ranging from gold juniors to AMP. The performance here has been no less incredible though; including an average yield of 2.5%, the average total gain here is currently 42.8%...
It was impressive enough to see the ten most tipped stocks comprehensively beat the market, but it's more than doubly impressive to see Livewire readers smash it out of the park twice!
As we open up our new survey, here is our final wrap on this group of stocks for 2019.
- Jumbo Interactive: 178.8%
- Nanosonics: 141.5%
The performance dispersion was far higher with this group, as is more typical with small caps, and mostly underwritten by big results from Jumbo and Nanosonics.
Jumbo (ASX:JIN) has been flying higher for a few years. It started 2016 at around $1.00, 2017 at $1.55, 2018 at $3.67, and then 2019 at $7.20. It carried this incredible momentum through this year, reaching $27.00 in mid-October.
Since then it has stumbled to trade around $19.60. This still puts it up by 178.8%, however, this is a long way behind the 230.8% gain it sat on at the last update. This is the main reason the group has slipped from +47.5% overall as of end Sept Q, down to +42.8% today. Back then we flagged that Roger Montgomery had sold his fund out of the stock on valuation grounds as reported in Why we’re not trumpeting Jumbo Interactive right now.
More recently we ran the stock past Arden Jennings from Ausbil Investment Management and Robert Miller at NAOS Asset Management in a late-September episode of Buy Hold Sell. Arden put it on ‘Hold’ and Rob gave it a 'Sell', saying,
“From an ESG perspective we don't own this business, but I think it's an excellent business, but it's priced at an excellent valuation as well. It's got great ROE and financial metrics. Big opportunity overseas. I'm just questioning their execution risk and what's already priced in with the Tabcorp stuff. So, for us it's a sell”.
The other multi-bagger here, Nanosonics (ASX:NAN), has gained a little ground over the quarter, up from +120% to +142% for the year.
Over the last decade, this stock has grown from a $0.20 microcap to a $6.70 midcap. Today it has a $2 billion market cap and sits comfortably within the ASX200, where it is the 6th top performer over the last 12-months, sitting behind Afterpay in 5th spot, and just ahead of Magellan in 7th spot.
Despite this track record, the only mention of the stock this quarter came from Anton Tagliaferro when he cited it in a piece on passive investing as being among a group of healthcare growth stocks that he believes have stretched valuations:
"We are also seeing several biotech or early-stage pharmaceutical companies like Avita Medical, Pro Medicus and Nanosonics soaring to billions of dollars of market value, putting these stocks on very frothy and, often, very unrealistic, valuations. Many investors continue to pay massive multiples for a slice of the action which, as highlighted above, is further supported by the wave of passive and quant-based funds buying shares in these companies simply because they are starting to represent a larger part of the index".
The 50-100% gainers
- Nearmap: 91.2%
- Baby Bunting: 51.6%
Nearmap (ASX:NEA) was trading around $0.63 at the start of 2018 and was around $1.48 at the start of 2019. By mid-2019 it cracked $4.00 (it which point it was on a ~540% gain over 18 months).
It has since simmered down to sit at $2.83, where it has held steady for the last few months, and which still gives it an impressive 91.2% YTD gain.
In ‘Emergence of a New Generation’, Andrew Mitchell wrote about a dozen ASX midcaps that are successfully growing into offshore markets, with Nearmap being a prime example among them.
These Australian companies have seized the opportunity to massively expand their potential by moving from Australia, with a market of just 25 million potential consumers, to a global market of nearly 8 billion people. The success of Offshore Growers has delivered significant value to shareholders. If you had invested in an equally weighted portfolio of the 12 Offshore Growers in January 2016, you would be up over 340%, compared to around 50% for the S&P/ASX Small Ordinaries Accumulation Index (to 27 September 2019).
Baby Bunting (ASX:BBN), is up an impressive 51.6%. We also ran this one past Arden Jennings and Rob Miller in the same Buy Hold Sell episode that I mentioned earlier. Rob was a 'Hold', while Arden was a 'Buy', saying:
We do own it in the fund and we were buying it aggressively prior to the results. I think got hit by a lot of transition money in the market. But look, these guys really delivered on the result. Prior to the result it was trading on 16 times PE, offering 30% EPS growth, which is quite attractive. But I suppose the market didn't believe that they were going to hit that guidance, but they did, and some more. So markets re-rated that. Coming up, we've got the AGM, which should provide a positive trading update. They're revisiting their store format across Australia, and we think there could be some upside from that at the first half results. So strong online growth. They're really watching the website, strong same store sales growth, expanded footprint from the store rollout, management are executing on what they said they would do. Stock is up, sort of 60% since June, but we think that there could be more to come in the next 12 months
With the ASX300 up 23% for the year, the rest of the list either undershot the market or went backwards altogether.
The weak performance from three gold stocks here, Northern Star (ASX:NST), Evolution (ASX:EVN) and Aurelia (ASX:AMI), have been the biggest surprise, given the gold price has had its strongest year since the GFC, jumping 18.5% YTD in $A terms.
It reinforces the fact that in resource investing, getting the commodity view is just the start, and the stock selection is of greater importance. If you think gold is going up, and you want to leverage it, you may be better off betting on gold futures, or buying gold ETFs on margin, than punting on gold juniors which introduces company risks.
Mineral Resources (ASX:MIN) deserves a special mention here though as ‘Most improved’ over the quarter. It has moved sharply higher in recent months from ~$13 to ~$17, taking it from a YTD loss of 9% to a gain of 16.5%.
The stock was also shortlisted as a small-cap income stock preferred by Matt Williams at Airlie funds Management in a special piece I ran a few months back called 11 small-cap income stocks the fundies like. Quoting the yield on the stock as a respectable fully franked 4.9%, Matt wrote:
"This share price can be a wild ride - lately driven by lithium and iron prices. But within those volatile businesses is the very steady mining service business (crushing) that should allow a solid ongoing dividend payment. This is one of the few good quality stocks in the market trading closer to its 52 week low, rather than its 52 week high."
Be the first to get the 'Most tipped in 2020' list
Looking across all twenty of these most tipped stocks from our survey, the average gain across them all is currently 46.5%, with just 4 stocks underwater. This is an astonishing result and strike rate. We have to wait another 12 months to find out if lightning will strike again.
But if you want to be the first to read about which stocks feature in 'The most tipped for 2020', you just need to participate in our new survey, which you can do by clicking here. We will send you the report in early January.
All the best to you and yours this holiday season, and best wishes for your investing in the year to come.
Aurelia Metals has had a pretty bad rap over the past six months or so, possibly due to the shock departure of there CEO, Jim Simpson. A few other issues surrounding water supply look to have been resolved. Peak Gold mine and there newer mine at Nymagee producing lead, gold, zinc and silver all seem to be doing well. I'd expect that this could be a company to keep a close eye on, place it in your ambush list if you have one! With current low share price and a new CEO (Dan Clifford) on board there could be plenty of upside potential over the next twelve months.
Nearmap is a donut How anybody can recommend a company with accounting like that is beyond the pale
Some great insights, thanks for the article Alex. I look forward to seeing what is in store for 2020. I can't help but feel that Baby Bunting (BBN) is going to continue to grow and dominate the marketplace. Nanosonics (NAN) seems so expensive and it is always hard to know when buying in to stretched valuations is a wise idea. However, with the release of new products, there is positive growth opportunities there. I am keen to see if Webjet (WEB) comes up on the list for next year. EML Payments (EML) is another company which looks to show positive signs of growth. Will Crown Resorts (CWN) show positive growth in the lead up to opening a Sydney establishment? Growth of microcaps and sustainability/environmental companies will be one to watch closely, such as Phoslock Environmental Technologies (PET) and Envirosuite (EVS) to name a few. The growth of medical companies and how technology is used by almost every organisation will be of interest. Will banks drop below 5yr lows ($22/23 for most of them)? I look forward to reading what the feedback is from your readership. Such a great way of understanding the general opinion of the crowd. Also, people should check out Strawman if they want to do this in a different format. www.strawman.com (I am not associated with the company)