Australia’s cohort of unprofitable companies still commands $60 billion of market capitalisation and their appeal is all the more mysterious given the worsening record of returns for investing in the style popularised by Cathie Wood and Masayoshi Son.
There are 50 companies in the ASX 300 that make no money, up from 48 following the latest index rebalance, MST Marquee research shows. Hasan Tevfik’s hypothetical portfolio of ASX losers has been reliably bad for returns except for fleeting flashes of brilliance.A $100 model portfolio that backed strictly loss-making companies since 2000 is worth just 24¢ today after compound average losses of 23 per cent a year dating back to inception. Over those 22 years, the ASX 300 has earned 8 per cent a year, on average.
“Despite the dismal track-record, investors still buy these profitless companies – the combined market cap of the current batch of ouris a still considerable $60 billion. Why?” wrote MST senior research analyst Hasan Tevfik. “Maybe it is the hope that these stocks will generate stunningly strong returns, like they did in 2009 which has been the portfolio’s best year so far at 37 per cent,” the strategist said. The portfolio stormed back into favour during the pandemic, when it earned 60 per cent between March 2020 and October 2021, but those gains quickly evaporated.
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Source: FinancialReview - 🏆 2. / 90 Read more »