Investment Matters

Looking back on 6000

In recent days the Australian market (All Ordinaries Index) has settled in above the 6000 mark.  (It touched 6000 briefly intraday on 27-Oct, then late last week moved above, which continued into this week.)

The last time the market was at this level was back in May-08.

This week’s IM looks at the ASX All Ordinaries Index (XAO) – now versus then.


Source: Iress, First Samuel

Not back to where you started

Quoting a return to the 6000 mark, and the graph above, is actually quite deceptive – it looks like investors have just returned to where they were ~10 years ago.  Actually, meaningful returns have been made over this time (and First Samuel clients have achieved even more) – through the receipt of dividends.

Using the All Ordinaries Index in the context of performance is therefore wrong.  It is the All Ordinaries Accumulation Index (which includes dividends) that should be used instead.  (And this is the performance comparison that we use for our client's equity portfolios.)


Source: Iress, First Samuel

Top 10

It is interesting, however, to consider changes in the composition of the Index since we were last around the 6000 mark.  There has been quite a remarkable change in the top 10 companies in the Index, as shown in the table below.

Source: Iress, First Samuel

The big-4 banks comprised 14.1% of the market in May-08.  This compares to 22.6% now.

This table is also reflective of changes in the mining industry – from heady boom times to now coming out of a post-GFC downturn. (Rio Tinto is now #11, at 1.7%.)

Who’s missing?

Perhaps surprisingly – a very large number.  Of the 497 companies in the index in May-08, only 211 remain in the index now. 

The GFC was a large contributor to this, but it is not the only reason.  Other reasons include mergers and takeovers, companies going bust not associated with the GFC, and companies reducing in size so that they are ineligible for the Index.

A few names of note:

* Babcock & Brown – perhaps the most spectacular blowup of the GFC, along with the smaller financial engineering firm Allco

* Timbercorp and Great Southern Plantations – were prominent GFC agribusiness collapses

* ABC Learning Centres – staggering gearing and questionable accounting culminated in this GFC collapse

* A number of over-extended property REITs including Centro and Rubicon

* Westfield – restructured (split) and then offshored the domicile of its non-Australian assets

* Energy Developments – taken over by Duet (which in turn was taken over, led by Hong Kong-based CKI).  Other companies in the Index which First Samuel clients owned before they were taken over included Patties Foods, Oakton, Pacific Brands, Toll Holdings, Ausenco, Austereo, Aevum, Tower and AXA

* Mermaid Marine and Swick Mining Services (oil and gas, and resource drilling respectively) are examples of companies that are now smaller, and thus out of the Index in a post GFC world

* Healthscope – taken over by private equity in 2010 (as ASX code HSP), relisted as HSO in 2014.

Big Moves Up

The big movers up the Index have been:

Source: Iress, First Samuel

Valuation – P/E

Another interesting comparison of now versus then is the valuation of the market, as measured by its P/E.  In May-08, the market’s P/E was around 12.5x (source:  This compares to 16.3x now.  The long term average is around 14.7x.


Source:, First Samuel

Investment reflections

Over time it is easy to lose track of just how much things change.  The ‘market’, specifically in this case the All Ordinaries Index, has meaningfully changed since it was last at the 6000 mark – around 10 years ago.  It is also now more expensive than it was then.

We obviously don’t have a crystal ball to predict the next 10 years.  But certainly sticking to our investing principles (and steering clear of collapses) is the best way forward – no matter what the market does.