Investment Matters

Index changes

Today the quarterly ASX announcement of changes to the S&P ASX indexes was released (to be effective on 19-Mar-18).

Companies can move in and out of indexes dependent on their market capitalisation (size), and also liquidity (trading of their register).  Companies on the border of an index can more in and out, dependent on the cyclicality of their earnings, and share price performance relative to other companies.

First Samuel is index agnostic, as our investment approach is to assess individual companies / opportunities, irrespective of which index they belong to. 

All that said, there were two notable changes this quarter.  Firstly was in relation to Myer.  The removal of Myer from the ASX200 Index marks the fall from grace that the troubled retailer has experienced.  We view it as unlikely that it will regain inclusion in Australia's top listed 200 companies for the foreseeable future, if at all.

Secondly, Emeco's strong recovery has resulted in its inclusion in the ASX300 index.  In is the opposite situation to Myer in some regards - in that it marks the successful turnaround of the company.  We look forward to its continued growth, and therefore its inclusion in the ASX200 one day in the future!

In relation to other companies you own in your equity portfolio, other changes were that South32 and QBE Insurance swapped places - South32 into the ASX20, and QBE out.  We have noted the disappointing results QBE released, partly impacted by a record catastrophe season.  We also note the simplification and growth strategy the company is adopting (please refer to Investment Matters 2-Mar-18 for the QBE reporting season synopsis).

Additionally, HT&E was removed from the ASX200 index.  We do not consider that this has the significance as a Myer or Emeco, and view it is likely to be included again when its operating / financial performance results in relative share price outperformance.