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Times have changed with a change in the investor sentiments and higher market volatility. Equity markets are surrounded by a never-before amount of uncertainty and reactions of investorsare becoming increasingly unpredictable. We are witnessing anincreased number of stocks outperforming the marketin current times where mostof the stocks were undervalued amidst the worldwide sell-off from the investors.
Moreover, the two consecutive day increase in the benchmark index S&P/ASX 200 of ~ 5.54% and 2.3% on 25 and 26 March 2020 respectively reflects that the investor confidence is getting on track. A major number of indiceson ASX too settled in the green zone during the two days’ trade. However, on 27 March 2020, the benchmark index, was trading at 4973.4 points, down by 2.74% (at AEDT 1:35 PM).
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The spiking stock prices have exceeded the index performance or the overall stock market. This scenario of individual stocks producing higher returns as compared to the index or the equity market is known as outperformance by a stock.
When do Stocks Outperform?
Generally, stocks outperform the market in times when aCompany reports faster growth in its sales or earning exceeding the projections, or the whole sector is under pressure. Moreover, this type of scenario is also very well witnessed when the stocks are undervalued and are rebounding because of the same.
In current times when stocks are undervalued, it is a new normal to see stocks outperforming the market with significant gains.It is projected that the covid-19 still has a lot to unravel on the global economic level, yetstocks seem to lure investor’s attentionamidst such times full of concerns.
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The outperformance of a stock has nothing to do with the settlement of the stock in the red zone or the green zone anddoes not necessarily mean that the stock performance has been positive. Moreover, a stock would outperform the market if it has shown less decline as compared to the market given a certain period of time.
For example, the stocks of a certain Company declined by say 20% and the market plunged by around 29% during the same time. In this situation, the stock shall be known to outperform the market even though the stock has not shown any gains during the given period.
Outperformance Amidst Coronavirus Uncertainties
The spread of the covid-19 has wiped off trillions of dollars for the investors globally, and stocks had plunged to fresh lows. Many stocksfell to the category of undervalued during recent times of the contagion coronavirus pandemic that are still persistent.
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The uncertainties and the spread of the coronavirus disease in the market do not look like fading away in the near term, but it looks like the ASX has started to pick up some investor sentiments. The benchmark index on ASX started to gaintraction from 24 March 2020 where it soared up by ~ 4.2% from its previous close & settled at 4,735.7. By 26 March 2020, the S&P/ASX 200 had surpassed the 5000 points mark and settled at 5,113.3 during the day.
Let us look at some individual stocks that have outperformed the market.
LOV Surged up by~29% on 26 March
The stock price of Lovisa Holdings Ltd (ASX:LOV)spiked to nearly 29%on 26 March 2020, that too when the Company announced the temporary closure of its stores in Australia, New Zealand and South Africain compliance with the containment initiatives by the government. The stores of LOV in France, Spain, Malaysia, the USand the UK had been closed earlier in the last week, while stores in onlySingapore stand operational.
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Moreover, an interim dividend of 15 cents per share announced earlier has been deferred by LOV and has taken measures to contain the cost structure of the business, like the stand-down of store teams in all markets with closed stores andreduction of headcount in its support teams across the world.
The investors have defied all the uncertaintyfor the Company surrounding this announcement from LOV, where the stock settled at a price of $4.950and has returned 56.73% returns to its shareholders in the last five days till 25 March 2020.
On 27 March 2020, LOV was trading at $5.010, up by 1.212% (at AEDT 1:40 PM).
NEA Surpassed15% Intraday Growth on 26 March
The stock of Nearmap Ltd (ASX:NEA)a next-gen digital content leader and an ASX 200 technologycompanyzoomed up by 15.698% on 26 March 2020 after an announcement regarding the promotion of flexible working environment and remote working facilities.
Moreover, the Company emphasised on robust cash management with $49.6 million cash on hand as at 31 December 2019. The Company is well prepared to steer through the current uncertain times.
Keeping the momentum alive, the stock was trading at $1.015, rising up by 2.01% (1:43 PM) on 27 March 2020.
RHC Settled withOver 15% on 26 March
Global healthcare player, Ramsay Health Care Limited’s (ASX:RHC)stock witnessed a surge of over 15%on 26 March 2020,following an announcement that RHC’s facilities globally were being utilised by governmentsand the Company is well-positioned to extend its support to the Australian public health system.
RHC has cancelled Category 3 and deferrednon-urgent Category 2 elective surgery across all of its private hospitals. Subsequently, RHC stock settled at a price of $58.270 with a market capitalisation of $ 10.21 billion (as on 26 March 2020).
However, on 27 March 2020, RHC was trading at $56.290, declining by 3.398% (at AEDT 1:45 PM).
Tech Stocks SharedMarket Positivityon 26 March
In the fintech sector, the stock of Afterpay Limited (ASX:APT) zoomed over 29% intraday on 26 March 2020. The stock settled at a price of $19.410with a market capitalisation of $3.99 billion (as on 26 March 2020).
However, on 27 March 2020, APT was trading at $19.310, down by 0.515% (at AEDT 1:47 PM). Though in the last five days period, APT stock has delivered more than 56% return to its shareholders.
Likewise, another fintech company, EML Payments’ (ASX:EML) stock skyrocketed by approximately 33% intraday on 26 March 2020. The stock settled at a price of $1.920with a market capitalisation of $470.23 million.
However, on 27 March 2020, EML was trading at $1.780, falling down by 7.292% (at AEDT 1:47 PM).
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The increase in the stock prices of the two fintech companies was seen as an effect of the positivity surrounding theinformation technology stocks. Moreover, the S&P/ASX 200 Information Technology (Sector) increased by 7.44% intraday on 26 March 2020.
In addition to this, theS&P/ASX All Technology Indexsurged by 7.72% registering an upward movement of 100.3 points. Though, on 27 March 2020, the index was trading at 1,380.5 points, down by 1.36 % (at AEDT 1:50 pm).
These stocks storminghigher in times of consistent market volatilitydepict a positivity sprouting in the market. Moreover, a number of other stocks outperformed the market in recent days making the deal even sweeter.
