When coronavirus case numbers first started popping up outside China early last year, they brought in their wake a wrecking ball that smashed global stock markets.
The losses rivalled those seen when the dot-com bubble burst in 2001, during the Black Monday crash in 1987 and when France fell to German forces in 1940.
Australian shareholders were not immune. In fact, after surging to an all-time high on February 20, the ASX fell off a cliff, dropping by almost 40 per cent in a month and losing a record-breaking almost 10 per cent in just one day on March 16.
And while shares have slowly rallied since that time, the pain felt by many has been significant. The ASX’s Australian Investor Study 2020 found that 28 per cent of Australians have changed their retirement plans due to the impact of COVID-19.
Bear markets are, of course, an opportunity for savvy investors.
Taylor Collison stockbroker George Capozzi manages portfolios for high net worth individuals in Adelaide and those with self-managed super funds. He explained that the all-time highs of February actually put his clients in an excellent position going into the crash.
“As the market was reaching record levels in January and February, valuations were stretched on companies so we sold some shares (for clients) and had cash in reserve for when the opportunity came,” Capozzi said.
“We didn’t know there was going to be a pandemic – all we knew was that at some point the market was going to have a wobble, and that’s when we want to deploy some cash. We want to deploy when everyone is running scared and selling – we don’t want to be buying when things are looking rosy.
“I would say that if I look across all my client’s portfolios, they’re generally up now versus pre-pandemic.
“I didn’t have anyone sell at the bottom because I’d trained my clients that we want to be selling shares at the top and deploying cash at the bottom, otherwise there’s no point.
“I would say many people have made more money this year than they have in the last few years.”
Fellow Taylor Collison stockbroker Chris Eddington also made some windfalls on behalf of his clients.
Eddington says that understanding which companies represented good value while the market was low, and managing risk as cash was deployed, was critical.
“We saw some high-quality companies that you could buy historically on cheap multiples due to the panic,” he said.
Eddington says while the share price of some companies have taken big hits, other companies that provide products and services that matched with the people’s new focus of spending like retail, renovations and vehicles have done extremely well.
“It was broad-based, but we (bought stocks in) companies that Taylor Collision had followed for a long time, like Reece (plumbing) and ARB Corporation (vehicle accessories).”
Eddington says that because no one knew when the market would reach its low point, it was important to mitigate risk for clients by spreading the investment over a few months.
“(We wanted) an average price that we were happy with – buying a certain number of shares over a two-to-three month outlook and drip-feeding the investment.
“At the end of the day you’re never going to be able to sell at the absolute highs and buy at the absolute lows, but you want an average that’s leaning towards one of those sides.”
Taylor Collison is the data partner for the InDaily’s annual South Australian Business Index, the list of the Top 100 SA businesses.
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