Quick-bite: The need-to-knows about ASX performance through February 2023

Investment bank Macquarie’s research desk released a note on Thursday outlining the performance of the ASX through February. 

To kick-off the start of March as the calendar year heads towards Q2, this piece will take a quick look at the key takeaways of Macquarie’s research desk.

In summary:

• The ASX fell -2.4% in February, led by weaker performance from mining stocks. January rally gains were largely erased. 

• The best performing sector was Insurance, up 6.5%. (Market Index’s Kerry Sun covered that development here earlier this week).

• In second place was Utilities, up 3.4% in February. This was largely driven by Origin Energy’s (ASX: ORG) share price (+10.9% over Feb) following developments in its takeover proposal from Brookfield. The latter lowered its bid for ORG, but not as much as markets feared.

• The worst performing sector was Mining, down -7.5%. A stronger US dollar pressured commodity prices. Gold stocks were among the largest decliners (-9.1%). Lithium stocks were also poor performers.

• Growth outperformed value by 2.6%. Macquarie analysts argue this was “supported by the outperformance of technology where higher earnings more than offset headwind from higher real yields.” 

Best 5 performers 

Despite Insurance and Utilities being the best performing sectors over February, none of the top 5 gainers from last month are in either sector. 

Three are from Consumer Cyclical, one in Tech, and one in Finance. 

• G.U.D Holdings (ASX: GUD) — +22.7% Improved auto sales, beneficiary of higher prices

• Flight Centre Travel (ASX: FLT) — +20.0% Raised earnings guidance

• Eagers Automotive (ASX: APE) — +19.9% Record orders

• Link Administration Holdings (ASX: LNK) —  +17.4% Macquarie is restricted from researching LNK 

• AUB Group (ASX: AUB) — +17.3% Raised FY23 profit guidance 

G.U.D Holdings' three month chart

Worst 5 performers 

More in line with the overall read, there were two materials stocks in the worst performers for February. There was also one tech player, one finance player, and of course, Australia’s largest pizza delivery chain. 

• Domino’s Pizza (ASX: DMP) — -31.3% Weak 2023 opening and faltering sales

• Silver Lake Resources (ASX: SLR) — -29.7% Downgraded FY23 sales guidance, higher cost of doing business

• Lake Resources (ASX: LKE) — -24.2% Chinese lithium prices declining 

• Megaport Limited (ASX: MP1) — -23.8% Positive earnings but new service additions missed consensus 

• AMP Limited (ASX: AMP) — -23.0% Missed 2022 sales and earnings guidance

Domino's Pizza three month charts

Macro trends 

• RBA raised the rate 25bps in February. Pundits and institutions alike are largely betting on another 25bps rise at the next meeting. Citigroup sees a terminal rate of 3.85%. 

• US inflation reads came out hotter than expected in late February, which pushed down global stocks everywhere. 

• A “higher rates for longer” narrative has come to re-settle at the forefront of the investor zeitgeist (if you will), in stark contrast to January’s optimism. 

• However, the XJO (ASX 200) continues to outperform as one of the few equity markets with a positive return in the last year.