ANALYSIS OF THE 2025 BENCHMARK-STRUCTURE AND PERFORMANCE

 ANALYSIS OF THE 2025 BENCHMARK-STRUCTURE AND PERFORMANCE

28/6/24 to 27/6/25

As previously described, the benchmark for 2025 comprised 401 stocks equally weighted. The table below shows the benchmark mix being 242 profitable Australian shares, 120 quality growth international shares, and 39 speculative shares. The general approach here is to replicate what the existing portfolio is or what it could potentially be, so it includes the likely investing universe. The main call is the asset allocation between the Australian and International exposure, which was 70% Australian and 30% International as decided at the start of the year. The speculative element was 10%, which will be reduced next year and incorporated into the broader Australian mix.

The dividend of the benchmark was 2.8%, being the weighted benchmarks for each component.

The overall benchmark performance was 11.5%, which is about what I would have expected. Being modestly above the long-term averages and reflective of a favourable market environment.

The performance of each component was a surprise, with the international shares being a surprisingly large drag, delivering 0.3%, while the speculative shares did well. A good return for the speculative component in a positive market is to be expected, but the size of the return was still very good, and the Australian return of 9.5% was reasonable as well. These are all average, not median returns, to account for the recurrent skew in equity returns.

The median returns show how difficult the market was in 2025. It is worth considering the average and median return for speculative investments; the difference between winners and losers is significant. The percentage of losers, defined as SP being + or negative (before dividends), was over 50% for International. The median International return was negative. That surprised me, and I checked the data; many high-quality shares gave up ground in 2025.

 

		Ave	Med	losers		total			% losers
Aust shares		9.5%	3.4%	105		242					43%		40%
Spec		29.6%	11.5%	17		39					44%		80%
Intl		0.3%	-2.2%	63		120					53%		25%
						401

Standard deviations were 40%, 80% and 25% respectively. All large numbers, although the relativities make sense, with speculative producing a very wide range, as should be expected.

BENMARK INDIVIDUAL SHARES PERFORMANCE

The main aim here is to identify any recurring themes or styles that influenced the stock results. There will always be winners and losers, random events and information that result in winners and losers. There is little to be gained, for future strategy, in overanalysing these; they are historical stock-specific events. What is interesting is any recurring lessons that we can take forward.

Given the benchmark return of 11.5%, I have looked at those stock returns below -10% as the poor performers and above +30% as the good performers (a 20% spread). Of course, one year's returns are to a large extent a lottery, so over-analysis can result in the wrong conclusions.

 

WINNERS

Defining winners as those shares offering at least 20% above the benchmark return. There were 84 such stocks and 134 in the losers, 21% and 36% respectively of the total shares in the universe.  Indicating there was a significant difference in stock picking, that is, a high skew in returns.

The bold represents some of the portfolio holdings, some held for part of the year.

Of particular note, only 9 international shares were in the large winners and 50 in the losers. The story here is that stocks carrying large premiums from previous gains but encountering poor news flows, then brought the shares under pressure in 2025. Most of the time, this entails earnings downgrades, but not all the time. Sometimes other worries drive the underperformance.

The 9 international winners were AVGO, BLK, ADYEN, HEI, PAYC, MELI, VEEV, APH and META.

SGI	260%
CAT	223%
EOL	195%
SOM	160%
ASB	144%
MTO	138%
SM1	134%
SIG	131%
TPW	125%
ALC	119%
TNE	118%
EVN	117%
DSE	112%
BVS	107%
SRG	104%
CMM	103%
TRS	97%
PME	96%
360	94%
GOR	91%
SPZ	87%
HUB	87%
QAN	80%
JBH	77%
REG	75%
CHC	72%
MAF	70%
AVGO:US	70%
AHC	69%
CDA	67%
APE	65%
SNL	64%
BXB	61%
IFL	60%
PAYC:US	59%
Nintendo	59%
VGL	58%
OCL	55%
CGS	54%
MELI:US	54%
UNI	53%
SSM	52%
VEEV:US	52%
CWP	51%
CPU	50%
LYC	50%
SGM	48%
SUN	48%
NWL	48%
SVR	47%
CBA	46%
APH:US	44%
AEF	43%
DHG	43%
BLX	43%
SGH	42%
HLI	42%
HEI:US	42%
PNI	42%
ADT	42%
DSK	41%
EVT	41%
NST	41%
DBI	41%
XRF	40%
META:US	40%
DRO	38%
NAN	38%
RIC	38%
MND	37%
DOW	36%
ADYEN:NL	36%
VCX	35%
TUA	34%
FCL	34%
XRO	34%
VNT	34%
RMD	34%
BOQ	34%
QBE	34%
MPL	34%
TLS	33%
BLK:US	32%
TLX	31%

 

 

LOSERS

Defining losers as those stocks returning at least 20% below the benchmark return.

A:US	-9%
JBHT:US	-9%
RWC	-9%
WKL:NL	-9%
HSY:US	-9%
MPWR:US	-9%
AGL	-10%
GIVN:CH	-10%
AMD:US	-10%
DHI:US	-10%
DTL	-10%
KGN	-11%
COH	-11%
ATD:CA	-11%
CARL/A:DK	-11%
SXL	-11%
ZTS:US	-12%
MMS	-12%
IEX:US	-12%
CPRT:US	-12%
CNI:US	-12%
NHF	-12%
BHP	-12%
HPG	-12%
GNC	-12%
LLY:US	-13%
WOR	-13%
PFE:US	-13%
SIQ	-13%
NIBEB:CH	-13%
SOON:CH	-14%
FPR	-14%
Nestle	-14%
AIS	-14%
ARB	-14%
LOR:DE	-15%
MTD:US	-15%
WDS	-16%
NGI	-16%
SMP	-17%
SNPS:US	-17%
DDR	-17%
C79	-17%
EW:US	-17%
JHX	-18%
AZJ	-18%
STG	-19%
SLX	-19%
BBY:US	-19%
QCOM:US	-19%
LYL	-19%
NXT	-20%
S32	-20%
GQG	-20%
DHR:US	-20%
LTR	-20%
EDV	-21%
CSL	-21%
CDW:US	-21%
AMAT:US	-21%
PFP	-22%
ASML:US	-22%
ALD	-23%
EGL	-23%
PEP:US	-23%
ELD	-23%
PMV	-23%
NHC	-24%
AOV	-24%
RHC	-24%
FND:US	-25%
A1N	-25%
LULU:US	-25%
TMO:US	-25%
KLS	-26%
KMD	-26%
DGE:GB	-27%
IGO	-27%
Coloplast	-27%
IPH	-27%
ABY	-28%
FMG	-28%
WHC	-28%
AX1	-28%
RDY	-29%
TRJ	-29%
ADBE:US	-30%
RDX	-30%
HMC	-30%
SPX:GB	-30%
MAQ	-30%
IFM	-30%
CUV	-33%
KNIN:CH	-33%
VEA	-33%
WST:US	-33%
TGT:US	-33%
NKE:US	-34%
BAH:US	-34%
RHI:US	-35%
EVO:SE	-35%
DGL	-35%
IPG	-36%
TWE	-37%
SKC	-37%
HLO	-38%
UNH:US	-38%
ENTG:US	-38%
PWH	-38%
TER:US	-38%
BF/A:US	-38%
LVMH	-39%
FLT	-39%
ILU	-41%
SPK	-42%
JIN	-44%
REH	-44%
LIC	-44%
JLG	-45%
WEB	-45%
SMR	-46%
M7T	-46%
DMP	-47%
HLS	-47%
NUF	-47%
KER:FR	-49%
LBL	-49%
PNV	-51%
FDV	-52%
DUG	-53%
NVO:US	-53%
AD8	-53%
PTM	-54%
PLS	-55%
NTD	-57%
MIN	-61%
OFX	-66%
CTT	-69%
SGR	-70%
IEL	-75%
PLY	-79%
MDR	-84%
CRN	-89%

 

 

SUMMARY AND CONCLUSIONS

The aim here is not to discuss 400 individual stories but to attempt to identify any general trends in winners and losers over the year. Remembering that a year is a short period for assessing any correlations with intrinsic values.

To state a meaningless observation is that the market rewards those with good news and not those with poor news. What has changed is the market's willingness to pursue good news and sell off bad news to a larger degrees. There appears little value based buying coming in to add support and or temper rallies, which indicates some change in the mix of the market and could be expected to continue.

The lesson to me is that there is little incentive to rush into poor news, and the chances of a V-shaped recovery are small. Over and undervaluation only becomes an issue when newsflow turns from negative to positive and then the valuation difference is highlighted, and then the SP moves can be large and rapid. Valuation as a factor looks to play a lesser role, especially over the short to medium term. Patience and timing become more important, although not easy.

The volatility in the US compared to Australia for individual stocks highlights an opportunity on a risk-adjusted measure. There are many Australian stocks that look like beneficiaries of the flow of funds, compared to US stocks, which appear more open to sentiment. Indicating that inefficiencies exist in the US market, ie the market overreacts and follows trends to a greater degree. The Australian market generally looks like many poor returning businesses on high premiums and those few great businesses on extreme valuations.

I'm trying not to get carried away with this analysis, but trend following has a weakness in that, in specific instances, the valleys and peaks get accentuated, and for patient investors with a longer timeframe, opportunities will inevitably present themselves.

I will cover more of this theme in the portfolio review and analysis for 2025.