According to SG Hiscock portfolio manager Hamish Tadgell, about 63 per cent of ASX 300 companies saw price moves of more than 5 per cent on results day, while a third posted moves beyond 10 per cent.
Small caps fared better than large peers, helped by stronger growth prospects and rate-cut expectations.
“Overall results have been a mixed bag,” Tadgell said. “Underlying growth has slowed and the impact of greater regulation, tariffs and inflation has led to higher costs of doing business for many companies, creating a challenging operating environment.
“Most companies are having to work harder to manage margins, and the ability to pull on price is becoming increasingly difficult as the cost-of-living pressures have become more pronounced.”
Large-cap names bore the brunt of investor punishment, with outsized moves in James Hardie, AGL, CSL, Sonic Healthcare, Woolworths and Amcor.
CSL’s “low-quality result beat” and structural overhaul raised fresh questions about the biotech’s recovery, Tadgell noted, while US-exposed building material and packaging stocks flagged weakening demand.
Retailers, however, offered bright spots, with Baby Bunting, REA Group, JB Hi-Fi and Coles all surprising positive, while real estate investment trusts such as Stockland and Mirvac pointed to tentative improvements in property markets following the Reserve Bank’s May rate cut.
Ultimately, Tadgell said: “In general, small caps have outperformed large caps given better growth prospects and are benefiting from expectations for further rate cuts.”
This, he noted, suggests the market is taking a more “black and white view on results day”.
“The weight of money being driven by passive, quant and structured products seems to be creating a more binary view on whether results are good or bad, amplifying the moves and often ignoring the nuance,” Tadgell said.
“While this can be frustrating, rarely are the outsized moves as good or bad as share prices are implying, creating long-term opportunities for those prepared to focus on the fundamentals.”
Global X strategist Marc Jocum said the season highlighted the challenge for local companies to match global peers.
“With the August reporting season now behind us, only 20 per cent to 30 per cent of Australian companies managed to exceed earnings expectations, a stark contrast to the 80 per cent-plus beat rate observed in the US,” Jocum said.
“This disparity underscores the challenges Australian companies face in meeting investor expectations amid a moderating earnings outlook.”
Jocum argued the season reinforced the case for diversification.
“The recent performance of stocks like James Hardie and CSL serves as a cautionary tale for investors who concentrate their portfolios in individual names. Their sharp declines highlight the risks of stock picking, especially when a single company’s performance can significantly impact a portfolio’s value,” Jocum said.
“With only around 7 per cent of Australian companies outperforming the broader market over the past 20 years, the odds of consistently identifying winners are slim.”
Despite the bruising results, the market still hit record highs in August, marking one of the strongest reporting seasons in recent years for overall performance.
This, Jocum underscored, highlights that the strength of the market often lies in the sum of its parts, showing why broad diversification can be a “smarter approach” than trying to pick individual winners and losers.
