Whilst heading back from the gym this morning I heard on the radio that the local market was eyeing off a 10 year high ( a good thing) due to a surge in demand for local miners (perhaps). Naturally I decided to have a look at the comparative performance of the big five local miners – Australia only has big five and that’s being charitable.If I was being realistic I would say we have two giants, some modestly sized followers and a lot of stocks that shouldn’t be listed at all. But back to the point about seemingly runaway demand for our miners. The chart below looks at the one year comparative performance of our biggest five.
As you can see RIO and BHP are in demand – the others not so much. This is a reflection of the extreme dichotomy in size between the two dominant players and the rest. For example RIO has a market capitalisation of about $145B whereas AGG has a cap of about $4.9B – this is a staggering difference and if we throw in a bottom of the barrel stock such as TNR you get a market cap of $10M. This is part of the problem with the local market and its lack of movement over the past few years. It is easy for investors to get their fill of the likes of BHP and RIO up to a point but then the models that they use to suggest entry become what they would could fully valued. Further down the food chain there is not really a lot of depth for investors of any size. For example AGG’s weekly average volume sits at about 35,000 shares and on 18% of trading days last year it had no volume. This sort of thing would hardly inspire a large institutional or even mid sized private investor to get involved with the stock.