A Dunedin cancer diagnostics company’s 916.67% share rise is the biggest annual share increase of any company listed on the NZX in the past ten years – but there’s a catch.
The New Zealand stock exchange has provided data showing the most significant on-year movements over the past decade.
The data assumes net dividends are reinvested and adjusts for capital events.
The share price of Pacific Edge Ltd — a Dunedin-based cancer diagnostic company with laboratories in New Zealand and the United States — increased 916.67 percent in 2020. It started the year at 12c and ended it at $1.22.
It has since fallen away again, to 10c.
“It’s important to look at everything in context,” Devon Funds head of retail Greg Smith said.
“While it had a big run in that particular year, look at the bigger picture and it’s lost 99 percent of its value from the peak. It was a big-sized company at its peak, and now it’s like a penny stock.”
He said growth stocks were popular during the pandemic when interest rates were low.
“They made progress with clinical trials – that often happens with biotech companies, they make progress and there’s reaction in the share price. There were probably macro and micro drivers of that one.”
Serko was second, with a 655.17 gain in 2017.
It rose from less than 30c at the start of the year to about $2.20 at the end.
The price continued to rise to about $7.85 towards the end of 2021, before falling away again.
“The business was going pretty well, that was reflected in the share price,” Smith said.
“Scroll forward and they got hit during Covid and have started to make a bit of a comeback now. Digitisation trends, and they were a winning business as it were.”
On the flip side, Iperion had the biggest annual fall, down 95 percent in 2018. Me Today was second, down 88.89 percent in 2023.
“They’re pretty micro-cap businesses as it is,” Smith said.
“It’s probably virtually impossible to characterise those declines with anything that happened market-wise. Me Today is a bit symptomatic of a boom during Covid and then a massive reality check . . . But Fisher & Paykel Healthcare at the other end of the spectrum boomed during Covid and it’s back near those record highs.”
Mark Lister, investment director at Craigs Investment Partners, said smaller companies tended to be the ones that did very well or very badly.
They were higher risk and higher return and were pushed around by the economy.
“Pacific Edge signs one contract and away it goes or loses a big contract and back down again. That’s the nature of those smaller stocks.
“What you’ll find is much less of the big safe stable performers in those lists. The Fisher & Paykel Healthcares or Infratils or Meridian Energy – they’re not going to exhibit that same volatility, the same ups and downs.
“You could probably find a time when A2 went through the roof in a short space of time but then went the other way in an equally short space of time. Over the whole 10 years or over a 20-year period, the companies that stood the test of time and turned out to be the better long-term performers probably won’t be your Pacific Edges,
A2s, Me Todays. It’ll be your Infratils, Ebos, Mainfreight – your big established companies that are delivering that consistent long-term growth.”
He said some investors would be chasing short-term movements.
“It all depends what you’re looking for. If you’re a trader you’re probably trying to pick the next Pacific Edge at the right time and ride the wave and avoid the Me Today – but for the rest of us we’re thinking more of our share portfolio as a 10- or 20-year strategy. We may be looking for more consistent returns over a longer period.”
The average return of listed NZX stocks over the past 10 years was 68 percent, but the NZX20 had a weighted average return over the same period of 262 percent with a median return of 152 percent.
The property market returned 99 percent.
Lister said the NZX All Index, which covered the whole market, had recorded about 9.5 percent a year over the decade, or about 160 percent over the period.
“That’s probably something closer to the long-term average. If you go back 30 years for New Zealand, the norm is somewhere between 8.5 percent and 10 percent.
For New Zealand property, since 1990 the average has been about 6.5 percent. That’s normal, shares should give you a better return because they’re higher risk.”
He said the next 10 years should deliver solid returns.
“I think the New Zealand market is quite well positioned … things look decent over that 10-year period.
“Over the last three or four years, they look pretty mediocre. New Zealand shares have been pretty terrible and have done very little. New Zealand share prices are still about 15 percent below their all-time high which came in 2021. We have underperformed over these last three or four years.
“My guess from here is the New Zealand market will go fairly well over the next few years, we’ll drag ourselves out of recession next year, interest rates will continue to come down and you’ll have a much more prosperous environment for investors.
“We’re very interest rate-sensitive. We’ve had a tough times as interest rates have been rising but as rates steadily decline we’ll be in a much better position. I’m also comforted that we’re trading some way below those record highs. We’re not priced to perfection like some markets around the world.”
He said most other markets had hit new all-time highs this year.
“If I had to pick a number out of the air and guess, for the next 10 years I’d say 8 to 9 percent per annum [return from shares] over the 10 years including dividends. I would guess housing might be a percent or two below that. Shares will deliver a better return than housing over that period although I think they’ll both be up.”
Smith said people would be able to leverage a property investment to increase their returns in a way they could not from investing in shares.
“If you have an investment property it might only go up 10 percent in a year but with the use of leverage, your absolute return is higher. Investors don’t typically leverage into stocks.”
