This AFR article resonated for me:
I'm a little mindful of IP issues, so I wont paste the entire article. But the tl;dr, as summarised by AI, is:
Over the past three years, the ASX 20 — home to Australia’s biggest listed companies — has surged 51%, easily outpacing the broader market. Yet, as Dion Hershan from Yarra Capital points out, that rise came despite a 19% fall in earnings. Fourteen of those 20 companies are expected to earn less this year than in the past, and eight are making 25% below their prior peaks.
It’s a striking disconnect: prices have climbed, profits haven’t. Hershan argues that this isn’t about fundamentals anymore, but flows — the steady tide of superannuation and passive investing that keeps pouring into the index regardless of underlying performance. Investors have rewarded size and familiarity, not growth.
Zoom out and it’s even less flattering. Many so-called blue chips have gone sideways for years. Woolworths peaked at $41 in 2021, now it’s $27. Woodside was $66 in 2008, now $22. Telstra fetched $8.62 in 1999, today it’s $4.92. Even the banks, despite huge dividends, have barely advanced in a decade. Hershan calls them “broken blue chips” — still dominant, but offering little real return once inflation is considered.
Meanwhile, small and mid-cap stocks look more appealing. They’re less tied to the macro cycle, more nimble, and still priced on fundamentals rather than fund flows. Hershan highlights ResMed, Xero, and NextDC as growth names with long runways, and Orica, TPG, and Carsales as solid operators with room to expand.
The takeaway? The ASX 20 may dominate the index, but its giants have largely stopped growing. For genuine returns over the next decade, the real opportunities could lie further down the market cap spectrum.
A nice bit of confirmation bias for me. Some of our largest "blue chip" stocks are very, very ordinary. And their share price performance is in most cases a big disconnect from the fundamentals.
I thought this was interesting.
Very brief summary: small caps are under-loved, due to ETFs, passive-investing and increased scrutiny of super funds returns (turning them into index-huggers, not prepared to own "risky" small caps).
The article mainly focused on how this is preventing small companies from raising capital. But from my point of view, I couldn't help thinking about the opportunities that are bound to be out there
Which I guess brings me to my point. The value of Strawman to me is mainly in finding ideas for under-loved small caps to invest in. I don't have time to research 1700 companies. This community throws up possibilities and gives me a starting point in researching them. And does it very well IMO
https://www.afr.com//markets/equity-markets/small-caps-bulldozed-by-etfs-20250315-p5ljsj?btis
