Hatchings

MARCH 2025 – ISSUE 22

Author: Platypus Asset Management

The S&P ASX300 (ASX300) declined 3.79%1 in the month. This came after a very positive January when the same index increased 4.46%2 . Of the February decline the predominance of it occurred in the last 10 trading days, as the market declined 4.46%3 . It was a brutal last 10 days of the month.

The Platypus Australian Equities Fund declined 8.10% in February.

The last 10 days of February saw 195 out of the 300 ASX300 components decline4. The largest components of the fall were in descending order National Australia Bank (NAB), Commonwealth Bank of Australia (CBA), BHP Group Ltd (BHP), Westpac Banking Corporation (WBC), Goodman Group (GMG), WiseTech Global (WTC), Fortescue Ltd (FMG), Wesfarmers WES, ANZ Group (ANZ), and Macquarie Group (MQG). These 10 companies contributed 82%5 of the market decline of 361.9pts. The 10 largest percentage movements being experienced by WTC -27.5%, FMG 16.2%, NAB -14.4%, GMG -13.65%, WBC -8.2%, CBA -6%, WES – 5%, BHP 4.75%, ANZ -4.6% and MQG -4.1%.

What happened? Why did the market reverse so aggressively in 10 trading days? And was this caused by poor half-yearly reports or updates from the companies in this 10-day period?

The global macro environment turned negative and global equity indexes fell in this 10-day period. The S&P500 declined 2.63%, the NASDAQ declined 5.16% and the Eurostox50 declined 0.67%. Plainly it was a period of ‘risk off’, particularly for higher PE stocks and those that had performed well in the preceding 6 months. Bond yields fell across the board.

Interestingly of the 27 Platypus portfolio companies that reported in February 2025, six delivered results that were below expectations and 21 delivered results that were inline or exceeded expectations. Of those that exceeded expectations the share price response was muted, pointing to the fact that this was a period of ‘risk off’.
The moves in the Australian market in this period cannot all be attributed to the global macro sell off. Some of the falls were idiosyncratic in nature (GMG) and some as a result of self-harm (WTC). The losses in the bank stocks were because of a weak earnings report from Bendigo and Adelaide Bank (BEN) which fell -19.2% and a surprising update in regard declining credit quality from the NAB.

There was also some evidence of weaker earnings as a lagged response to the tightening of monetary policy during 2022 and 2023. Woolworths Ltd (WOW) highlighted that consumers had become more value conscious. Myer Group (MYR) highlighted that sales were flat, with the first 5 weeks of sales in 2025 being -2.6%. Endeavour Group (EDV) continued to struggle, as sales decreased 1%.

In regard “investment factors’’, the biggest change was a move from growth and momentum to value, where what had risen the most in the prior 6 months was liquidated as investors sought safety elsewhere.

At Platypus our experience over the last 10 days of February was particularly tough when compared to the broader market. The Platypus portfolio at the end of January had earnings growth expectations for the 2025 financial year of +13.6%6. At the end of February, the Platypus portfolio experienced a 180bp decline, which was larger than the ASX300, which saw expectations fall 121bp from 2.1% to 0.89%7 for the full financial year. For context, at the August 2024 reporting season, the Platypus portfolio had experienced a 150bps negative revision against 180bps negative revision for the S&P/ASX300.

At Platypus we believe that share prices follow earnings growth. As these expectations fell at a greater rate than the market, the portfolio suffered both absolutely and relatively.

1. Bloomberg, 2. Bloomberg, 3. Bloomberg, 4. IRESS, 5. IRESS, 6. Platypus AM, 7. Factset

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