How Livewire readers' most-tipped ASX shares are tracking in 2022

July 15, 2022 10:27

Livewire Markets

Back in April, we provided an update on our readers' Aussie stock picks - 10 large and 10 smalls. It opened with "Global markets have had a rough time of it in the first quarter of 2022." Well, we're sorry to say that as we round out Q2, things have gotten markedly worse.

The S&P ASX 200 is down 12.38% YTD, while the Small Ords is down 23.20%.

The reality is that if you're not a resources company - or meme stock like Brainchip - then you're in the red.

The good news for investors though is that there is a silver lining. Our readers' small caps picks matched the Small Ords index, with a loss of 23%. While the small-cap picks didn't beat the market, at least they didn't lose out to it either. That's no small feat at such a high-risk end of the market.

This wire is the match report on your ASX small-cap and large-cap reader picks through the first half of FY22.

Note: YTD performance is based on this calendar year through July 14, 2022.

Large Caps

At Livewire, we track our portfolios using Sharesight. If you're interested in tracking the price and performance of all of your investments in one place, try using Sharesight for yourself for free.

Key takeaways:

The basket of stocks returned -11.23%
Woodside Energy (ASX: WDS) wins first place in the rankings for the second quarter. It's now clocked a 48.78% YTD total return.
Pilbara Minerals (ASX: PLS) was the worst performing stock in the first half - returning a 26.25% YTD loss.
CSL (ASX: CSL) was the only other top reader pick that reported a positive first half.
Four out of the five stocks that weren't in the red in Q1 fell into the red this quarter.
Pilbara dropped from fifth place to the bottom.

1. Woodside Energy (ASX: WDS)

Share of tips: 1.4%

Q1 Total returns: 55.90%

Total return YTD: 48.78%

Woodside Energy continues to tear it up courtesy of high energy prices with a total return of 48.78%. It's a case of the market's pain being Woodside's gain.

Dr Philipp Hofflin of Lazard Asset Management has been bullish on oil and gas since 2020, a stance that's rung true for Woodside.

The astonishing thing about Woodside is that you can buy it today at 20% less than it was pre-COVID ... the cash flow is enormous. They have a fortress balance sheet because they did this deal entirely with equity.

For more on Hofflin's thesis on oil and gas, head over to the interview he did last month with Livewire's James Marlay.

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Hofflin: An update on the thesis for ASX energy stocks

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2. CSL (ASX: CSL)

Share of tips: 5%

Q1 total return: -7.27%

YTD total return: 1.55 %

CSL, the beloved Australian biotech, is the only other reader large-cap pick to pop out of the red. It was also able to outperform the ASX200. The views of bullish brokers limited CSL's downfall, where most companies were dragged down amid fears of hiking rates and elevated inflation.

Take note that the market's optimism in CSL is driven by more than just bullish brokers. Over the years, CSL has been given plenty of love from our readers and the industry. The company appeared as a ranking choice to beat inflation and one of Macquarie's recession-proof stocks.

For more on the Macquarie list, you can read this article which my colleague Hans Lee wrote:

Asset Allocation

Macquarie reveals its 16-stock "recession-proof" portfolio

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Additionally, Ben Clark, portfolio manager at TMS Capital, told us that CSL is one of their largest holdings:

I’m not losing any sleep owning those businesses through this cycle – it’s not fun seeing the share prices lower than where they should be, but those companies will be significantly bigger from this point.

3. Westpac (ASX: WBC)

Share of tips: 1%

Q1 total return: 13.54%

YTD total return: -1.49%

Westpac is the only bank on our list from the big four and came in third on the performance table. The bank took a nosedive in June when the RBA hiked interest rates by 50bps and announced the same plans for July, now returning a -1.49% YTD total return. The traditional view is that increasing interest rates would play to a bank's advantage, but the RBA's super hikes have shocked the market and thrown oil onto the fears of a recession.

The fact remains that despite the red label, Westpac still outperformed the broader ASX 200. A large portion of this achievement is attributable to their strong dividend returns returning 4.08% dividends for the first half of 2022.

In a recent article written by Sara Allen, Hugh Dive from Atlas funds management placed Westpac among other banks as one of his top dividend ideas for FY23.

He is positive on the banks and expects them to surprise markets on the upside, including 3 in his recommendations.

4. BHP Group (ASX: BHP)

Share of tips: 2.5%

Q1 Total Returns: 31.86%

Total return YTD: -3.87%

The Big Australian had a great first quarter but stumbled in the second. But one person's poor performance is another person's buying opportunity.

Both Ausbil's Luke Smith and Paradice Investment Management's Tom Richardson gave the stock a "buy" in one of our most recent Buy Hold Sell episodes.

The second half looks well supported from China's economic stimulus and BHP's spewing a lot of cash, and they're going to give it all back to investors.

Catch up on that chat here:

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5. Fortescue Metals Group (ASX: FMG)

Share of tips: 2.2%

Q1 total return: 13.94%

YTD total return: -5.16%

A downward spiral could be a way to describe the performance of iron ore in recent months. China's tenacity to stick to a zero COVID-19 policy made it difficult for steel demand forecasters. For a pure-play iron ore exposure like Fortescue, the price falls were inevitable. After a solid first quarter return of 13.94%, it's now returned a five per cent loss.

Compounding the company's problems are ongoing reports from the FT that China is looking to consolidate its iron ore imports by the end of this year. Additionally, economists say it's quite unlikely that its recovery out of the COVID-induced economic slump won't be anything like its post-GFC comeback.

Those two things, in part, inform Morgan Stanley's underweight call in Fortescue:

“Fortescue is the underweight call because its share price may not warrant all the spending it is making on its Future Industries arm.”

6. Macquarie Group (ASX: MQG)

Share of tips: 4.3%

Q1 total return: -1.04%

YTD total return: -14.58%

The dominant thematic of 2022 so far has been around inflation and interest rates. Despite the commonly held opinion that rising rates are good for the banks, fears that hiking rates will reduce demand for mortgage loans. This is what, ultimately, has created the downward slide in share price. Although Macquarie Group isn't as exposed to consumers, the share price has still fallen 14.58% YTD, in comparison to a flat first quarter.

This may be a buying opportunity for a quality business. Following Rob Crookston from WILSONS, and his look at Macquarie Group's outlook. Rob believes Macquarie fits the bill.

“MQG is a quality business with the proven ability to position itself to take advantage of structural growth opportunities, resulting in compound earnings growth over the long-term. We think the medium- to long-term opportunity for the Group is significantly stronger than other large-cap financials on the market.”

7. Aristocrat Leisure (ASX: ALL)

Share of tips: 0.7%

Q1 total return: -15.77%

YTD total return: -16.38%

Gaming giant Aristocrat Leisure continued its first quarter underperformance into the second - with a YTD total return of -16.38%. As the market has been in disarray, it has pulled Aristocrat down with it. In spite of the bearish outlook, JPMorgan still expects Aristocrat's earnings could expand by more than 20% AND WHY.

Additionally, Randal Jenneke from T. Rowe Price looks to the stock for outperformance into the second half and beyond. The reason? An exceptionally strong US Dollar.

“As we expect the U.S. dollar to remain firm in 2022, we are positive toward the prospects for the dollar earners in our portfolio, companies such as ResMed and Aristocrat”

8. Minerals Resources (ASX: MIN)

Share of tips: 2.54%

Q1 total return: -5.88%

YTD total return: -20.73%

I may sound like a broken record, but it's also been a tough quarter for Mineral Resources. The company recently reported its worst first-half financial result in three years. So far, MinRes' share price has clocked up a near -21% loss. Looking back at their Q1 performance, it's clear that the real damage was done in the second quarter.

Much like rival Fortescue, MinRes's share price was driven largely by the volatile conditions and eventual collapse in iron ore prices. Uncertainty is certainly not a market's friend.

And yet, some analysts like Janus Henderson's Tim Gerrard and Daniel Sullivan say the fundamentals remain strong:

“In spite of slowing Chinese steel production, stocks are reasonable and steel volumes remain at levels unforeseen three or four years ago” – Gerrard and Sullivan

9. Wesfarmers (ASX: WES)

Share of tips: 0.9%

Q1 total return: -13.06%

YTD total return: -21.68%

Wesfarmers extended its capital declines through the June quarter - ending the first half with a total loss of 21.68%. The recent tumble largely happened in June.

Like many of the other retailers, Wesfarmers has had to deal with supply chain challenges - especially around its inventory. Levels there continue to remain abnormally high.

Regardless, many fund managers still view Wesfarmers as one of the quality, defensive options that pay out stable dividends in volatile markets. Dr Don Hamson and Peter Gardner from Plato Australian Shares Income Fund shared this about the conglomerate recently:

“Wesfarmers, JB Hi-fi is more defensive than people think given our demand for Bunnings and also in the digital world we live in, electronics have become more of a staple than a discretionary as they have historically been regarded. So, both Wesfarmers and JB Hi-fi also look like sustainable long-term dividend payers.”

10. Pilbara Minerals (ASX: PLS)

Share of tips: 2.6%

Q1 total return: 0%

YTD total return: -26.25%

As a whole, lithium miners have taken a huge beating this quarter - but particularly in the month of June. As one of the biggest lithium miners in the global space, Pilbara bore the brunt of this sell-off. As a result, Pilbara Minerals' share price closed down 26% this half.

Of note, Goldman Sachs put out a note on the lithium space which caught many a trader's attention. Analysts, led by Jeff Currie, claimed that although the long-term prospects for the battery metals remain strong due to the rapid uptake of electric vehicles (EVs), investor enthusiasm has led to an oversupply. The note was quickly dismissed by industry experts but the share prices continued to fall.

In a recent webinar, Peter O'Connor of Shaw and Partners pointed to Pilbara Minerals as an example of a company that satisfies his "five-point thumb rule" for battery metal stocks.

“It has a product in the ground, it has access to a market and the infrastructure to get there, and it has the people to do it… they're trading at a deeper discount to their valuation than they have in almost two years."

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Small Caps

Key takeaways:

The basket of reader-picked stocks returned -23.61%
Brainchip (ASX: BRN) wins top place with a 24.26% YTD total return
EML Payments (ASX: EML) is the worst performing stock on our list returning -71.05%
No dividends were distributed again
Lake Resources (ASX: LKE) plummeted 130% in one quarter falling from 97.52% to -33.17%
Audinate (ASX: AD8) was the only stock to improve its standing this quarter

First-Half update, from best to worst

1. Brainchip (ASX: BRN)

Share of tips: 0.61%

Q1 total return: 41.91%

YTD total return: 24.26%

Taking the top spot on the small-cap podium is Brainchip, an Aussie semi-conductor stock and Reddit trader favourite. It is the only stock from this cohort that remains in positive territory, despite giving up some of the stellar gains received in Q1.

2. Audinate Group (ASX: AD8)

Share of tips: 0.49%

Q1 total return: -24.86%

YTD total return: -13.45%

Apart from Brainchip, it's all downhill from here. Audinate Group remains in the red for the half. But its 9% improvement in the second quarter was, if nothing else, surprising. The company gained some traction following its low in May.

It's also got the backing of some fund managers - like Donny Buchanan at Lakehouse Capital:

“We think it's one of the most competitively advantaged businesses on the ASX. It's well managed and emerging from a confluence of COVID and supply chain-related issues,” he said.

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3. Calix Limited (ASX: CXL)

Share of tips: 0.86%

Q1 total return: 11.73%

YTD total return: -17.89%

Calix had peaked in both April and May reaching prices at $9.23 and $8.34 but now falls to around $5.54. The steep climb to its peak in April and June both followed a series of positive announcements including the received approval for their environmentally friendly crop protection product Booster-Mag, and several government funds totalling more than $61 million.

In a recent Buy Hold Sell, John Deniz from Paragon rated it a compelling buy:

“Calix is one of the very few ways to gain pure-play exposure to the de-carbonisation theme."

4. Lake Resources (ASX: LKE)

Share of tips: 0.99%

Q1 total return: 97.52%

YTD total return: -33.17%

Lake Resources shot the lights out in the first quarter with a 97.32% return, but they flipped 180 degrees and nosedived down to a -33.17% YTD total return. That's a differential of about 130%! While the story with Lake Resources overlaps with the fall of Lithium miners, its price decline is very much related to the sudden departure of its CEO Steve Promnitz.

Barry Fitz Gerald comments:

"The collapse in Lake’s share price is very much stock-specific, the main factor being the shock departure on Monday of its MD Stephen Promnitz. Unexplained departures of MDs never go down well. It means Lake has become a short-sellers plaything, and that investors have been left to ponder where to next in its aggressive development planning for its Kachi lithium project."

Barry may have hit the nail as we take note of the attention Lake drew from activist short seller J Capital.

"Lake is claiming to produce “cleaner lithium.” We believe, however, DLE will still use large amounts of water and produce toxic waste."

5. Aussie Broadband (ASX: ABB)

Share of tips: 0.64%

Q1 total return: 12%

YTD total return: -35.16%

With two successive falls in May and June, Aussie Broadband dipped from its 12% Q1 performance to a -35.16% YTD total return.

The first beating followed the FY22 Q3 trading update announcement, making almost a vertical plunge on the day of the announcement. It's clear that the shareholders were not happy with the news. Later in June, despite not making any announcements the sell-off continued anyway, falling with the market Aussie broadband was carried down to its 52-week low.

James Gerrish from Market Matters had an alternative view. He pointed out that the severity of the Aussie Broadband's punishment in May may have gone too far,

“The sell-off here was an overreaction and we think ABB will grind higher”

6. Vulcan Energy (ASX: VUL)

Share of tips: 0.86%

Q1 total return: -2.40%

YTD total return: -46.06%

Lithium explorer Vulcan Energy Resources boasts the world's first and only zero-carbon lithium process. Vulcan's downward momentum continued on from its fall from its peak in September 2021 arriving at a -46.06% YTD total returns.

Following the attack by the activist short-seller J Capital, the 100% clean lithium producer fell from its peak back in September 2021 and has now lost almost 65% of its value. While J Capital has retracted its report, settled its lawsuit and made a formal apology, Vulcan still continued to fall as it washed down with the rest of the lithium producers.

Vulcan energy recently made its appearance as our reader's stock pick to take charge for net-zero. Angus Kennedy describes Vulcan Energy as,

“A prospective producer of 100% clean lithium through chemical extraction, meaning no 'traditional' mining processes are needed. This is a reader favourite after climbing more than 40x over the past 5 years (Quadragintupling, for those that were wondering), and it has stayed strong through a loyal shareholder base after a short-seller attack from J Capital in October 2021.”

7. Frontier Digital Ventures (ASX: FDV)

Share of tips: 0.61%

Q1 total return: -16.03%

YTD total return: -46.79%

With a portfolio of 16 investments across 20 countries, Frontier Digital Ventures Limited focuses on developing online marketplace businesses in emerging or underdeveloped countries. This quarter Frontier gained further downwards momentum with recent market sell-offs, eventually reaching new 52-week lows and a YTD total return of -46.79%.

It is surprising that Frontier continues to be sold down considering their Q1 report. Frontier has a whopping $48.1 million in cash as of March 31. Additionally, they boast the success of their organic growth strategies that saw transaction growth increase by 60% compared to Q1 2021. Shaun Di Gregorio, CEO of Frontier explains that,

"The logic in this is that online marketplaces have really strong brands. They're operating in emerging markets where there is a lack of trust, meaning these marketplaces become trusted intermediaries between buyers and sellers "

In a recent Buy Hold Sell, Josh Clark from QVG Capital comments that Frontier could be a buy in the long term taking into account his experience on the returns online classified businesses can give,

"...if you think about it on a more long-term basis, the Australian experience and globally for that matter has taught us what online classified businesses can do. Not only can they compound at really high rates of return, but they can do it for extremely long periods of time. Frontier has a diversified portfolio of these, and you certainly don't need all of them to pay off, just a small amount of success within that portfolio will be enough for the stock to make money."

8. Poseidon Nickel (ASX: POS)

Share of tips: 1.31%

Q1 total return: -17.27%

YTD total return: -62.73%

The nickel sulphide explorer and developer tripped up quite a bit in this second quarter returning -62.73% YTD total returns. While the market sell-offs contributed to Poseidon's price fall, the downwards momentum started earlier in May with the nickel prices falling over 20% in less than a month.

As scary as it is to see a company fall more than 54% in value, the sell-off for Poseidon might represent a buying opportunity for brave investors. Poseidon just released their update on the Black Swan Restart Project (For those who don't know, Black Swan is the name of a resource Pit), with a 10 kilotonne improvement to their last Mineral resource estimate at 181 kilotonnes of nickel-metal.

9. Life360 (ASX: 360)

Share of tips: 1.11%

Q1 total return: -39.24%

YTD total return: -63.65%

Though by only one ranking, the freemium model mobile app developer Life 360 has escaped last place returning -63.65% YTD in comparison to -39.24% total returns in Q1.

According to a report posted by Bell Potter, Life 360 has a buy rating with a price target of $7.50. However, they do acknowledge that it is currently not profitable but is expected to be cash flow positive in the fourth quarter of 2023

“Yes Life360 is currently not profitable but is expected to be operating cash flow positive from 4Q2023 and has more than sufficient cash to fund its operations till then.”

10. EML Payments (ASX: EML)

Share of tips: 0.86%

Q1 total return: -6.81%

YTD total return: -71.05%

It's a tough start to 2022 for EML Payments with a YTD performance of -71.05%. Looking at the fact that EML only fell by 6.81% in the first quarter, it is clear that the climax of the damage took place in the second quarter.

In the month of April, EML Payments learnt the hard way that their shareholders don't take missed expectations lightly with cuts on management guidance. This is especially the case when it means slower revenue growth and higher costs i.e. downward earnings revisions. Losing more than 35% of its value in one day, they set themselves up for a downward spiral.

The final insult for war weary EML shareholders was the recent departure of long time CEO Tom Cregan.

Let's hope for a better second half

Well there's no way to sugarcoat it - the first half has been brutal, especially for smaller and more speculative companies. The investing landscape today feels markedly different to the one we were facing in December and investors have retreated to the safety of defensive assets.

We will keep following the progress of your most-tipped stocks throughout 2022 and hopefully some better performance emerges in the second half. My colleague Ally Selby recently provided an update on the performance of the fund managers picks for 2022 - you can access that via the link below.