Bear Market Winners

Mark Twain said that ‘history doesn’t repeat itself, but it often rhymes’. With fears of a recession mounting, what can we learn from patterns of the past? It’s a great time to look at the last two major market downturns and which industries bucked the trend on Wall St and the ASX. The crashes we’ll review are the Global Financial Crisis (GFC) and the Dot-Com Bubble.

The GFC caused the S&P 500 to lose 37% in 2008 – and that’s considering the crisis only really took hold in the second half of that year. Despite the common belief that the entire market crashed during the early stage of the GFC, that’s not the case. If we look at the top ten performing companies during 2008 on Wall St, discount retailers stood out: Dollar General ($DG) gained 61%, and Walmart ($WMT) gained 18%. Bringing this insight into 2022, while the S&P 500 has plummeted 20% over the last six months, Walmart has only declined 13%, and Dollar General has actually gained 7%.

It’s not called the GFC for nothing, with the crisis taking down global markets, including the ASX 200 which ended the year down 38%. Unlike on Wall St, energy was the industry that saved Aussie portfolios in 2008. When we look at the year’s top 20 performing stocks in the ASX 200, eight were energy, and three of those were in the top five, with Linc Energy returning 170%, Origin Energy ($ORG) 78% and New Hope Corporation ($NHC) generating 38%. While Linc Energy has since changed its listing to Singapore, Origin Energy and the New Hope Corporation remain active on the ASX. Not only are they active, but they are outperforming again. Over the last six months in 2022 the ASX 200 has lost 15% of its value, but Origin Energy has gained an impressive 58% and the New Hope Corporation, 6%.

Going further back, the Dot-Com Bubble burst began in 2000 and was intensified in the wake of September 11, 2001. But the market’s worst year was 2002, with the S&P 500 dropping 22%. The shining light in the otherwise dark market was the manufacturing industry, with three of the top five performers fitting this category. Crown Cork & Seal ($CCK) topped the list, returning 156% in capital gains to shareholders. The company manufactures a range of metal canisters and other specialty packing. Compared to the S&P 500’s 20% decline over the first half of 2022, Crown has declined 14%.

The ASX was far from immune when the internet bubble burst, and declined by 8.8%. The golden sector here was non-bank financials, but this was mostly due to the industry expanding and offering new products.

The key takeaway is that, no matter how dire the market might seem, there are always winners to be found.