Federal budget recap: Have you missed the quick gains?

JB Hi-Fi Limited (ASX:JBH) has struggled, well behind the big winners from the budget!

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BUDGET, BUDGET, BUDGET!

Investors couldn't escape the news last week that Treasurer Joe Hockey delivered a federal budget that excited small business owners, relieved working parents, worried self-funded retirees, and scared (not really) big business.

To quickly recap; here are some of the major points that Foolish writer Mike King took out of the budget:

  • An estimated 326,000 self-funded retirees will lose part-pension benefits as the means testing for asset limits falls from above $1 million to $823,000.
  • The ATO is targeting 30 multi-national companies suspected of diverting profits from Australia. If found guilty, the companies will be liable to pay double the amount of tax they owe, plus interest.
  • Work-related car expense claims are also being targeted, with the government aiming to save $845 million over the next 3 years
  • An additional $1.6 billion is going towards new and amended listings on the Pharmaceutical Benefits Scheme (PBS).
  • Small businesses with less than $2m in turnover will see their tax rates cut to 28.5% from 30%. Sole traders will also get a 5% tax discount of up to $1,000. Small business can claim an immediate tax deduction for each and every item they purchase up to $20,000. It can be written off to reduce tax liability. That is estimated to help more than 2 million businesses.

Big Winners

A number of analysts, including us at the Motley Fool, made some predictions about companies set to benefit. Well, which companies have actually outperformed over the last week as a result of the budget (note the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is up only 20 points over the last week)?

Childcare providers have underperformed: Affinity Education Group Ltd (ASX: AFJ) is down 1%, while G8 Education Ltd (ASX: GEM) is up 1%

Leasing groups have done well: FlexiGroup Limited (ASX: FXL) is 6% higher and Silver Chef Limited (ASX: SIV) is up 3%.

After an initial bounce, retailers have struggled: JB Hi-Fi Limited (ASX: JBH) is flat, while Harvey Norman Holdings Limited (ASX: HVN) is nearly 2% LOWER!

What's the Lesson?

The lesson here is that for every short-term catalyst that moves a share price, there's the rational assessment of the company's long-term earning ability to consider. If the budget's measures were sure to boost earnings then share prices would have pushed even higher.

Motley Fool contributor Andrew Mudie owns shares of FlexiGroup Limited and Silver Chef Limited. You can find Andrew on Twitter @andrewmudie The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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