The share market has historically generated far greater gains for investors than various other alternatives, including government bonds and cash ? both of which are widely considered to be ‘risk-free’.
Of course, investing in the share market isn’t without risk ? as investors behind these 10 non-performing stocks have certainly found out in 2016 ? but it does have the potential to grow your wealth significantly over time.
Occasionally, you may even find the odd share or two that skyrockets in price over a short period of time. Here are the 10 biggest gainers from the S&P/ASX 200 (Index:…
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The share market has historically generated far greater gains for investors than various other alternatives, including government bonds and cash – both of which are widely considered to be ‘risk-free’.
Of course, investing in the share market isn’t without risk – as investors behind these 10 non-performing stocks have certainly found out in 2016 – but it does have the potential to grow your wealth significantly over time.
Occasionally, you may even find the odd share or two that skyrockets in price over a short period of time. Here are the 10 biggest gainers from the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) so far in 2016:
|Company||Market Cap||Gain (YTD)|
|Saracen Mineral Holdings Limited (ASX: SAR)||$1,285.3 million||163.1%|
|Whitehaven Coal Ltd (ASX: WHC)||$1,755.9 million||152.9%|
|Mineral Resources Limited (ASX: MIN)||$1,784.2 million||138.2%|
|Fortescue Metals Group Limited (ASX: FMG)||$12,610.9 million||116.6%|
|St Barbara Ltd (ASX: SBM)||$1,510.1 million||114%|
|EVOLUTION FPO (ASX: EVN)||$3,964.3 million||94.2%|
|BlueScope Steel Limited (ASX: BSL)||$4,576.5 million||80.8%|
|Newcrest Mining Limited (ASX: NCM)||$17,939.1 million||80.6%|
|Primary Health Care Limited (ASX: PRY)||$2,153.5 million||76.5%|
|South32 Ltd (ASX: S32)||$9,796.1 million||72.8%|
Data provided by S&P Global Market Intelligence
Given the strong rebounds experienced in various commodity prices, it’s hardly surprising to learn that nine of the top 10 performers from the ASX 200 so far in 2016 operate in the resources industry.
The fact that many (if not most) individuals and analysts believed that commodity prices had even further to fall at the beginning of the year has likely exacerbated the gains across the sector, leading some investors to snap up what they believe are bargains and other short sellers to frantically cover their positions.
Saracen Mineral Holdings has been the top performing stock from the benchmark index so far this year, with a return of 163%. Like St Barbara, Evolution and Newcrest, Saracen operates in the gold sector, although it predominantly acts as an exploration and development company whereas the others dig for the precious metal.
Meanwhile, Fortescue Metals Group has taken the market by storm, adding billions of dollars back to its market value, with BlueScope Steel and Mineral Resources also generating huge gains for investors. Primary Health Care is the sole company in the top 10 that doesn’t operate in the resource sector.
Of course, seeing a list of the top 10 performers so heavily dominated by resources businesses may seem tempting. After all, investors typically want to go where the big gains are being made, with momentum perhaps playing a role in some of those business’ returns already.
The problem is, resource prices have rebounded strongly, in some cases to the point where a number of economists are (justifiably) questioning whether, or for how long, those prices can be sustained. Given the sheer gains achieved by the shares of those businesses, a pullback in any of those commodities could have a heavy impact on the share prices, harming any investor that is too heavily exposed to the sector.
Unfortunately, it’s impossible to tell when that would happen: there is every chance they could continue to rise for the foreseeable future. But that is a big risk that investors need to consider before buying in.
Thankfully, there are plenty of alternatives that investors could look to invest in instead, including some that find themselves at the bottom of the ASX 200’s performance list so far in 2016! Shares of Blackmores Limited (ASX: BKL) have retreated nearly 30% since the beginning of the year and, although they still aren’t necessarily cheap, there is certainly the potential for gains to be made in the long-run.
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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. 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.