The shares prices for top tech companies such as WiseTech Global Ltd (ASX: WTC), Afterpay Touch Group Ltd (ASX: APT), Altium Limited (ASX: ALU), Appen Limited (ASX: APX) and Xero Limited (ASX: XRO) (whose initials led to the acronym WAAAX) have been under pressure in recent times.
Whilst there has been a broader market sell-off, these companies were running hot and perhaps their valuations were running ahead of their impressive business performance. My colleague Tom even wrote an article about WAAX shares in June this year, and correctly predicted that these share prices would drop in the second half of the year.
Since that date (22 June), here is the performance of WAAAX share prices compared to the ASX 200:
WiseTech Global Ltd share price is down 7%
Afterpay Touch Group Ltd share price is up 30%
Altium Limited share price is down 15%
Appen Limited share price is down 24%
Xero Limited share price is down 16%
Whilst it hasn’t been a good last few months for these companies and their share prices, what strikes me is that the average WAAAX share price over the period is down 6% whilst the ASX 200 is down 9% over the same period.
These share prices have actually (on average) been more resilient than you would expect given the recent volatility we have had.
Yes, the period under review is arbitrary and yes, these companies could go on to underperform even further but what can we learn from that? Here are a few of my thoughts:
- The performance of your portfolio as a whole is more important than the individual performance of its components
- Diversification is important but even more in a portfolio of growth companies where a few winners can drive the majority of the performance
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You can find Kevin on Twitter @KevinGandiya.
The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, Appen Ltd, WiseTech Global, and Xero. 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 Scott Phillips.