Individual ASX shares within a sector can perform drastically different from the sector as a whole. And spotting a well-performing sector is often a good way to start when looking for investment ideas before diving deeper into its individual companies.
This may form part of a so-called top-down approach. Here, you start with a macroeconomic or large picture of an economy and work your way down to the finer details.
So, within Australia, you may look for the best performing sector and then look within this sector for particular ASX shares you think may outperform. Well-performing sectors often have structural, demographical or other forms of tailwinds which help it to outperform the broader market over a period of time.
With that in mind, let's take a look at the best and worst performing sectors in the S&P/ASX 200 Index (ASX: XJO) and All Ordinaries (ASX: XAO) since the beginning of March.
S&P/ASX 200 Consumer Staples
It is probably no surprise that the best (and only positively) returning sector is the ASX consumer staples sector. At the time of writing, it has had a price return of 1.96% and total return (including dividends) of 2.78% since the start of March. This index comprises of companies which are less susceptible to economic shocks and business cycles.
Many people are wondering if it's time to own supermarket shares such as Coles Group Ltd (ASX: COL) or Woolworths Group Ltd (ASX: WOW). Both of these companies can be found within this sector and have both recently seen their share prices race higher as investors flock to own them.
S&P/ASX All Ordinaries Gold
Gold is often seen as a safe haven or store of value when markets crash. While this sector has performed better than most, it has still had a negative total return of -9.32% since the beginning of March.
This is still far better than the total S&P/ASX 200 Index (ASX: XJO) which has returned a negative 22.61% in the same time period.
S&P/ASX 200 Health Care
With this market crash being caused by the underlying health issue of COVID-19, and with a great deal of uncertainty still surrounding its outcome, it is interesting to see how the ASX healthcare sector has performed relative to the others.
The S&P/ASX 200 Health Care index has had a total return of -12.11% since the beginning of March. Meaning, despite the decline, it is still also performing better than the broader market.
Companies such as ResMed Inc (ASX: RMD) and CSL Limited (ASX: CSL) can be found in this index and have shown greater share price resilience.
S&P/ASX 200 Financials
The financials sector has performed worse, with a total return this month of -28.16%. Much of these declines are likely to have come from the big four banks such as National Australia Bank Ltd. (ASX: NAB) which is now down 38.6% in March at the time of writing.
S&P/ASX 200 Energy
However, the worst-performing ASX sector has been the energy sector, with its constituents such as Caltex Australia Limited (ASX: CTX), Beach Energy Ltd (ASX: BPT) and Origin Energy Ltd (ASX: ORG) all falling sharply.
This sector has returned a total of -40.54% in March, which increases to -50.42% when we go back to the beginning of the year.
Foolish takeaway
You may be looking at the ASX consumer staples sector as a great place to invest now. And it is true, consumer staples has had the best return this month, appearing as though everyone else is flocking there as well.
However, when we get through to the other side of this market crash and things return to normal (hopefully sooner rather than later), I would think this sector would perform more poorly relative to others.
So, as a long term investor, I'm predominately looking outside of this sector for opportunities right now.
