The Amcor CDI (ASX: AMC) share price is having a rough start to 2021. At the time of writing, Amcor shares are trading at $14.39, up 0.56% for the day. Even so, that means that Amcor is a good 5.5% below where it started 2021 at when its share price was $15.16.
Until yesterday, the S&P/ASX 200 Index (ASX: XJO) was up around 1.4% for the year. Even on today's levels, the ASX 200 is down 0.9% year to date.
That means that Amcor is significantly underperforming the broader market, whichever way you look at it. So what's going on with Amcor share price in 2021 so far?
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Who is Amcor?
Amcor is a packaging company best known for manufacturing boxes and other packaging for goods such as food and tobacco, home and healthcare products, and industrial goods.
It listed on the ASX way back in 1969. Today, it is a global company with operations on every continent around the world (except Antarctica of course). It's even dual-listed on the New York Stock Exchange under Amcor plc (NYSE: AMCR). The company is also a component of the S&P 500 Index (INDEXSP: .INX).
Looking at the Amcor share price, we can see it is a highly cyclical company. If an investor had held Amcor shares since March 2009, they would be sitting on a very respectable return of roughly 324%. However, anyone who held shares since early 2016 would have seen their shares go essentially nowhere.
Despite this, the Amcor share price is still up more than 42% since it reached a 7 year low of $9.87 in March last year.
Why is the Amcor share price having a rough start to the year?
As we touched on earlier, Amcor shares have not joined the party in 2021, falling where the broader market has been mostly rising.
There is no obvious reason why this is the case. The company has made no market-sensitive announcements this year, apart from some standard director forms and regulatory paperwork.
A likely explanation is the rise of the Australian dollar. Since Amcor is an internationally-based company, it is affected by fluctuations of the Australian dollar in foreign exchange markets.
Between 28 December and 26 January, the Aussie dollar has appreciated by more than 2% against the US dollar. That directly impacts a company like Amcor because they get less bang for their buck when swapping US dollars back to Aussie dollars.
Many investors like to pursue companies like Amcor because they are relatively stable and reliable dividend income payers. Individuals, businesses, and governments need boxes and packaging all of the time. That makes this company useful to investors who favour reliability of earnings. Amcor (unlike most ASX shares) also pays a dividend every quarter.
On current pricing, Amcor is offering a trailing yield of 2.63%. Government bond yields have also been rising over the past month or so, particularly over in the US. That reduces the appeal of dividend shares like Amcor because bonds are simply a safer alternative. This could also be playing a role.
It's probably a combination of these reasons that explains why we are seeing Amcor sell off over the first month of the year so far.
