Best and worst performing ASX sectors of financial year 2021

In the new fiscal year, will you bet on the industries that did well or have stumbled in the past 12 months?

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best and worse asx shares represented by green best button and red worst button

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Whether you take a contrarian view to investing or like to hop on what’s hot, it’s interesting to see which ASX sectors have fared the best in the past year.

Perhaps you want to put some money into the sectors that haven’t gone so well, thinking there will be a turnaround. Or maybe you prefer to ride the momentum of the industries that have been on fire.

Ausbil chief economist Jim Chronis predicted that inflation would remain under control in the coming years, and this might have a bearing on which industries investors might favour.

“This low-rate environment, and the multi-year economic growth outlook, are supportive of an underlying multi-year growth outlook for equities, especially in cyclical sectors — banks and resources — as world demand grows.”

To help you make up your own mind about what the coming 12 months might hold, The Motley Fool has calculated the 3 best-performing sectors and the 3 worst for the 2021 financial year.

3 best-performing ASX sectors 

The Motley Fool used the sector-based S&P indices and looked at their performance for the year to 30 June 2021.

These 3 industries came out on top:

GICS* sector ASX index Performance 2021 financial year
Consumer discretionary S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) Up 42.62%
Information technology S&P/ASX 200 Information Technology Index (ASX: XIJ) Up 38.88%
Financials S&P/ASX 200 Financials Ex-A-REIT Index (XXJ) Up 35.69%

All the money from COVID-19 government support and a lack of travel spending has seen the consumer discretionary sector go gangbusters.

1851 Capital portfolio manager Martin Hickson gave an example to The Motley Fool last month of a business in that area that served his fund very well last year.

“Post [March 2020] sell-off, it led to some of the best buying opportunities that we’ve seen in a decade since coming out of the GFC,” he told Ask A Fund Manager.

Eagers Automotive Ltd (ASX: APE), one of the largest automotive companies here in Australia — we initially started buying shares in AP Eagers at $3.30 back in March. Shares today are around $15. So it’s performed very strongly for us.”

Ausbil chief investment officer Paul Xiradis is backing bank shares to continue their run in the 2022 financial year.

“The banks had over-provisioned for [COVID-19] losses. With APRA allowing a return to more commercial dividend levels, and the economy resurging from the 2020 lows, we could see banks were in a position to reduce these provisions and grow their books further in a renewing real estate market,” he said.

“The result is that over the next few years, the unwinding of this over-provisioning will see a rerating of earnings, ahead of the consensus expectation at the time we began up-weighting into banks.”

3 worst-performing ASX sectors 

Noting that 2 of the 3 still made positive returns, here is the worst-performing trio from the 2021 financial year:

GICS* sector ASX index Performance 2021 financial year
Utilities S&P/ASX 200 Utilities Index (ASX: XUJ) Down 22.94%
Healthcare S&P/ASX 200 Health Care Index (ASX: XHJ) Up 4.98%
Consumer staples S&P/ASX 200 Consumer Staples (ASX: XSJ) Up 5.36%

Utilities, especially energy providers, are having a torrid time. 

Uncertainty over future climate change regulations and falling electricity prices have combined to hammer stocks like AGL Energy Limited (ASX: AGL), which is down more than 53% over the past 12 months.

Sadly for utilities, The Motley Fool couldn’t find many analysts willing to back it as a comeback play.

Healthcare, however, does seem to have a better future.

AVITA Medical Inc (ASX: AVH) shares, for example, have fallen 40% in the past year. But this week one fund manager told investors to keep the faith.

“We remain optimistic the company will expand its addressable markets through both label extension and geographic expansion given the extensive evidence of real-world cases in its targeted indications, while also growing its current burns business for years to come.”

* – ‘Global Industry Classification Standard’

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Motley Fool contributor Tony Yoo owns shares of Avita Medical Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Avita Medical Limited. The Motley Fool Australia has recommended Avita Medical Limited. 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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