On a YTD basis, Končar & HPB were the only companies to outperform the CROBEX10 index significantly, while a good few number of constituents outperformed the index in terms of the number of trading days (%) YTD. In this quick overview, we bring you the details of why this happened.
On a YTD basis, CROBEX10 managed to return a solid 8.5%, based on the strong performance of many of its constituents. The stars of the show, however, are Končar and HPB. These companies managed returns of 38%, and 24.1%, respectively, YTD. During Q1, the only quarter to have been published yet this year, top-line growth was recorded by almost all the companies, due to an increase in prices supported by sufficient demand and volume growth, but with mixed development regarding profitability. Food companies saw improvements in profitability on the back of higher prices coupled with volume growth. Tourism companies saw improvements on the top line on the back of higher prices, while profitability was under threat due to higher costs. Industrials were the category that recorded significant improvement in the few previous quarters, including this one, as demand for products remains high, while major expense categories’ growth was controlled. Telecoms recorded better revenue & profitability, helped by price indexation.
Price performance of CROBEX10, CROBEX10 constituents in 2024 YTD (%)
Source: ZSE, InterCapital Research
As we can see, other companies did not slack off, however, with HT, Valamar Riviera and Adris (pref.) returning 9.2%, 7.6% and 6% YTD, respectively. On the other spectrum, Span recorded the biggest YTD loss, the only company to note a double-digit YTD loss, of 10.6%. Further, Atlantic Grupa and Podravka recorded a slightly decline of 4.4%, 3.4% since the end of 2023, respectively.
How much did individual constituents outperform/underperform compared to the index (2024, p.p.)
Source: ZSE, InterCapital Research
Given the strong returns, Končar outperformed the index by more than 29 p.p., while HPB outperformed the index by more than 15 p.p. HT yielded slightly more than the index itself (+0.6 p.p.). The other companies underperformed the index. Out of the remaining companies, half of the constituents underperformed CROBEX 10 by double-digit returns, due to more or less flat movement on the market, vs. CROBEX 10’s aforementioned high single-digit return. For example, Atlantska Plovidba underperformed the index by more than 8 p.p. on the back of flat share price development, while Podravka and Span underperformed CROBEX 10 by 19.1 p.p. and 12.9 p.p., respectively.
How often did CROBEX10 constituents outperform the index in 2024 (% of working days)
Source: ZSE, InterCapital Research
This brings us to an interesting conclusion and one that might not seem that obvious from the start. So far, 2024 is a good year for CROBEX10 and its constituents. As such, the high return recorded by the index was the weighted sum of the performance of the individual companies. In other words, if these companies gave returns on certain days, which by themselves might not seem much (especially when they’re weighted in the index), the overall index return was still high, since it takes into account all of their performances. When companies perform as well as most of these companies did then, they can significantly boost the index performance, leading to it “outperforming” them on those days.
As such, looking at this data by itself can be misleading. It should be taken with other indicators, such as the price performance, or any other metric that one investor might be interested in. Still, 10 companies in an index do make things relatively simple. Imagine looking at an index such as the S&P 500, in which most of the companies have such low weights, that even if they gave a 100% return, a tiny increase in the index due to other companies’ performance (usually the largest ones) would still mean that the index would outperform that individual stock.
