On a YTD basis, Končar was the only company to outperform the CROBEX10 index significantly 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 an already impressive 10.8%, 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 43.3%, and 28.3%, respectively, YTD. Recently, Croatian blue chips published 2023 Q4 results (and FY overall), where top-line growth was recorded by almost all the companies, due to an increase in prices supported by sufficient demand and volume growth. The banking sector benefited the most from the increase in key interest rates, resulting in higher NIM and still solid loan production – resulting in strong HPB performance. Telecoms recorded better revenue & profitability, helped by price indexation – resulting in solid HT performance. However, op. and net profit for companies such as Span and Atlantska Plovidba were under threat in 2023, for different reasons. As a result, both Atlantska Plovidba and Span noted a negative share price development during 2024 so far.
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 11.7%, 9.3% and 7.1% YTD, respectively. On the other spectrum, Atlantska Plovidba recorded the biggest loss, the only company to note a double-digit YTD loss, of 17.2%. Further, Span, Podravka and Atlantic Grupa recorded a slightly decline of 6%, 1.2% and 0.9% since the end of 2023.
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 32 p.p., while HPB outperformed the index by more than 17 p.p. HT yielded slightly more than the index itself (+0.9 p.p.). The other companies underperformed the index. Out of the remaining companies, most of them underperformed CROBEX 10 by a double-digit returns, due to more or less flat movement on market, vs. CROBEX 10’s aforementioned double-digit return. For example, Ericcson NT underperformed the index by almost 11 p.p. on the back of flat share price development, while Podravka and Span underperformed CROBEX 10 by 12 p.p. and 16.8 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.
