On a YTD basis, two Slovenian blue chips outperformed SBITOP, while the remaining seven companies underperformed the index, at least in terms of the number of days. In this quick overview, we bring you the details of why this happened. Overall, each SBITOP constituent noted a positive share price development.
On a YTD basis, SBITOP managed to return an impressive 24%, based on the strong performance of many of its constituents. The stars of the show, however, is NLB, followed by Krka, Petrol and Telekom Slovenije. These companies managed returns of 45.9%, 24.1%, 22.7% and 20.7%, respectively, on a YTD basis. In Q1 2024, most Slovenian blue chips recorded revenue growth. Krka’s revenue grew across all markets with continued demand, NLB’s sales grew due to higher NIM and continued loan growth, while the insurers noted steady top-line growth, mainly driven by Non-life. On the other hand, Petrol recorded a drop in revenue, due to lower prices and volumes sold. In terms of profitability, Krka recorded no FX loss in Q1 and as such results were positive, NLB continued its growth on the back of higher interest rates & volume of loans, while the insurers reported an improved profitability, further amplified by investment returns. Telekom Slovenije also recorded solid profitability, due to sales growth and stable OPEX. On the other hand, Petrol’s profits were affected by lower petrol margins & no compensation for natural gas sold in Croatia and Slovenia.
Price performance of SBITOP and its constituents in 2024 YTD (%)
Source: LJSE, InterCapital Research
How much did individual constituents outperform/underperform compared to the index (2024 YTD, p.p.)
Source: LJSE, InterCapital Research
As compared to the index, NLB outperformed it by 21.9 p.p., followed by Krka at “only” 0.1 p.p. On the other hand, Telekom Slovenije, Sava Re, Luka Koper and few other constituents underperformed the index, however, they still noted a positive share price development. But nevertheless, underperforming the index itself. So far, in 2024 we recorded 119 trading days. Of all the SBITOP constituents, two outperformed the index, while the remaining seven underperformed the index, at least in terms of the working days.
How often did SBITOP constituents outperform the index in 2024 YTD (% of working days)
Source: LJSE, InterCapital Research
Of these companies, Krka outperformed the index 54.6% of the days, followed by Luka Koper at 51.3%. On the flip side, Equinox outperformed the index on only 35.3% of the working days, while both Petrol and Triglav outperformed it on 43.7% of the working 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, 9 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.
What can be taken away from this? Two things. Firstly, day-to-day trading, as much as we would like to time it, is quite hard for many different reasons. Of course, a situation might occur when an investor scores a win, but one also has to take into account the higher inherent costs of buying and selling constantly. Secondly, a day always comes when a certain share performs extremely well. While it might happen that an investor times this correctly, without any prior knowledge (which of course, is generally unavailable publicly, or if available, wouldn’t mean much), investing for a longer period in a stable portfolio will generally yield a lot more stable result. After all, a 16.5% SBITOP return (and this is not including the dividends!), turns out a lot better than trying to time the market, both for the sake of time and for the sake of higher costs associated with this action. Not to mention, if a certain share loses a lot of its price due to some development, the risk is diversified far more when investing into an entire portfolio, than an individual stock.
