After a disappointing 2016 for small investors after their favoured stocks failed to fire, the recently concluded profit reporting season doesn't bode well for 2017.
While the Australian sharemarket, including dividends, returned 11.6 per cent for the year to the end of January 2017, a portfolio of the nine equally weighted stocks favoured by small investors produced a return of 0.9 per cent.
Of the nine stocks, only the Commonwealth Bank produced an outstanding result this profit reporting season.
CommSec chief economist, Craig James, created the Mums and Dads Index in 1999 to track the stocks that came into being during the demutualisations and privatisations that started in the 1990s.
The index consists of those whose share registers are packed with small shareholders – Telstra, CBA, Woolworths, Qantas, AMP, Tabcorp, Suncorp, IAG and Wesfarmers.
Miners boom
"A number of the mums and dads stocks suffered from sector rotation in 2016 with investors switching attention to the big miners," James says.
"Commodity prices were surprisingly firm in 2016 and, as a result, BHP Billiton's share price lifted 40 per cent and Rio Tinto gained 34 per cent", he says.
Elio D'Amato, director of research and education at Lincoln Indicators, says many small investors don't hold the resources companies because of the "stomach-churning rollercoaster ride" that occurred a few years back.
However, the good performances of the big miners is only part of the story.
The mums and dads shares just didn't do that well.
"The performance of mum and dad stocks highlights the need for investors to be alert to changes in the investment landscape," James says.
He says many of the stocks are in mature industries with strong competition, tight margins and lack of price leadership; where growth in share prices is harder to come by.
Profits 'tad' positive
Michael Heffernan, senior client adviser and economist with sharebroker Phillip Capital, says the profit season was a "tad" on the positive side, a bit better than expectations.
Some of the good ones have been very good with only one of those – the Commonwealth Bank – among the mum and dad stocks, Heffernan says.
The Commonwealth Bank reported yet another record profit for the six months to December 31, 2016, of $4.9 billion.
That was 6 per cent higher than for the same period a year earlier.
The strong result saw the bank's share price lift a couple of dollars to $85.
The share prices of the big banks have been improving since the later part of last year with Commonwealth Bank shares trading for most of last year at about $75.
But the Commonwealth Bank's good result has helped to lift the share prices of all the big banks, Heffernan says.
Telstra
Telstra, the most widely held stock of all with more than one million shareholders, reported a 14.4 per cent cut in profit for the six months to December 31, 2016, to $1.79 billion.
Its share price has slid to under $4.90, near three-year lows as investors reacted to the results.
As long as the telco continues to pay high dividends, Telstra will remain attractive for shareholders, Heffernan says.
"It's the biggest blue chip dividend stock on the market and it's great for dividends," he says.
The latest profit result comes after Telstra produced a total average annual return over the past year of minus 8.5 per cent – the third-worst performer among the mum and dad stocks.
Insurers
The best of the mum and dad stocks over the past year include Woolworths, Suncorp and IAG, with total returns between 8 and 9 per cent.
However, AMP's return for the year to January 31, 2017, is minus 12.9 per cent, the second-worst performer.
There was more bad news for AMP shareholders after the insurer announced a full-year loss of $344 million against a $972 million profit last time, after a surge in insurance claims and write-downs.
Suncorp announced a 1.3 per cent rise in net-profit after-tax to $538 million for the six months to December, a little lower than analysts were expecting.
Its general insurance profit was 52 per cent higher and banking was up almost 5 per cent, but its New Zealand business's profit was down 54 per cent.
Insurance giant IAG saw its profit for the last six months of last year dip by 4.3 per cent to $446 million as a result of increased claims, though the result exceeded analysts' expectations.
Qantas
Qantas reported a drop of 7.5 per cent in underlying profit before tax, to $852 million, for the six months to December 31, 2016.
That comes after a tough year for Qantas shareholders. It is the worst performer among the popular stocks over the past year with a total return of minus 16.9 per cent.
The drop in profit was mostly because of increased competition on international routes and "unprecedented" airfare discounts.
However, the result was better than the flying kangaroo's guidance last year and its shares have risen by more than 6 per cent on the profit announcement.
Tabcorp, Wesfarmers
Tabcorp's results were hit by a big rise in one-off costs (significant costs) due to money laundering investigations into the company, its push into Britain and its pending takeover of Tatts Group.
The gaming giant's net profit after tax, before significant items, for the six months ended December 31, rose 5.3 per cent to $102.7 million from $97.5 million a year-earlier.
However, after factoring-in the significant costs, the net profit after tax was down 28 per cent.
A rebound in Wesfarmers' resources operations has helped the conglomerate slightly beat earnings forecasts at a time when earnings at Coles were lower.
Wesfarmer's profit for the second six months of last year increased 13.2 per cent to $1.58 billion with strong contributions from Officeworks, Bunnings and Kmart.
However, Coles' revenue was flat as its sales growth slowed due to discounting by rival Woolworths.
Woolworths
Woolworths cut its dividend after announcing a fall of almost 17 per cent in net profits from continuing operations to $786 million for the six months to December 31 last year.
Woolworths' sales have experienced a sharp rise after reducing prices to regain market share from Coles, Aldi and IGA.
However, the price discounts on groceries, together with payments of incentive bonuses to staff, will cost shareholders after Woolworths slashed its interim dividend by 10¢ a share to 34¢.
However, Woolies shares rose strongly as investor sentiment was buoyed by increased sales at the supermarket chain.