The August reporting season has seen stark share price volatility with moves setting new records, according to portfolio manager at SG Hiscock & Company, Hamish Tadgell. Around 63 per cent of stocks in the ASX300 have seen price moves of five per cent or more in both directions, and a third price moves greater than 10 per cent, with small caps faring better than their larger peers.

“Overall results have been a mixed bag this reporting season. Underlying growth has slowed and the impact of greater regulation, tariffs, and inflation has led to higher costs of doing business for many companies, creating a challenging operating environment.

“Most companies are having to work harder to manage margins, and the ability to pull on price is becoming increasingly difficult as the cost of living pressures have become more pronounced. This is evident in the more cautious tone we are seeing around revenue growth and guidance for many companies, and growing focus on cost out and restructuring. This is seeing companies that are growing strongly rewarded, and in many cases trading on elevated multiples,” says Mr Tadgell.

The share price volatility experienced this reporting season has been more extreme in larger cap companies where price reactions to results from the likes of James Hardie, AGL, CSL, Sonic Healthcare, Woolworths and Amcor have been extreme.

“In general, small caps have outperformed large caps given better growth prospects and are benefiting from expectations for further rate cuts. This has been most pronounced in the discretionary retail, REITs and resources, particularly gold names,” Mr Tadgell says.

“It seems the market is taking a more black and white view on results day. The weight of money being driven by passive, quant and structured products seems to be creating a more binary view on whether results are good or bad, amplifying the moves and often ignoring the nuance. While this can be frustrating, rarely are the outsized moves as good or bad as share prices are implying, creating long term opportunities for those prepared to focus on the fundamentals,” he says.

The biggest surprise this reporting season for Mr Tadgell has been from CSL. “Once again CSL did not deliver against expectations with a low-quality result beat driven by lower R&D and tax expenses, and soft guidance in its Behring plasma business. This, coupled with management’s decision to embark on major structural changes, including a cost-out/restructure and plans to spin off its Seqirus flu business, has raised questions around the pathway and timing of the recovery.

“Fundamentally, the share price move looks overdone, but the result has raised a number of new questions that will require execution and evidence to instil greater confidence and recovery,” he says.

He adds that several themes emerged from this reporting season. Results have shown a slight increase in confidence in the domestic economy, with evidence that consumer confidence is stabilising and improving following the Reserve Bank of Australia’s rate cut in May. However, US tariffs are impacting US exposed stocks.

“A number of retailers and REITs have highlighted a discernible improvement in trading activity since June and into August. Baby Bunting, REA Group, JB HiFi, Coles and some apparel names which surprised positively on volumes, indicating that households are willing to spend selectively when value or necessity is clear.

“REIT results are also pointing to some improving signs of life in parts of the property market. Stockland, Mirvac and Charter Hall highlighted increased property inquiry with interest rate cuts and signs of property values stabilising. However, this doesn’t appear to be flowing through to new starts and building materials and construction sectors yet.

“Reliance Worldwide, Reece and Boral all highlighted that market conditions remain sluggish and broader demand pressures persist. Geographically this is more pronounced in Victoria where confidence seems lower and there are additional structural concerns around higher taxes and regulation.

“US exposed building material and packaging results highlighted a discernible weakening in the US economy and challenging trading conditions. It is clear the US housing market activity for both new builds and remodelling work continues to deteriorate with US tariff volatility and policy uncertainty weighing on household and business confidence,” says Mr Tadgell.