The share market’s knack for overreaction is alive and well in the childcare sector. This time last year, key childcare-related stocks were under immense pressure amid fears of centre oversupply. Now some stocks and trusts have soared. It’s time to take profits.
Consider sector leader, G8 Education (ASX Code: GEM). Investors could not get enough of G8 when it soared to $5.58 in late 2014, a tenfold increase in three years. G8’s story was compelling: rising childcare demand and an industry ripe for consolidation.
Gains were short-lived. G8 hit a 52-week low of $1.88 late last year, as concerns grew about sector overcapacity. A record number of childcare centres opened in Victoria and some other states were not far behind, as the industry’s favourable outlook attracted new entrants.