The old share market saying “buy stocks when everybody else is selling” is hard to put into practice. Mining services companies are a good example. After being smashed this year, a few look like good value; most are value traps that could still crunch portfolios.
Investors could not get enough of mining services stocks in 2010 and 2011 as Australia’s staggering resource investment boom peaked. Then commodity prices fell; several large mining projects were deferred or cancelled; and big resource companies sought cost savings from service providers.
The result was a sea of earnings downgrades from mining services stocks in 2012-13, and tumbling share prices. Former market darling Monadelphous Group slumped from a 52-week high of $28.48 to $17.54, and Forge Group fell from almost $7 to $4.18.