Business Maverick

BUSINESS MAVERICK ANALYSIS

The JSE’s poor performance over five years

The JSE has welcomed proposals aimed at enhancing the regulatory framework for short selling in SA, says Shaun Davies, director of market regulation at the JSE. (Photo: EPA-EFE / Kim Ludbrook)

How badly has the JSE performed? Over the past year, it has not done well. However, it’s sometimes said that one should buy and hold a portfolio of blue chips for at least five years to ensure a reasonable return.

Disclosure: Reg Rumney holds shares directly in Old Mutual, Nedbank, Quilter plc and indirectly in ETFs. This article should not be construed in way or form as financial advice.

The bad news is if you held for the past five years many of the top shares that are now in the Top 40 you would have lost money.

TABLE 1 – A MIXED BAG – TOP 10 JSE COMPANIES BY MARKET CAPITALISATION
Share Five- year performance Market capitalisation Percentage of the Top 40 market cap
1 AB INBEV -40,5% 2 035 903 571 110 18,3%
2 NASPERS-N 173,7% 1 370 519 444 497 12,4%
3 BATS -12,3% 1 338 623 835 986 12,1%
4 BHP -1,6% 699 792 748 169 6,3%
5 GLENCORE -17,3% 696 345 191 151 6,3%
6 RICHEMONT -2,2% 562 716 000 000 5,1%
7 ANGLO 32,1% 498 421 060 099 4,5%
8 FIRSTRAND 62,3% 360 690 078 464 3,3%
9 STANBANK 35,9% 312 295 548 861 2,8%
10 SASOL -40,3% 222 451 075 943 2,0%

A snapshot of the Top 40 shows that over five years until 28 May, 23 companies had produced positive returns – before adjusting for inflation of about 27%.

Of those, only a mix of financial services and resources companies, with one investment holding company, Bidvest; one retailer, Clicks; and one paper producer, Mondi, made any real money. Kumba, Anglo, South32 and Amplats are miners. Standard Bank, RMBH, FirstRand, PSG and Capitec are all in financial services. Only one retailer makes the cut, Clicks.

TABLE 2 – TOP 40 POSITIVE RETURNS
SHARE 5 year MARKET CAP – Rands
1 CAPITEC 476,6% 148 342 491 834
2 CLICKS 197,2% 49 387 003 245
3 NASPERS-N 173,7% 1 370 519 444 497
4 BIDVEST 138,4% 66 402 947 800
5 PSG 137,1% 55 459 158 116
6 SOUTH32 88,9% 171 142 103 498
7 MONDIPLC 63,2% 113 826 287 510
8 FIRSTRAND 62,3% 360 690 078 464
9 RMBH 53,6% 111 552 788 286
10 AMPLATS 40,2% 176 903 226 759
11 STANBANK 35,9% 312 295 548 861
12 ANGLO 32,1% 498 421 060 099
13 KUMBA 28,7% 145 705 252 918
14 SANLAM 23,7% 172 141 612 933
15 MC GROUP 17,4% 54 635 264 766
16 EXXARO 16,4% 57 841 464 082
17 DISCOVERY 12,5% 92 029 044 893
18 MRPRICE 11,4% 47 008 220 755
19 ASSORE 10,1% 53 648 177 960
20 NEDBANK 9,4% 123 642 067 080
21 ABSA 3,3% 136 623 499 428
22 RMIH 2,7% 49 691 844 059
23 ANGGOLD 2,4% 68 211 803 707

Some of the Top 40 have been massively disappointing. MTN tops the list.

TABLE 3 – POOR PERFORMERS
MARKET CAP – Rands
1 MTN GROUP -55,80% 187 484 840 921
2 AB INBEV -40,53% 2 035 903 571 110
3 SASOL -40,33% 222 451 075 943
4 REMGRO -19,01% 94 290 594 137
5 GLENCORE -17,25% 696 345 191 151
6 BATS -12,31% 1 338 623 835 986
7 PEPKORH -12,27% 61 444 500 000
8 VODACOM -9,12% 213 400 943 067
9 REDEFINE -8,92% 50 047 141 952
10 INVPLC -6,59% 57 782 487 784
11 NEPIROCK -6,05% 68 250 230 336
12 BIDCORP -3,45% 98 441 136 222
13 RICHEMONT -2,24% 562 716 000 000
14 OMUTUAL -2,02% 105 265 629 962
15 BHP -1,63% 699 792 748 169
16 GROWPNT -1,21% 70 352 836 900
17 SHOPRIT -0,58% 96 997 254 483

[Where five-year performance is not available, the longest period available has been used, eg three years]

So what of the future?

PSG Wealth Old Oak portfolio manager Schalk Louw is characteristically sanguine. He notes that comparisons between the JSE’s performance and other stock markets such as the New York Stock Exchange, which has done a lot better than the JSE for a while now, should be done over the long term.

It has been tough doing business in South Africa for the past five years, he admits. In 2012, South Africa moved out of recession and money was flowing back into emerging markets, but the political environment soured, he says. The currency came under pressure, and so did listed companies.

Globally, uncertainty persists. The Trump trade war has affected Chinese internet companies, for example. South Africa did have a bad year, but so did other emerging economies. There is turmoil all over the world, especially in emerging countries, he says. “The US market has been boosted by artificial money, and somewhere along the line that will stop.” Indeed, at the time of writing, the Financial Times reports that analysts believe US stocks are looking increasingly expensive compared to the rest of the world.

This may be the time to buy, selectively, shares on the JSE but the adage of “time in the market is better than timing the market” surely holds true for most investors. Five years is the minimum, but clearly, that is not always long enough. DM

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