Belinda Anderson
Investec research has shown that the Johannesburg Stock Exchange’s (JSE) all share index has outperformed most major global indices when measured over two years in US dollar terms. The JSE has grown by 10,5% over the past 24 months this considering the 22% depreciation in the rand during that time. Its closest competitor in the performance ranks is the Wired Index (which grew by 8,1% over the period).
Speaking on Classic Business, chief investment strategist Piet Viljoen said: “I think it’s a matter of time before the penny drops, but there are actually a lot of stocks in South Africa that are extremely cheap, that make good, fundamental long-term sense to invest in, as opposed to speculating in, which I think a lot of people have been doing.”
The research forms part of Investec’s monthly feedback to holders of its unit trusts. In the February report, Viljoen says the market is shifting from momentum investing (chasing the hottest stock) to value investing, or buying companies with strong earnings potential. “In South Africa, massive negative investor sentiment has driven good quality companies’ stock prices to such low levels that one is really finding a lot of bargains on the table. No doubt, a lot of minds will become focused over the forthcoming months by the underperformance of offshore assets, which were supposedly guaranteed to outperform it is difficult to rationalise that you lost a third of your money (that is 33,3% of your offshore allowance) while investing in the so-called blue chips of the new economy.”
Viljoen says local companies have been forced to utilise their capital more efficiently during the bear market of the past few years, whereas many companies in the US have been overcapitalising their businesses, subsequently generating a lower return on that investment. Rather than putting one’s money in the Nasdaq, he recommends the investor leave it in cash or invest in the bond market.
The stocks that Viljoen held the most of in his Opportunity Fund unit trust portfolio during February were Reunert, SAB and Nampak. Also in its top 10 (as a percentage of the portfolio) were Tiger Brands, Santam and Sasol. The bulk or 58% of the fund is invested in equities, with 24% in cash, 13% in real estate and 5% in bonds.