Alec Hogg
Boardroom talk
The detailed performances of the Johannesburg Stock Exchange (JSE) during the first quarter of this year show there is still very good money to be made on shares provided you pick the right stocks.
And judging from the experience of the first three months, finding companies involved in “corporate action” produces the biggest wins.
Half of the JSE’s top 12 performers of the past quarter enjoyed share price improvements that came as a direct result of takeover activity. Leading the pack was education business Educor whose price surged a staggering 172% (from 43c to 117c) because of a buyout offer at 120c from majority shareholder Naspers.
The quarter’s next best share price appreciation was posted by the country’s largest distributor of security equipment, the low profile Elvey Security Technologies, whose value jumped from end-December’s 40c to 86c on the final trading session of March 31. Again, it was a direct result of a buyout offer, at 90c, made this time by industrial conglomerate Hudaco.
In absolute terms, though, diamond giant De Beers created by far the most wealth for shareholders. Again, corporate action was responsible with the share price ending the quarter 52% higher following a buyout offer from the consortium of Anglo American plc, the Oppenheimer family and its Botswana affiliate Debswana.
The quarter’s improvement from R200 to R305 in the De Beers price added an astonishing R42-billion to its shareholders’ net worth. By way of comparison, that’s enough to buy 100% of Stanbic, the country’s most valuable banking group and itself ranked as South Africa’s eighth most valuable company.
Three more of the quarter’s 12 biggest winners owe their newfound popularity among investors to talk of pending buyouts. Corpcom, which was covered in this column last month, leads this group with a 104% price improvement on disclosures of takeover talks with a global outdoor advertising group.
Another share price to flourish was that of steel group Iscor, whose value rose 75% in the three-month period on the strength of a hostile takeover bid. Education and training business Advtech made it into the quarter’s top dozen performers with a 48% rise (from 29c to 43c) following news of a since aborted bid from entrepreneur Jonathan Beare and his merchant banking associate Mark Barnes.
The first quarter’s performance tables also highlighted a handful of stocks whose attractions, after being neglected for so long, were suddenly rediscovered by the investment community.
Leading this pack was the 79% price surge by motor component manufacturer Metair, which reported a near trebling in its earnings in the financial year to end December. Aquila Growth, whose major asset is a chunk of the successful gaming operation Global Resorts, picked up 63% in value as investors started looking beyond the more obvious winners from the casino licensing awards.
Profit turnarounds with the promise of better to come translated into excellent gains, too, for some shareholders. Bombed-out technology company Faritec did best of these with a 95% price rise, with other beneficiaries construction group Murray & Roberts (up 52% in the quarter) and building supplies retailer Cashbuild (up 50%).
Highly speculative exploration group Thabex made it on to the list largely due to a trebling from 30c to 90c during the first two trading weeks of the year. Even though the stock gave back half those gains it still ended the quarter 63% higher than it began.
All of which emphasises that as bleak as the environment may appear when seen as a whole, there remain excellent opportunities for those prepared to do their homework and then exercise the patience that’s often equally important. It’s easy to make money out of shares when the bull is rampant. But it’s in more difficult conditions like today where the quality stock pickers prosper.