Where the post-GNU money has been made on the JSE

In a stock picker’s market, you could have seen returns of 50%-plus since May … 

The JSE All Share Index is up 13% over the last six months – since early May – where the prevailing mood in the country was of uncertainty given the national and provincial elections at the end of that month.

A government of national unity (GNU) wasn’t seen as a likely or even possible scenario by most experts. Performance on the market hasn’t been even, with resources practically flat over the period.

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It is clear that sentiment has improved dramatically since the formation of the GNU, and this has helped propel many of the SA Inc-type stocks to their highest levels in years.

Listen/read: Sentiment is improving under the GNU – JSE CEO

Traditional rand hedges have battled as the currency continues to strengthen (5% better against the dollar over six months). This has been a stock-pickers market.

The stars

Among the Top 40, eight shares have delivered returns in excess of 30% over the six months, with insurers Discovery (55%) and OUTsurance (52%) leading the pack.

Sanlam is up 30%. Three of the big banks, Capitec Bank (43%), Standard Bank (39%) and Nedbank (33%), are also standout performers, along with Mr Price (45%) and Impala Platinum (39%).

Discovery’s performance has been astonishing, with it currently trading at 52-week highs (over R180) versus lows of under R110 in May and early June.

From then, it has been a steady climb. The market has clearly changed its mind about the threat of the ANC’s National Health Insurance (NHI) plan, with a more pragmatic approach likely given the various parties who are members of the GNU.

In its September results presentation, Discovery highlighted two items regarding the Section 33 “pinch point”. This section says: “Once National Health Insurance has been fully implemented as determined by the Minister through regulations in the Gazette, medical schemes may only offer complementary cover to services not reimbursable by the Fund.”

Read: Adrian Gore: An NHI fix can be found

It reiterates that: “Until the NHI is fully implemented, there are no restrictions on medical schemes,” with some views in the market being that this could take a decade or more to implement.

It also asks a key question regarding complimentary cover: “How comprehensive will NHI be?”

Mid-caps even brighter

Performance among mid-caps has been even stronger, with just over 20 shares up more than 30% over the last six months.

Most of these are ‘SA Inc’ stocks, including Southern Sun (63%) which continues its strong post-Covid 19 recovery, Life Healthcare (62%), Netcare and Adcock Ingram (both 32%), JSE Limited (43%), Momentum (40%), as well as retailers TFG Limited (56%), Italtile (49%), Truworths (46%) and automotive group Motus (38%).

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Some of this will also be on the back of the anticipated increase in consumer spending following the implementation of the two-pot retirement system in September.

Listen/read:
Are we seeing a consumer-led GNU recovery?
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The performance of some on the list is stock-specific, such as Premier Foods (up 77% in six months) as commodity input prices eased, WBHO (55%), UK wealth manager Quilter (31%) and two Reits, Hyprop (46%) and Fortress B (31%).

ARC Investments is up 38% as it continues to bulk up in the financial services space in partnership with Sanlam (with a little help from their common shareholder). Net asset value, as calculated by the group, has practically doubled in the last four years (R9 billion to R18 billion). Rain and Tyme Group account for about half of this valuation.

An exit of either of these (it plans to list Tyme in the next four to five years) will see shareholders score.

Read: Discovery and TymeBank take market share, but who’s losing?

Three resource counters are among the mid-cap top performers: Pan African Resources (49%), Montauk Renewables (44%), and DRDGOLD (41%).

And the top performer is …

The top performer, excluding small caps, on the market over the six months is WeBuyCars, which is up by 78%. It listed on 11 April at R18.75 a share and is currently trading at over R37.

Even after these gains, many of the shares – particularly in the mid-cap space – are still trading at very undemanding price-earnings ratios (low teens).

Holding one of four big caps in the Top 40 – Sasol, Aspen Pharmacare, Mondi plc or Kumba Iron Ore – would’ve seen you down by around 20% or more.

Read:
Best and worst shares since January
Most JSE shares fall in first quarter
JSE springs a record for the September quarter

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