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In this edition of Business Day Spotlight, we talk about the investment opportunities offered by small to medium-sized companies (SMEs) on the JSE.

Host Mudiwa Gavaza is joined by Vanessa van Vuuren, a portfolio manager and equity analyst at Sanlam Investments.

Van Vuuren says there is an opportunity for investors to take advantage of the growth in some of SA’s small to medium stocks on the JSE.

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Globally, attention and capital is usually directed towards large listed companies. In the US, the likes of Apple, Amazon, Google, Facebook, Microsoft and others dominate with market capitalisations that keep rising beyond the $1-trillion (R14.3-trillion) mark.

In SA, the story is much the same, with the JSE top 40 being the focus of many investors locally.

Van Vuuren says SA’s post-pandemic economic landscape offers ideal conditions for carefully selected small and mid-cap shares to outperform their large-cap counterparts. Local investors who stayed true to their investments in smaller companies have enjoyed incredible returns on their capital thanks to a reversal in some of the “significant valuation dislocations” that existed in the smaller company universe, she says.

Mudiwa Gavaza. Picture: DOROTHY KGOSI.
Mudiwa Gavaza. Picture: DOROTHY KGOSI.

While a number of large companies have fared well during the pandemic, Van Vuuren says some of the share prices may be out of reach for many ordinary South Africans.

Vehicle tracking company Cartrack, now listed as Karooooo on the JSE, and private education provider Curro, are some of the companies that Van Vuuren highlights as examples of current and future growth potential in the small-cap space.

The discussion focuses on the potential of small to medium-sized stocks on the JSE for wealth creation; the performance of these companies — before and after the pandemic; the lack of attention that such stocks suffer from; the effect of the economy on company prospects; Sanlam’s investment philosophy about such stocks; and an outlook in which sectors see good growth in the coming decades.

Van Vuuren also discusses how they go about investing in smaller companies and the time it takes to realise a return on such investments.

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 Business Day Spotlight is a MultimediaLIVE production.


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