JSE 2016: Blood on the floor
It was a mostly torrid year for the markets, with some blue-chip stalwarts reaching unexpected lows
What a horrible year on the JSE.
The chart depicting the all share index might at first glance not look too tragic, with the line holding comfortably above the 50,000 points level.
But in truth, investors probably can’t wait for 2016 to be over — especially those who have followed the philosophy of "buy blue-chip shares and hold them for the long term". They would have endured a wretched 2016 in terms of returns.
Sweet spots such as the vibrant consumer-driven sectors and traditional rand hedges turned sour, and rotating into better-performing sectors was not easy.
And many of the reliable "default" stock picks for retail investors performed disappointingly in the year to date. At the time of writing, Naspers was down 1.94%, while PSG fell 4%, Remgro 8%, British American Tobacco 8%, Steinhoff 2%, Richemont 17%, Aspen 7%, Sasol 7% and Anheuser-Busch InBev 27%.
Then there were the popular UK-aligned stocks that were smashed by the surprise Brexit decision — most notably Brait, Capital & Counties and Intu (all down more than 40%).
The popular consumer sector was not the usual cinch either. While Massmart (after a prolonged period of underperformance) and Shoprite (courtesy mainly of rumours of corporate action involving Steinhoff) both saw their shares up more than 35%, other supermarket shares, including Pick n Pay and Spar, were far more pedestrian. Grocery and fashion hybrid Woolworths, a popular stock pick, was down more than 30%.
Fashion retailers had a shabby time with Truworths down 10% and Mr Price down more than 20%. The Foschini Group (TFG) was the exception, with a smart 38% gain.
The investors who will have fond memories of 2016 are those who bravely delved where most feared to tread. Those who backed a recovery in construction giant Aveng, where sentiment had been ground to dust, were rewarded with a 252% return.
Industrial giants Barloworld (up 93% since the start of the year), Imperial Holdings (61%) and Invicta Holdings (68%) also provided enviable returns, even if prospects for the local economy sometimes appeared dangerously brittle. Though there were rich recovery pickings in certain construction and industrial stocks, there were other counters — such as PPC (down 64%), Torre (-52%) and Distribution & Warehousing Network (-60%) — that would have seriously demolished portfolios.
Other shares racking up notable returns in 2016 included telecoms specialists Blue Label Telecoms (up 60%) and Huge Group (82%), with both involved in game-changing corporate action. The performance by Blue Label and Huge shares is in stark contrast to cellular services giants MTN and Vodacom, whose shares were down 8% and 4%.
Other standout share-growth performances would include recently listed asset manager Sygnia (43%), a recovering Coronation Fund Managers (34%) and niche packaging enterprise Transpaco (40%), as well as chemicals groups Omnia (41%) and Rolfes (35%).
One noteworthy performance would be investment company RECM & Calibre, a deep-value investment vehicle. The value of its preference shares surged 55% after value was unlocked in key investments (including the sale of Dis-Chem shares ahead of the listing of this retail company on the JSE).
In essence, successful investors would have needed to rely on stock-picking rather than backing a sector for excellent returns.
Still, if there was a JSE sector to back in the past year it would have been banking, coming off a low base after being smashed by "Nenegate" at the end of 2015.
The "big five" banks and upstart Capitec all managed strong returns. Standard Bank was the best, with share-price growth of close to 40%, and FirstRand and Nedbank managing better than 30%.
Niche financier Transaction Capital was up more than 20% since the start of 2016.
The food sector provided some sumptuous returns — also after a fairly lean spell following a prolonged drought in many parts of SA. Tiger Brands (up 34%), Tongaat Hulett (46%) and AVI (20%) were the pick of the bunch, with Pioneer Foods and RCL Foods lagging somewhat.
Poultry producers had their profits plucked when a combination of higher feed costs and cheaper imports hit operating margins. But JSE "big bird" Astral Foods and niche player Sovereign Food Investments were both up 8% for the year to date. Interestingly, both these chicken stocks beat fishing group Oceana, which was up only 6% despite an impressive profit catch in the financial year to end-September.
Resources were another bright spot, with platinum producers shining. Punters would have secured extraordinary returns by looking past volatile commodity prices and an oscillating currency to simply buy the big three resource counters — Anglo American (up 229%), Glencore (163%) and BHP Billiton (39%).
Put another way, an investment of R100,000 spread equally between the three mining heavyweights would have garnered a snappy return of R243,000 without counting back dividends.
The performance from gold miners, coal miners and some base-metal producers was mixed. But certain junior miners showed their mettle — particularly platinum counters Tharisa (up 328%), Wesizwe (85%) and coal merchant and miner Wescoal (128%).
Though they did not "shoot the lights out" in 2016, it is perhaps encouraging to see fast-growing second-line companies — health-care conglomerate Ascendis (up 17%), local bourse operator JSE Limited (27%), private-education group AdvTech (19%), empowerment investment company Hosken Consolidated Investments (18%) and acquisitive food brands group Rhodes (12%) — still attracting positive sentiment.
Of course, there were a few nasty blowouts during the year. Empowerment group Labat reversed its logistics acquisitions, then saw its shares lose 80% of their value. Some former market darlings also took beatings, including electronics group Ellies (down 68%), cement maker Sephaku (-43%) and financial services group Finbond (-39.5%).
Consistent profit performers in the small-cap space were also not rewarded for their efforts. Logistics group Santova was down 20%, investment counter Trematon Capital fell 20% and Consolidated Infrastructure was down 31%. Alternative gaming group Phumelela was up only 2%, albeit up more than 30% since mid-December 2015.
Recently listed counters also felt pain, with Botswana-based retailer Choppies down 55% and offshore investment company Astoria shedding more than 40%.
Shares in investment companies EPE Capital Partners and Universal Partners were down 8% and 6%, with fledgling fast-food brands business Gold Brands Investments down 20%.