BARLOWORLD ANOMALY CREATED OPPORTUNITY
SOMETIMES ONE’S faith in the rationality of markets is sorely tested. Like when Barloworld declared a special dividend the other day.
Now it has been known for months that the latest phase of Barloworld’s retreat from its ambition to be a diversified international player would entail a cash distribution and the unbundling of the stake in PPC Cement. That news should already be in the price, and though the object is to unlock value, it doesn’t actually create new value: it’s simply passing over to shareholders assets they already own indirectly.
Yet when Barloworld declared a 500c special dividend, the share firmed 807c on a day in which the JSE as a whole weakened. A small gain might be understandable, as investors could welcome the crystallisation of some of their expected handout; but a gain 60% greater than the payout is simply absurd.
Then, the next trading day, the share fell back 202c against a firmer overall market, as sanity returned. And the following day it was again weaker than the market.
Over a slightly longer period, Barloworld ended February at 17 340c, with the overall JSE index at 25 796; as I write, it’s 17 320c, with the index at 25 209. So it’s held up modestly better than the market, which may be justifiable; but for a couple of days there were useful pickings for any traders who took advantage of the anomalous reaction to the dividend news.