Mar­ket pun­ishes Mass­mart

Finweek English Edition - - MONEY - BY LU­CAS DE LANGE

There are very few things that you can be sure of when you in­vest in shares, but it is ac­cepted that, in the f inal in­stance, earn­ings rule the roost when it comes to de­ter­min­ing share prices. It is sig­nif­i­cant in this re­gard that Mass­mart, which re­cently an­nounced a 26% de­cline in head­line earn­ings per share for the six months to end June, has landed among the poor­est per­form­ing shares on the JSE. The share, which caught the imag­i­na­tion of many in­vestors when it was ac­quired by Wal­mart, has now tum­bled by about 49% since reach­ing its his­toric high in May 2013.

There is a belief that Wal­mart’s in­put – such as gro­ceries at Game – is not as suc­cess­ful as orig­i­nally an­tic­i­pated. For ex­am­ple, it is very diff icult to take on com­peti­tors such as Shoprite/Check­ers, Pick n Pay and Wool­worths in shop­ping cen­tres.

That there has been an un­der­ly­ing weak­en­ing in the mar­ket has been borne out by the fact that the num­ber of shares whose clos­ing prices are 10% or more above their in­di­vid­ual 200-day ex­po­nen­tial mov­ing av­er­age (EA) has dropped to 52% of the 100 big­gest shares in terms of mar­ket cap. The feel­ing among most in­vest­ment man­agers seems to be that the cur­rent weak­ness should rather be seen as a buy­ing op­por­tu­nity. Nev­er­the­less, some ad­mit that they are in­creas­ing their ex­po­sure to de­fen­sive shares.

At the same time, there are warn­ing signs that, with the lo­cal econ­omy cur­rently so weak that we could end up in re­ce­ces­sion, pre­cau­tions should be taken. Even a favourite such as Mr Price is ex­pe­ri­enc­ing pres­sure as it has weak­ened by some 28% since April.

There is an un­easi­ness about what’s hap­pen­ing on the New York Stock Ex­change, the world’s fore­most bourse. For ex­am­ple, New York ’s gen­eral 12-month mov­ing av­er­age, an in­di­ca­tor re­garded by many mar­ket play­ers as im­por­tant, has headed south for the first time in four years. The trend is con­firmed by the S&P 500, which re­cently ex­pe­ri­enced its big­gest down­turn since 2011 when it dropped by al­most 22%. At the time, the JSE’s All Share In­dex de­clined by just over 15%, which did of­fer good buy­ing op­por­tu­ni­ties.

Nev­er­the­less, it should be borne in mind that the JSE, like most stock ex­changes, tends to fol­low New York.

It is note­wor­thy that banks and in­sur­ance com­pa­nies have made their ap­pear­ance among the weak­en­ing shares. Even San­lam, which has per­formed re­mark­ably for its share­hold­ers since 2009, has re­tracted to such an ex­tent that its long-term mov­ing av­er­age (200 days) has shown a down­ward re­ver­sal for the first time since 2009. MMI and Lib­erty Hold­ings have also re­versed. Of the banks, shares like Stan­dard Bank and Ned­bank look weak. FirstRand is, as usual, the strong­est among the heav­ies.

Of t he sha r es t hat a r e brea k i ng through their 200-day mov­ing av­er­age, Tru­worths, Vuk­ile, Shoprite and Aquarius look in­ter­est­ing. With re­gard to the last­men­tioned, there are 10 con­sen­sus an­a­lysts who be­lieve it’s a buy. And in the case of Royal Bafo­keng, there are a some­what un­usual nine buy rec­om­men­da­tions. WEAK­EST STOCKS

LON­MIN

ARCELORMIT­TAL

AVENG

KUMBA IRON ORE

HAR­MONY

GLEN­CORE

AL­TRON-A

AS­SORE

ARM

EXXARO

IM­PLATS

AN­GLO

ILLOVO

MASS­MART

% BE­LOW 200-DAY EA

-73.99

-52.6

-51.5

-50

-49.3

-46.6

-42.6

-38.7

-35.02

-31.02

-29.3

-26.8

-26.2

-21.5 STRONG­EST STOCKS

PSG

MONDI PLC

PI­O­NEER FOODS

MONDI LTD

MPACT

CAPITEC

RE­SILIENT

KAP STEIN­HOFF NASPERS-N

DIS­COV­ERY

DATATEC

HYPROP

NET­CARE

WOOL­WORTHS

SPAR

MEDI­CLINIC

RMI HOLD­INGS

CLICKS

AS­TRAL

DIS­TELL

SU­PER GROUP

AVI FIRSTRAND TELKOM

BAT

CAPPROP

PICK N PAY

INVESTEC PLC

INVESTEC LTD

RMB HOLD­INGS BID­VEST OLD MU­TUAL ASPEN

TFG

MR PRICE

BLUETEL

REM­GRO

SABMILLER

CITY LODGE

SA CORP *Based on the 100 largest mar­ket cap­i­tal­i­sa­tions BREAK­ING THROUGH

% ABOVE 200-DAY EA

92.8

79.3

76.9

76.7

69.5

68.6

68.5

64.6 61.3 46.5

44.4

43.8

41.1

38.2

36.96

36.4

35,8331

34.7

34.6

33.9

33.3

30.9

30.7 29.8 29.3

29.1

28.7

27.99

27.9

26.4

26.1 26.03 24.6 23.4

22.9

21.9

21.7

21.3

21.2

20.95

20.85

% ABOVE 200-DAY EA

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