Nampak sticks out like a sore thumb
Investors have apparently used the earlier weakness on the JSE as a buying opportunity. To support this, the share prices of most of the 100 largest companies on the exchange are now once again lying above their 200-day exponential moving averages.
most of the top 100 companies on the JSE are once again lying above their 200-day exponential moving averages (EMAs) after most of them – 54% – found themselves below their EMAs last month for the first time in quite some time ( finweek, 15 October). Some 55% of the top 100 are once again in positive territory, which indicates that investors used the market’s pullback to buy more shares.
Of the strongest shares, PSG Group is head and shoulders above the rest, followed by its offshoot, Capitec, despite analysts’ fears regarding the unusual phenomenon that it’s trading at a substantial premium to the valuation of its underlying investments.
Corporate action is the reason why SABMiller and Aquarius fill the third and fourth places respectively. An interesting fact, evident from the table of the strongest shares, is that the longstanding stepchild among the major shares, Sappi, is still experiencing firm buying pressure; to such an extent that not only did it reach a new high, but in fact its highest level since 2009. There’s much truth in the belief that once a heavyweight has started reaching new highs, it will continue doing so because large investors have decided on a rerating.
Among the weakest shares, commodity stocks are still suffering the most. Lonmin, Kumba and ArcelorMittal are all three lying 50% or more below their EMAs. In fact, with one exception, the 12 weakest of the weak were resources shares. The exception, which sticks out like a sore thumb, is Nampak, Africa’s largest diversified packaging group, which is being heavily punished because of its disappointing results for the six months to March. It’s at levels last seen in 2012 and judging by the consistently new lows reached, large investors did not hold out much hope that matters would improve in the half-year to end September. Nampak is facing a number of major problems, such as its glass division, which suffered a loss of R70m. And then there is talk of a price war with Consol, the country’s largest supplier of glassware. A positive is that the rest of Africa’s contribution to Nampak’s profits is growing well. In the half-year to March, it contributed 38% (2014 halfyear: 27%) to trading profit.
Another share that has been heavily punished –landing up among the resources and building and construction stepchildren – is MTN. It finds itself in this position because of the enormous fine it has to pay in Nigeria, while the market is also averse to the fact that the JSE wants to investigate it.
Among the shares that have broken out and appear interesting, Adcock Ingram, Vukile and Rebosis seem to be the most promising.