World’s key mar­kets in US hit new highs

On the JSE, Dis-Chem is per­form­ing well among the top 100 shares.

Finweek English Edition - - Contents - By Lu­cas de Lange

com­mod­ity shares are still the favourites on the JSE with Kumba, to the sur­prise of many, at the top of the list of the strongest shares mea­sured in terms of the dif­fer­ence be­tween the mar­ket price and the shares’ own 200day ex­po­nen­tial mov­ing av­er­age (EMA). South32, As­sore and An­glo are close be­hind, but at the same time the weak­est share is the gold and plat­inum group, Sibanye-Still­wa­ter. This group just is­sued con­vert­ible deben­tures val­ued at $450m to fi­nally fi­nance its takeover of Still­wa­ter Min­ing in the US. The share has lately been pun­ished by the mar­ket (Mar­ket flogs Sibanye over Still­wa­ter, 10 Au­gust is­sue), while its gold as­sets are show­ing se­ri­ous losses.

An­other share that’s un­der strong sales pres­sure is the once-pop­u­lar Brait. It has fallen by al­most 70% since the be­gin­ning of 2016 when it was trad­ing above R170/share. It’s ap­par­ently still ex­pe­ri­enc­ing prob­lems with UK ladies cloth­ing re­tailer, New Look, for which the mar­ket has no stom­ach. Its down­ward move­ment is sup­ported by its price/ vol­ume trend (PVT), which is still go­ing south. PVT is ob­tained by mul­ti­ply­ing vol­ume by the per­cent­age change in the price and then de­pict­ing the re­sult graph­i­cally. PVT of­ten pre­cedes a trend change, of which there is no sign at Brait or Sibanye.

An in­ter­est­ing growth share that is per­form­ing well among the top 100 on the JSE is Dis-Chem, which was listed in Novem­ber last year. Its pop­u­lar­ity in the mar­ket is ap­par­ent from the fact that it has a price-to-earn­ings mul­ti­ple of close on 40 with a div­i­dend yield of 0.2%. It’s ex­pand­ing rapidly and is in the process of open­ing 18 new out­lets in the cur­rent fi­nan­cial year to Fe­bru­ary. At the end of Fe­bru­ary 2017 it had 108 out­lets.

Its mar­ket cap­i­tal­i­sa­tion has sur­passed R25bn, which means that the group’s founders, the Saltz­man fam­ily – which own 53.1% of the is­sued shares via a trust – is now one of the rich­est fam­i­lies in SA with an es­ti­mated worth of R13.3bn. Ivan Saltz­man and his wife, Lynette – both phar­ma­cists – es­tab­lished the busi­ness in 1978 with cap­i­tal of R10 000 and a sin­gle phar­macy in Mon­deor, Jo­han­nes­burg. The group op­er­ates in one of the few sec­tors that still shows sat­is­fac­tory growth in South Africa. Its chair­man, Larry Nes­tadt, points out that phar­ma­ceu­ti­cal and re­lated prod­ucts and ser­vices are more ro­bust than gen­eral re­tail, which is un­der pres­sure ow­ing to SA’s low GDP growth.

An­other for­mer favourite, Rhodes Foods, has un­for­tu­nately been dis­ap­point­ing. It ini­tially treated in­vestors well since its list­ing in Oc­to­ber 2014 by show­ing growth of al­most 190% in its share price un­til it reached a high of 3 100c. Since then it’s been down­hill all the way and it has thus far dropped by about 44%, and there is no sign of the de­cline be­ing halted.

The world’s lead­ing mar­kets in the US as mea­sured by the Dow Jones, the S&P 500 and Nas­daq have all three re­cently reached new highs. It’s sig­nif­i­cant that the in­creases have taken place over a wide front with es­pe­cially ba­sic com­modi­ties, in­dus­tri­als and fi­nan­cials per­form­ing. The gen­eral feel­ing is that the ris­ing trend will con­tinue given the good news on the US eco­nomic front. It’s pre­dicted that de­fence shares should be watched as they will ben­e­fit from the Trump ad­min­is­tra­tion’s in­creased ex­pen­di­ture on de­fence. Leg­is­la­tion to ap­prove a de­fence bud­get of $700bn was re­cently passed by the se­nate.

Among the shares that have bro­ken through, Old Mu­tual seems to be the most in­ter­est­ing with its PVT giv­ing a strong buy sig­nal. ■ ed­i­to­rial@fin­

Lu­cas de Lange is a for­mer ed­i­tor of fin­week and an au­thor of two books on in­vest­ment. **fin­week is a pub­li­ca­tion of Me­dia24, a sub­sidiary of Naspers.

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