World’s key markets in US hit new highs
On the JSE, Dis-Chem is performing well among the top 100 shares.
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. ■ firstname.lastname@example.org
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.