The big, blue chip losers of 2016
VOLATILITY CLAIMS BIG VICTIMS
Investors are unlikely to look back on 2016 with much fondness. The year began with a market selloff that made January one of the worst in history. In the first 10 trading days of the year, the FTSE in London lost more than £113 billion in value. Locally, the FTSE/JSE All Share Index plunged 8.6%. Things improved amid plenty of volatility and the JSE rose to within 1.6% of its all-time high in June. It has since declined and is 2.8% down for the year.
The Top 40 illustrates how uneven market performance has been. Of the 44 stocks in the index, 21 are up and 23 are down.
Anglo American has surged over 200% since January, from about R65 per share, to R212.12 on Friday. Other leaders include Impala Platinum, up 75.03% so far, and BHP Billiton, which has climbed 38%.
There have also been some big losers, including some very significant companies. Brait has lost 47.83% this year, Intu Properties is down 32.04%, Woolworths fell 31.46%, Mr Price 25.73%, BidCorp 21.36%, Richemont 16.35%, Old Mutual 15.33%, Steinhoff 14.35%, Reinet 13.68% and MTN 13.02%.
Brait’s change in fortunes has been quite remarkable, surfing from R20 at the start of 2012 to R170 at the end of 2015. From R160 per share in June 2016, it has shed nearly half of its value since. It closed on Friday at R85.02.
The trouble really began for Brait’s share price with the Brexit vote, as suddenly the acquisitions it made in the UK last year began to look less inspiring. The company posted a R4.5-billion loss for the six months to September, largely due to pound weakness.
A similar pattern could be observed with Intu. After the Brexit vote it plunged more than 26% in two weeks. Some investors will be asking if it has interesting potential at current levels. It is offering a yield of 6% in sterling.
The two retailers in the list have retreated significantly in the past three months. For a long time, these companies had traded on very elevated price-to-earnings ratios and these have now come back a long way. They must now be close to value territory.
What is perhaps most interesting is the appearance of both Richemont and Steinhoff. However, their recent declines suggest things are turning.
After the recovery in commodity counters, the JSE in 2016 looks very different to the past few years. Heading into 2017, a new market cycle may have begun. Investors can no longer rely on the big rand hedge industrials and may have to start looking elsewhere for returns.