Resource stocks continue to surprise

As at 30 November, equities – as an asset class, based on the FTSE/JSE All Share Index total return – have returned -12.26% year-to-date.

Other asset classes like cash, inflation-linked bonds, regular bonds and government bonds, have respectively returned +6.65%, -0.34%, +7.05%, and +6.21%. The only asset class that exhibited worse performance than equities is listed property, achieving -24.46% year-to-date.

While there were very few shining stars in stocks this past year, and decisions should always be based on a long-term objective, one approach that definitely bore fruit was being overweight in certain resource counters. In the SA top 40, the best-performing stocks were Anglo American, Anglo Gold Ashanti and BHP Billiton.

The mining industry is falling on tough times. With commodity prices still under pressure and weaker emerging market currencies, together with weaker investor sentiment, the positive returns from these resource stocks weren’t completely expected.

Although these stocks have come down a bit in the last month, the information and data from the companies continues to surprise investors positively. As long as the numbers remain positive, investor sentiment will continue to gain momentum.

In light of this difficult climate, diversification and a long-term outlook remains key. A well-diversified portfolio is able to weather the storm a lot better than concentrated portfolios in tough times. As long as your portfolio’s diversified, the best option will be to stick to your long-term financial strategy. Badenhorst is a Momentum Securities portfolio manager