Financial Mail - Investors Monthly - - Opening Bell - Petri Redel­inghuys

Share price: R103.52 JSE code: CFR

con­sider SELL IT sell­ing SEEMS a com­pany COUN­TER­IN­TU­ITIVE that is do­ing TO so well. But over the past 12 months the share price has re­ally gone side­ways to nowhere.

This is a poor per­for­mance con­sid­er­ing that the weak­en­ing rand has been some­what of a tail­wind over the past few months and that Richemont re­ported or­ganic sales growth of 10% in April.

Granted, this sales growth was higher than ex­pected for the most part, but it comes with the back­drop of the lux­ury sec­tor be­ing down 7% in the week be­fore the num­ber was re­ported. Since April the stock has traded higher, but by mid-Oc­to­ber it was back at the lows of April.

It seems the mar­ket finds lit­tle rea­son to buy Richemont. Fur­ther, con­cerns that MSCI may an­nounce that it is re­duc­ing the weight­ings that com­pa­nies with un­equal vot­ing struc­tures hold in its in­dices at the end of Oc­to­ber has some of the ma­jor mar­ket names un­der pres­sure.

One such com­pany is Richemont. We don’t know if MSCI will make a ma­jor change to how it cal­cu­lates its in­dices, but Richemont is a big contributor to a va­ri­ety of in­dices in SA and glob­ally. A re­duc­tion in its weight­ing in ma­jor in­dices will cre­ate forced sell­ing from in­dex track­ing funds and ETFs, with po­ten­tially se­verely neg­a­tive con­se­quences.

Pic­tures: 123RF

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