EDITOR’S NOTE

Perhaps it’s time to go small or go home?

IT’S BEEN SO FAR, SO GOOD with the JSE this year — thanks to momentum provided by large-cap stocks like Naspers, AB InBev and the big miners. At the time of writing, April was looking anything but the cruellest month — though shareholders in low trackers such as Phumelela, Omnia, Sun International, EOH and Nampak might disagree.

Of course, the traditional question of whether to “sell in May and go away” is all the more pertinent. Yes, some decent profits can be banked for investors in the all share index. This might well be tempting with what looks like a fractious election looming. I can’t begrudge anyone taking a decent profit — especially after the hammering investors took last year. It’s what I have done, though I have not come close to making up for last year’s beating.

That said, I’m not sure it’s possible to keep ignoring the enormous value that lies in stocks outside the top 40 — those small

to medium companies firmly bedded in the SA economy. Earnings multiples, in some instances, are dismissive, and perhaps betray a resignation around the political will in the economy rather than the prospects of individual counters.

I can remember that not too many years ago punters were bitching about not being able to find decent value. Now there’s a plethora of well-priced opportunities, and many ordinary investors are cooling their heels on the sidelines. I am as guilty as the next investor. I remain short of local stocks, and have nibbled only very selectively (and skittishly). That said, share prices do show that turnaround opportunities are being studiously avoided, solid value discounted and promising profit performances given the jaundiced eye.

There is increasing evidence of traction at a number of companies that have restructured smartly to adapt to the dour trading environment. If and when economic growth kicks in again, these leaner and meaner counters will no doubt take off.

I have happily noted the commendable turnaround effort at technology conglomerate Altron — engineered largely by new shareholder of reference Value Capital Partners (VCP). Hopefully VCP has the same success at PPC, Adcorp, Sun International and Grand Parade Investments.

A fresh perspective can often lift struggling counters from their funk, with a new lead shareholder able to be more decisive around prickly legacy issues. Maybe there will be more proactive engagement from influential shareholders (read: institutions) around underperformance and strategic stuff-ups rather than the quiet diplomacy that still pervades.