SMALL CAPS’ BIG GAINS
It’s rare that a handpicked portfolio returning a more than 40% gain over a year is comfortably trounced by the index. Welcome to the weird and wonderful world of JSE small caps ...
The FM’s small-cap picks for 2021 returned more than 40% capital gain for the year — excluding the payment of some really sumptuous dividends, which would have brought the gains to closer to 45%.
The portfolio was also underweight commodity counters, which makes its performance all the more commendable. In addition, none of the companies we selected benefited from the buyout/delisting trend, which continued to rage on the JSE.
That said, the FM’s portfolio underperformed its benchmark. The scoreboard will show that the JSE’s small-cap index returned well over 50% over the year — a spectacular performance from an asset class that, not too long ago, was neglected and derided when a handful of large international companies were consistently driving the JSE
higher and higher.
By comparison, the JSE’s all share and mid-cap indices were up about 25% for 2021, while the top 40 was up just shy of 24%.
There were some great small-cap rebounds during the year, with some of the standouts being electrical retailer Ellies (up 260%), steelmaker ArcelorMittal (up 750%) and financial services specialist Purple Group (up 240%), as well as technology businesses PBT Group (100%), Mustek (66%) and Alviva (85%).
Share prices were also driven by buyouts and delistings, with shareholders seeing premiumpriced offers pitched (or in the process of being pitched) for companies such as Alaris, Adapt IT, Onelogix, ARB Holdings and Long4Life.
Selected small commodity players (junior miners, if you will) also saw sterling gains. Tin miner Alphamin rocketed by more than 265%, cash-flush ferrochrome business Merafe appreciated by over
150%, platinum miner Wesizwe roughly doubled, metal merchant Insimbi shifted up 60% and Jubilee Metals Group 30%. There were, however, some dull spots — most notably much-vaunted copper miner Orion, which dribbled down 9%.
The FM’s portfolio was driven by five big gains: hotel group City Lodge (up more than 100%), aluminium group Hulamin (up 90%), investment counter Long4Life (up almost 75%), cash-spinning passenger transport group Frontier Transport Holdings (more than 70% up), and printing and packaging group Caxton & CTP
(up 50%).
Tech-aligned counters Net1 UEPS (up about 16%), agribusiness investor Zeder (about 22% up) and Metrofile (20%) were satisfactory, with the latter two paying decent dividends during the course of the year.
Consumer appliance business Nu-World registered muted 5% growth, but did provide some comfort with a generous dividend. Logistics group Grindrod — where there have been growing expectations of a value unlock — crept up by a low single digit.
Our only real shocker was Pan African Gold, which was down more than 30%.
The group didn’t do much wrong during the year — and even paid a decent dividend — but the market didn’t take a shine to gold for the most part of 2021.
ALTERNATIVE EXCHANGE
The AltX, which caters mainly for smaller entrepreneurial businesses, had a fairly rollicking year, with the index up more than 25%.
Mostly, the market perceives the AltX as comprising mainly companies either struggling or left-for-dead. Admittedly, there are some in obvious distress, but that shouldn’t detract from some impressive performances over the year.
Tin miner Alphamin was the standout share, gaining about 265%, while stalwart commodity counter Jubilee Metals Group managed 26% due to progress in building a global resource-extraction business. Day hospitals group Advanced Health saw its share price almost double after reinforcing its balance sheet, and communications business Alaris was up 79% on the back of a pending buyout offer.
Outside of impressive share price movements, a new-look Astoria took shape as a diversified investment company with holdings in retail, mining and gaming. Etion began unlocking value by selling off subsidiaries. Universal Partners managed a successful exit of its investment in electric motor maker Yasa at a decent premium. And sector stalwarts such as ISA Holdings, Workforce, Oasis Property, Silverbridge and
Telemaster did encouragingly well.
Other transformatory efforts were less convincing, including plans to breathe new life into bombed-out Mine Restoration, Visual International, Imbalie and GoLife.