The Financial Mail’s small-cap portfolio had another more-than-respectable year — especially since there was not a gold, platinum or telecoms share in sight.
The eight-strong portfolio was up around 33%, which admittedly lags the JSE’s all share index (Alsi) return of 37% — but comfortably beats the small cap index and AltX for 2025.
Once again the portfolio benefited from not having a blow-out. In fact, only one stock showed a negative return — that being timber group York, which was whittled down just 4%. One day York is going to run like a forest fire. Just when that day comes is not exactly certain.
The FM’s small-cap portfolio was boosted by a 125% gain from Weaver Fintech (the old HomeChoice) and a roughly 50% gain from logistics giant Grindrod. Investment company Ethos also ticked up encouragingly as value realisation efforts became more tangible in the second half of the year.
Zeda, the car rental and fleet management group, was helped by a generous dividend. The group, despite some solid numbers, continues to trade at a desultory earnings multiple.
Gaming group Goldrush was probably the biggest disappointment, with the market seemingly discounting the awarding of the lottery licence due to the usual controversy that accompanies such an event. Even the group’s progress in building a meaningful online gaming presence — something that might bring Goldrush into the sights of a gaming major such as Tsogo Sun — was overlooked.
The FM’s small-cap picks for 2026 are perhaps relying less on the much-mooted SA Inc uplift than on possible corporate action that may unlock trapped or overlooked value.
TRELLIDOR (186c)
This is a slightly reluctant pick as the share disappointed in previous years. The share is trading on a low single-digit earnings multiple, and the recent disposal of Taylor Blinds and NMC should not only sharpen operational focus but also perhaps make Trellidor a more palatable possibility for private equity or industrial buyers.
eMEDIA (215c)
A cash-generative broadcast business with great brands and enviable market share, trading on a 4.5 times earnings multiple and offering a close to 13% yield. What’s not to like? Even if 2026 is flat for eMedia, a decent dividend is almost certain. If parent company HCI — now degearing quite rapidly — wants to clean up its portfolio, then eMedia might be the first port of call for a minority shareholder buyout. And that offer would need to come at a premium to the current market price.
SOUTH OCEAN HOLDINGS (125c)
The electronic cabling sector has been on the fritz of late, with cheaper imports causing all kinds of havoc in the market. South Ocean, though, has a new influential shareholder in the form of an American industrial investment group. At 125c (a market value of less than R250m), South Ocean must be a target for a full takeover, remembering that earnings not too long ago topped 45c a share and that tangible net asset value is more than double the current share price.
The FM’s small-cap picks for 2026 are perhaps relying less on the much-mooted SA Inc uplift than on possible corporate action that may unlock trapped or overlooked value
AFRIMAT (R43.90)
After never really putting a foot wrong in corporate manoeuvres since listing in 2007, Afrimat came a little unstuck with its ambitious acquisition of cement producer Lafarge. Debt is obviously a worry, but Afrimat CEO Andries van Heerden is a smart operator and will latch onto any improvements in the sectors this mining and construction materials conglomerate serves.
INVICTA (R36)
If investors are banking on the cogs and wheels of the local economy whirring just a little faster this year, then Invicta could be a good bet. These days this niche industrial business is headed by Steven Joffe, one of the most underrated executives on the JSE. Joffe has already cleaned up Invicta’s structure and now has the business well poised if GDP growth takes hold this year.
CAXTON & CTP (R13.35)
It’s difficult to get one’s head around just how cheap Caxton is — no matter that it plies a chunk of its trade in moribund sectors such as printing and publishing. The group’s market value is almost completely underpinned by its cash holding and its nearly 35% stake in listed packaging group Mpact. The packaging division is growing into a formidable contender, quite capable of making smart and profit-enhancing acquisitions.
NU-WORLD (R27.10)
Like Caxton, after the cash is stripped out of this consumer goods distributor, the price being paid for enduringly profitable operations is negligible. It’s surprising Nu-World — which has sizeable offshore operations — has not been subject to corporate action yet. But investors get paid a decent dividend to hang around and wait for the action to unfold ... eventually.
iOCO (440c)
The operational turnaround has certainly gained traction, and share buybacks reinforce that the group’s new management (and key shareholders) have confidence in sustainable cash flows. There might even be selective acquisitions in the year ahead to bolster operational presence in key niches.
