Somehow it felt better for investors this year. But the scoreboard will show that the JSE’s all share index (Alsi) actually fell short of a 10% annual gain in 2024.
The FM’s Hot Stocks portfolio more than doubled the Alsi’s mediocre gain; with dividends accrued, the magazine’s picks managed a rather decent 26%. And there were dividends aplenty in 2024, as well as generous distributions from a number of our picks, such as gaming group Sun International, printing and packaging firm Caxton, industrial assemblage Argent, technology conglomerate Reunert, pharmaceutical group Adcock Ingram, banking group FirstRand and car rental giant Zeda.
The story for 2024 was the resurgence of South Africa Inc. For so long it had lagged the broader market, which was dominated in recent years by the large global listings scattered around the JSE. It was a wonderful, long-awaited homecoming.
Some of the JSE’s popular shares might arguably now be fully priced. But stock pickers may still have a whale of a time; a good number of punters are predicting stronger flows into emerging markets this year, especially with US markets starting to look overheated. But that has been a refrain in previous years too, and it proved frustratingly elusive.
Craig Pheiffer, chief investment strategist at Sasfin, explains that the counterargument to the US markets being too expensive is that “that’s where the growth is”.
He says: “It’s true that the prices of technology stocks have risen dramatically. But earnings growth has been just as dramatic, as technology advances have moved in leaps and bounds. Companies have chased after semiconductors, AI, data centres, battery technology, robotics and self-driving cars, all of them intent on not being left behind and losing a competitive advantage, or maybe even on gaining a competitive edge.”
He says the developers, manufacturers and suppliers of these goods have benefited handsomely, and earnings growth has justified high valuations. “However, where companies have misstepped and missed earnings expectations or provided weaker than expected guidance on future earnings, their share prices have instantly been severely punished.”
The official JSE scorecard might not make reading that is impressive, but local investor sentiment is discernibly better, for a couple of reasons.
First, it’s worth remembering that sentiment was dangerously jittery in the run-up to the election, which many observers initially felt could have stacked up fractious political alliances that would not have advanced much-needed economic growth or fostered a business-friendly fiscal policy. The formation of the government of national unity (GNU) and its subsequent functioning have largely soothed investor nerves.
Second, the overall market in 2024 was dragged down by the larger resource stocks, which detracted somewhat from the vibrant performances produced by the industrial and financial sectors and the retail segment. The small-cap sector, where the determined deep-value investors had been plugging away for years, also did well, and some scintillating gains were registered (see our separate small-cap review).
Among the JSE’s large stocks, value fashion retailers Mr Price (up more than 85%) and Pepkor (close to 50%) were star performers. Financials put in a strong showing too; insurer Outsurance led the pack with a gain of about 58%. Capitec Bank (up 55%) and financial services conglomerate Discovery (up 36%) also showed up well.
The JSE’s big global stocks were a mixed bag. Technology investment group Prosus was up by roughly a quarter, while beer giant AB InBev was down by about the same margin. Cigarette giant British American Tobacco (BAT) was up about 20% without counting its rich dividend flows, while luxury brands specialist Richemont managed a gain in the high teens.
While not wishing to put a dampener on proceedings this report, it would be remiss not to note that overall the JSE (once again) markedly lagged both big US benchmarks.
The big losers among the large counters were energy group Sasol (down 55%) and mining group Sibanye-Stillwater (down about 40%). Mining giants BHP and Glencore, as well as paper group Mondi, all dropped more than 20%.
Stock pickers who looked beyond the obvious investment areas would have made fortunes. Almost-forgotten resource junior Sable Exploration & Mining registered a gain of more than 1,100% and Kore Potash rose more than 300%. Other “lesser known” shares that rewarded richly included construction group Stefanutti Stocks (up 200%), Raubex, ARC Investments, human resourcing specialist Primeserv, vehicle tracking and fleet management group Karooooo, Argent, investment counter Novus, services group CA Sales, RFG Foods and Blue Label Telecoms.
While not wishing to put a damper on this report, it would be remiss not to note that overall the JSE (once again) markedly lagged both big US benchmarks. The S&P 500 was up more than 20% and the technology-laden Nasdaq rose close to 30%. The JSE was, however, ahead of the London Stock Exchange’s FTSE and also edged the Euro Stoxx 50.
The FM’s portfolio was thankfully short of duds this year. Our laggard was niche financial services business Vunani, but this drag was offset by strong showings from Outsurance, Argent and Hudaco. Nifty gains were registered by small caps such as PSG Financial Services and Calgro M3, as well as our perennial favourites, Reunert and Astral Foods.
Bubble, bubble …
So, what does 2025 hold? Certainly on the surface the mood very much contrasts with the despondent and despairing views at the start of last year. But there are worries, most notably whether a meaningful correction in the US market is overdue. Geopolitical uncertainty is also weighing on sentiment, as conflicts in Ukraine and the Middle East drag on. There are early indications that Donald Trump intends rattling plenty of cages, with South Africa-born technology magnate Elon Musk cheerleading, enthusiastically or alarmingly (depending on your politics). The UK also looks unsettled, politically speaking, and China remains at a difficult economic juncture.
Local investment experts see plenty of opportunity but are also clearly watchful … even wary.
Ninety One portfolio manager and deep-value doyen John Biccard agrees that 2024 was the year of South Africa Inc stocks. With hindsight it’s clear that things were perfectly set up for a local stocks rally. “South Africa Inc valuations were at a record low at the beginning of last year. Foreigners had completely sold out, and local investors were offshore to the largest extent they had ever been. It was the perfect set-up for the huge [South Africa Inc] rally.”
Biccard adds that the market was wrong in discounting Eskom by judging that load-shedding would go on forever, and points out that the outcome of the election was markedly better than expected.
“A South Africa Inc portfolio might have returned 50% in rands and 55% in dollars … these are some numbers.”
For the year ahead, Biccard is reducing his “pure South Africa” exposure. “These stocks are not expensive, but have returned to long-term averages. Shares such as Mr Price, Capitec and Clicks are above their long-term averages.”
He says the money he has raised selling a chunk of his South Africa Inc shares will be mobilised to buy local commodity shares. “These are shares that are listed in South Africa and are dependent on South African logistics — which look like what Eskom was three years ago. Improved ports and railways will give South African mining stocks volume growth in the next three years.”
Titanium Capital manager Charles Boles says that while the US remains the dominant global market, driven by tech giants (the Magnificent 7), its valuations are in the late stages of a bull market. “If 12 o’clock is the end [of the bull market], we’re somewhere between 10 and 12,” he says.
He notes that emerging markets, including South Africa, have underperformed for more than a decade and offer relative value, compared with the US. “Emerging markets have not been a good place to be for the past decade plus, but at some point that will revert.”
Boles says the GNU’s formation exceeded market expectations, fostering optimism among investors.
“You did see a number of local investors upweight their exposure to South Africa Inc stocks, benefiting from a more predictable, slightly better growth environment.”
But he cautions that many quality South African stocks — such as Mr Price, Shoprite and Tiger Brands — experienced significant gains after the formation of the GNU. “The valuations on these stocks are now feeling punchy … you need earnings growth to come through to support a lot of them.”
Boles also contends that investors are willing to pay a premium for companies that can deliver reliable growth in a challenging environment — counters such as Capitec, Dis-Chem, Clicks, WeBuyCars and AdvTech. “For businesses that can grow … the market is prepared to pay. Look at the valuations of those quality compounders — most are trading at 20 or 30 multiples.”
He advises investors in 2025 to focus on fundamental value. “Avoid trying to time the market. Instead, focus on buying assets that offer inherent value and can withstand short-term volatility. If I buy this asset now, am I comfortable that I’ve paid [for] good value so that even if there are bumps, my returns will come through in time?”
Asief Mohamed, chief investment officer at Aeon Investment Management, also highlights the growing conversation about a potential market bubble, particularly in the US.
“A lot of investment professionals say we’re close to reaching a bubble. They may or may not be right. I can’t tell. The Magnificent 7 in the S&P 500 have performed phenomenally well. If you remove that, the balance of the market in the S&P hasn’t performed that well. I wouldn’t be surprised to see a correction this year.”
Mohamed also strongly recommends looking at emerging markets for long-term value. “What I would do is buy an emerging-market index. It’s underperformed significantly and I think it’s just offering so much value.”
Brendon Hubbard, senior portfolio manager at ClucasGray, believes that after a terrible year for mining stocks — other than gold counters — many of these resource companies are now looking quite attractive.
“Emerging markets, including South Africa, remain very cheap relative to history. The question is when money starts rotating out of the US and back into these undervalued markets.”
“The US has been sucking up money for more than a decade, but valuations are stretched. Even Warren Buffett is sitting on the largest cash pile he’s ever had.”
Overall, Hubbard points out that local investor sentiment is now vastly better than in previous years, but stresses that GDP growth and earnings delivery are needed to sustain that confidence.
Veteran asset manager Terence Craig points out that systemic challenges such as load-shedding and inefficiencies in state-owned enterprises (such as Transnet and Eskom) remain. “People seem to forget that 2023 was the worst year of load-shedding. While there’s been some improvement, I don’t think we’ve seen the end of it.”
Politically, he is fretting too. “The government’s unity is far more tenuous than people think. The Bela [Basic Education Laws Amendment] Act and other issues show cracks in the façade.”
Then there are the geopolitical risks, with Trump set to grab the levers of power shortly. Craig says geopolitics will continue to play a role — possibly an even bigger one — in the year ahead.
“Issues such as China-Taiwan, Iran-Israel and the Ukraine war could have significant effects. It’s very difficult to price in geopolitical events, but when they have an impact on markets, the effects can be quite material — sometimes over the short term, sometimes long-lasting.”
Craig adds: “Markets are driven by sentiment, and geopolitics play a bigger role than we often acknowledge. The challenge is predicting the unpredictable.”
Pheiffer says the groundswell of local investor opinion is that the JSE is undervalued and should outperform in 2025, while US markets are overvalued and should underperform.
He points out that the meteoric rise in the S&P 500 has lifted the historic p:e ratio to 28 against a 20-year average of 18. “The argument here is that the current valuation is well above long-term averages and implies an expensive valuation. In contrast, the historical p:e of the FTSE/Alsi is 14.7 — almost exactly equal to the five-year average of 14.6 but well below the 10-year average of 17 and the 20-year average of 16.”
But he cautions that markets can stay undervalued or overvalued for long periods. “Nevertheless, whatever your belief, it is clear that US markets have been forging ahead with great momentum while the performance of the local market has been pedestrian at best. It is human nature to believe that the good times can’t go on indefinitely — and the same can be said about the bad times or the mediocre times.”
Pick and choose
In terms of specific stock picks for the year ahead, Boles highlights that big rand hedge stocks like AB InBev, Bidcorp and BAT are trading at attractive multiples compared with local retailers. “Bidcorp, in particular, looks like a decent investment over a five-year horizon.”
Boles also has a penchant for the investment holding companies. He points out that Remgro, Reinet and Hosken Consolidated Investments offer significant discounts to underlying value and exposure to a diversified portfolio of assets. He adds that certain small- and mid-cap stocks — such as Invicta and AVI — may be undervalued because these receive less attention from large investment institutions.
Veteran market watcher Des Mayers, a senior analyst at Afrifocus Securities, likes gold shares, specifically Gold Fields, DRDGold and Pan African Resources, while he also sees growth potential in poultry businesses such as Astral Foods and Rainbow Chicken.
Hubbard cites the effect of rail reform on a counter such as Grindrod. “This reform could unlock another R35bn in cargo movement annually, effectively doubling the current market. This is a high-margin business, with high barriers to entry. Grindrod is ideally positioned to benefit as the reform rolls out.”
Notwithstanding worries about the US markets, Pheiffer says that over the longer term investors would still want to own Microsoft, Alphabet, Meta and Amazon. “Those are best picked up during any market pullback.”
He adds that Constellation Software (out of Canada) has had a good year and is one for the long-term portfolio. “It should definitely be on the shopping list, even at current levels.”
Pheiffer argues that diabetes and weight-loss problems aren’t going to be resolved quickly — which means Novo Nordisk and Eli Lilly are both stocks to own. “Outside the technology space, a global portfolio would do well to own the likes of Visa and S&P Global and have some exposure to the medical technology industry through the likes of Stryker Corp.”
He says the markets have been pining for a strong and co-ordinated stimulus package from the Chinese authorities, as the dribs and drabs of stimulus haven’t helped boost demand. “It looks to be more of the same next year, and the resources sector probably isn’t the place to be fishing for winners.”
Biccard is making a play for South Africa-based resource shares — most notably African Rainbow Minerals and coal miners Exxaro and Thungela.
Anchor Capital named Afrimat, Naspers/Prosus, Southern Sun and AdvTech, as well as controversial helium group Renergen, as its stock picks for 2025.
The FM’s stock picks for 2025 follow, with their figures as at January 9 2025. Please remember that our portfolio is not a stock selection per se. The FM’s writers choose one share from the JSE main sectors, and the share has to be held for the remainder of the year. In other words, the FM portfolio is equally weighted and inflexible. That can be advantageous … or a nasty drag. Time will tell.
AltX
Investor sentiment towards AltX remains low, and 2024 was another year of decline.
Mining exploration firm Copper 360 was an example of a disappointing performer after a promising listing in 2023. The company’s fortunes quickly became emblematic of the difficulties of managing a
The share’s struggles mirror broader trends on the AltX, where other commodity-based companies such as Renergen and Jubilee Metals continued their downward streaks, contributing to an almost 22% decline in the index.
Mining exploration firm Copper 360 was an example of a disappointing performer after a promising listing in 2023. The company’s fortunes quickly became emblematic of the difficulties of managingmicrocap venture. The share price faced significant volatility, driven by limited free float and unusual trading activity, which even prompted criminal charges.
The share’s struggles mirror broader trends on the AltX, where other commodity-based companies such as Renergen and Jubilee Metals continued their downward streaks, contributing to an almost 22% decline in the index.
There are still pockets of growth; cannabis company Cilo Cybin, which listed in 2024, is poised to capitalise on the growing interest in legal and medicinal cannabis markets. The company’s performance has sparked cautious investor optimism. Its course will be closely watched as a bellwether for the viability of cannabis businesses. Investors have been waiting for the delayed interim results, which were due this week.
The move of Altvest Capital from the Cape Town Stock Exchange to AltX, motivated by a larger investor base and more liquidity, illustrates the ambition of companies seeking to make their mark on South Africa’s evolving capital markets despite the risks inherent in the microcap space. — Antoinette Steyn
Banks
There was a surge in bank share prices after the election.
They were good proxies for South Africa Inc, particularly Standard Bank and FirstRand. But on a 12-month view, the bank shares have marked time, with these two shares up a modest 10% year on year. Nedbank, which with hindsight was very cheap, has done the best, with its share price up about 40%. The transition from former Mike Brown as CEO to Jason Quinn was welcomed by the market as uneventful.
In contrast, the market was unhappy with the drama around Arrie Rautenbach’s sudden early retirement as Absa CEO, yet the share price is still up 20% from its dismal levels at the beginning of 2024. Value managers are still piling into Absa, but it looks rudderless with no permanent boss.
At the other extreme is Capitec, which is eating everyone’s lunch and will continue to do so while other banks charge bank fees far higher than their counterparts in the rest of the world. The only South African bank that is immune from Capitec’s surge is Investec. Capitec CEO Gerrie Fourie has made it clear he has no interest in Investec’s niches in the market. — Stephen Cranston
Building & Construction
The formation of the government of national unity has breathed new life into the moribund building and construction sector, with counters such as Stefanutti Stocks, Raubex, WBHO, Aveng and Calgro among the top JSE performers last year.
And it’s not just sentiment. According to Crédit Agricole, the value of fixed investment projects in South Africa rose from R193bn in 2023 to R794bn in 2024. Plus, the Afrimat activity index continued its upward trajectory in the third quarter of 2024, though still slightly negative on a year-on-year basis.
The biggest impediments to growth remain high interest rates and a lack of government infrastructure spending. While the latter can be addressed with more public-private partnerships, the government needs to create an enabling environment by combating the scourge of construction mafias that cause delays, cost overruns and project cancellations. Interest rates, however, are largely out of the government’s hands and will depend on international market conditions.
One of the sector’s main laggards, residential construction activity, might get an uplift from two-pot pension withdrawals. Sales updates from retailers such as Cashbuild and Spar’s Build it should provide early clues in this regard.
As the recent business rescue process of Murray & Roberts shows, it’s a risky industry where too much debt, client concentration and problems on big contracts, whether self-inflicted or external, can cause disaster. Companies with a diversified client base, low execution risk and steady cash flows, such as those supplying materials to building contractors and the public, are the safest bet.
Energy
The transition from fossil fuels to clean energy might be good for the environment, but it’s proving tricky for investors and company executives alike.
Faced with poor margins in an oversupplied renewables market and high upfront capital costs for technology that’s still evolving, global energy players are rowing back on green transition goals to exploit the better near-term returns of their traditional fossil fuel business.
This trend is reflected in Glencore’s shareholder vote to retain the company’s dirty (but very cash-generative) coal business, as well as environmental groups accusing Sasol of backtracking on decarbonisation targets, a charge the company denies.
Robust demand from Asia means global coal and oil usage is now expected to peak only in 2027 and 2030 respectively, with many predicting a plateau thereafter for at least five years before the inevitable decline.
In the short term, buoyant North American oil output will be offset by faltering Russian and Brazilian production and potential supply disruptions in the Middle East.
From an investment standpoint, caution is advised on green energy companies until the technology is settled, grid access is secured and market conditions allow adequate returns.
For fossil fuel companies, investors need to acknowledge that they are in structural decline over the long term unless dramatic pivots are made, so the focus should be on cash flows and dividends. Since these need to be generous enough to compensate for a low assumed terminal value, fair value implies a high dividend yield and low earnings multiple. — Raymond Steyn
Financial Services
Financial services is a much less homogeneous sector than banks or insurance, and the definition can be confusing. For example, many investors might have considered the fintech business Capital Appreciation to be a good financial services pick. It has had a great year, returning about 35%. But it’s classified as a computer services share. Equally, few would consider an investment holding company such as Remgro to be a financial services business.
The heart of the financial services sector is wealth and asset management. PSG Financial Services looks like the blue chip of the sector. It was last year’s choice, and it returned a further 25% to increase its market cap to R26bn. It is a share to keep in the bottom drawer, but one that might need to pause for a breath after its recent spurt. It might not be the top performer in 2025.
Coronation Fund Managers and Ninety One face structural headwinds as index funds take business from traditional active asset managers and second-tier fund managers eat into the market shares of these incumbents — and of their unlisted peer Allan Gray.
The sweet spot in the sector looks like the much duller field of retirement fund administration, in which there are two listed incumbents, Sygnia and Alexander Forbes. But Sygnia is not yet a scale business and has a negligible free float, with the bulk of shares held by its founding family, the Peiles. — Stephen Cranston
Food & Beverages
The food producers index had a stellar 2024, rising 35%. Despite mixed input costs, a benign consumer environment, the end of load-shedding and the ability to push pricing all boosted the sector’s performance. One of the key sector features in 2024 was the El Niño effect on the domestic maize harvest, with the crop down 22% year on year. That led to a surge in yellow maize, which rallied 44%, with white maize soaring 70%. Other inputs, driven by global issues, were also mostly benign, with softer prices for soya and wheat.
There were clear cost pressures on the sector and consumers, but the food producers mostly managed to pass the costs through.
One of the best-performing counters was Premier, which soared 116% on bumper earnings growth thanks to efficiency gains from its efficient bread and milling business. There is more to come as the mega-bakeries project comes online this year. New management at Tiger Brands has brought positive sentiment towards the slumbering food giant despite lacklustre results; the stock rose 44% year on year.
In the mid-cap sector, RFG was the standout as the stock rose 53% on improving earnings and upbeat prospects. The outlook for the food producers remains tied to the macro environment. Declining interest rates and lower year-on-year fuel costs — aided by an expectation that soft commodities, especially maize, should normalise — will boost the ability to protect margin. But the sector needs volume growth, which has been muted. — Anthony Clark
Hospitals & healthcare
The private health-care sector has recovered well since the pandemic, with its leading players showing healthy growth in 2024.
Life Heathcare’s revenue rose 12.7% to R25.5bn and operating profit surged 18.9% to R2.89bn for the year to end-September. It was a similar story at Netcare, where revenue jumped 6.3% to R25.2bn and operating profit rose 13.1% to R3.12bn in the same period.
The hospital groups are not the only ones in the sector doing well: pharmaceutical companies Adcock Ingram and Aspen Pharmacare also produced solid numbers. Aspen’s announcement that it would be making GLP-1 weight-loss medications under licence has grabbed the attention of investors. Originally meant as a way to control diabetes, GLP-1 drugs have been promoted in recent years as a way to lose weight.
But it was not all plain sailing for the health-care sector. Thanks to a R230m goodwill impairment relating to its holdings Activo Health, Pharmacy Direct and Curasana, the AfroCentric Group’s profit for the year to end-June dropped from R295m to R74.2m. For its part, Ascendis is still in a listing limbo. A move by some minority shareholders to prevent its delisting has thrown a spanner in the works, resulting in the group having to “reinstate certain structures and reincur costs” that had been cut in anticipation of the delisting. — Larry Claasen
Industrials
The JSE industrial index is essentially the polony of the market: this is where they put all the companies that don’t have anywhere else to go. A narrower definition is therefore required for Hot Stocks, which still leaves us with a substantial opportunity set. With Barloworld likely to leave the market in a take-private deal that has set corporate governance tongues wagging, we are losing one of the big local names.
Luckily, there are still some interesting choices available. Invicta, Hudaco, Argent Industrial and KAP could all be considered here.
Our pick last year in this sector, Argent, turned out to be the right one — it delivered roughly an 80% share price return in 2024. This was a perfect example of the power of buying dirt-cheap JSE stocks. It’s now only cheap (on a p:e of six) rather than dirt cheap and recent results haven’t been inspiring, leading to a loss in momentum in share price growth. We also have to consider the geopolitical impact of Donald Trump, with tariffs and other potential disruptions a major risk in this sector.
Taking the route of a quality stock may be the most sensible approach in 2025, with Bidvest as a powerhouse that is performing well in most of its divisions. The financial services disposal also helps focus the group into even more of an industrial play. It probably won’t make you rich in 2025, but it will help you sleep at night in a tough sector. — The Finance Ghost
Insurance
The insurance sector includes three of South Africa’s most innovative companies and best deployers of capital. They are also the three groups in the sector with a market cap above R100bn: Sanlam returned 25% for the year and now has a R185bn market cap; Outsurance is up 59%, to touch R101bn; and Discovery is worth R133bn. Discovery’s growth is particularly notable, as it pays very little in dividends and has a negligible yield of 1.1%.
All three look fully priced, though with such strong business models most investors should retain them as quality holdings.
The top performer is likely to be elsewhere in the sector. South Africa’s top property and casualty insurer, Santam, is a well-managed business — but management cannot do much about the weather, and the country is already bracing for more floods.
Santam also suffers from liability and business interruption claims, which barely feature in Outsurance’s life. Before it delisted in February 2022, Liberty Holdings was the perennial underperformer in the sector. It is improving as an unlisted business. Parent Standard Bank is maximising insurance sales through the bank channels.
Today’s underperformer is Old Mutual. The market showed almost no faith in the business even after it unveiled its exciting new strategy to build its own bank. The share price barely budged in 2024, gaining a negligible 4%, and Old Mutual’s market cap of R60bn is a shocking indictment of the strategic failures of what used to be South Africa’s premier financials business. — Stephen Cranston
Investment companies
Investment holding companies on the JSE trade at structural discounts, so don’t make the mistake of seeing a juicy discount to NAV of 40% and thinking that it will reduce to zero. That only happens if the fund sells everything and returns capital to shareholders, which doesn’t often happen.
For the biggest names in this sector, the discount is simply part of the package. You therefore need to look through the portfolio to decide where the best growth prospects are.
At Remgro, there have been major disappointments for investors (such as the aftermath of the Distell transaction) and the portfolio is a confusing mix of listed and unlisted exposures.
The other way to invest alongside Johann Rupert is through Reinet, but then you need to be bullish on British American Tobacco.
Over at Sabvest, there’s a portfolio of unlisted investments that you can’t get exposure to any other way, which makes it far more appealing. The fund had a solid year in 2024 as valuations picked up in general, so this would be a preferred choice in the sector. But when it comes to growth, it looks like African Rainbow Capital is the pick of the litter right now. After a wonky start, the portfolio has come to life and includes some genuinely exciting assets like Tyme Group. This sector is known for housing billionaires rather than creating them, but African Rainbow Capital has the most intriguing portfolio. — The Finance Ghost
Junior mining
Investing in junior miners is not for the faint of heart. These companies lack the scale, balance sheet strength and human resources of bigger rivals, and face substantial financial and operational risks, especially as they often carry out exploration and development rather than large-scale production. However, the potential rewards are immense.
By focusing on companies in which the underlying commodities trend up strongly, investors can mitigate some risks. Existing, profitable operations or executive teams with a proven track record also offer a degree of assurance.
Unfortunately, many South African mining commodities are struggling. A real estate slump in major buyer China pushed iron ore prices down 15% in 2024, and more high-grade ore supplies from new projects in West Africa could pressure prices further. Diamonds are losing market share to lab-grown gems, and platinum group metals face muted catalytic converter utilisation as the electrification of transport continues. Ferrochrome and chrome ore are less affected by the Chinese real estate downturn but once-buoyant prices have softened in recent months.
Copper bucked the trend in 2024. With the metal’s strong long-term fundamentals, Northern Cape juniors Copper 360 and Orion Minerals look interesting but remain extremely speculative until they can demonstrate profitable operations.
Gold continues to shine as world debt levels balloon, but after DRD Gold and Pan African Resources graduated to more senior status in recent years, there are sadly no true junior gold miners left on the JSE.
Given the mining downturn, the best place to look for value is probably within niche commodities with good fundamentals that investors can’t get exposure to otherwise. — Raymond Steyn
Listed Property
After five years of going nowhere, the long-awaited recovery in property stocks went full throttle in 2024. The all property index recorded an impressive 29% total return last year, with at least 10 counters delivering more than 40%. The rally was particularly pronounced among South Africa-based counters, no doubt bolstered by bargain hunters looking to cash in on improved sentiment due to the end of load-shedding, a better than expected election outcome and the start of the rate-cutting cycle.
In stark contrast, most rand hedge counters — the UK ones in particular — floundered last year. Sadly, the FM’s bet on London-focused Shaftesbury Capital, the Covent Garden developer that owns about 400 pubs, clubs and restaurants in the capital city’s fashionable West End, didn’t pay off, with its share price slipping about 5% in 2024.
Whether domestic-focused stocks will continue to outperform their offshore counterparts in 2025 remains to be seen.
The FM reckons it’s probably prudent to invest in companies that offer the best of both worlds. Locally, counters with exposure to the logistics sector look appealing given that demand for well-located, modern warehouse and distribution facilities continues to outstrip supply. In terms of offshore exposure, Eastern Europeans’ propensity for retail therapy, coupled with the region’s superior economic growth prospects compared with Western Europe’s, bodes well for shopping centre owners in the region.
Mining
It was not the most memorable year for investors in the JSE resources sector — unless Anglo American and the big gold counters were your inspired picks.
The FM fortunately chose Anglo for our 2024 Hot Stocks portfolio, ensuring a trend-bucking annual gain.
The JSE’s resource 10 index was down 9%, with heavyweights such as Glencore and BHP faring markedly worse. Sasol was the real blot — down about 55%, with punters increasingly speculating about the sale of strategic assets.
Not that it was boring. BHP’s tilt for Anglo certainly caused ripples in Anglo American Platinum and shoved diamond group De Beers back into the spotlight (even if the chances of that company relisting or being sold in the short term appear remote).
The platinum group metals sector had its challenges too, with stubborn share prices and much speculation about the actual effect of electric vehicles on the market. Market darling Sibanye-Stillwater lost close to 40% of its value in 2024, which means that it has dropped more than 65% over the past three years.
On the coal front, cash-flush Exxaro’s 24% share price drop brought value investors in for a closer examination. Smaller rival Thungela stumbled 9%.
Gold shares, driven by a more than 25% rise in the bullion price, were robust. Harmony was on song, with a gain of more than 50%; AngloGold and Gold Fields were muted by comparison.
The big question for this year is whether BHP will take another gander at a restructured Anglo American or find other mining conglomerates to be of more interest. — David McKay
Media & entertainment
It has not been an easy time for media companies. A sluggish economy has dented advertising spend and the shift to digital has resulted in Google and Facebook swallowing the bulk of online advertising revenue.
But it is worse than that. Not only are the big tech companies taking advertising from media firms, the media houses have become dependent on them for traffic to their sites, which are at the mercy of the mercurial algorithms driving eyeballs across the internet.
The difficult environment has taken its toll on the industry, with Arena — FM’s parent company — and rival Independent Media announcing staff cuts in recent years.
Even South Africa’s biggest pay-TV operator, MultiChoice, is struggling. Its results for the half-year to end-September 2024 were dire, with its subscriber base dropping 11%, or 1.8-million, to 14.9-million and its loss for the year increasing from R911m to R1.84bn.
Caxton, the FM’s media & entertainment pick for 2024, also took strain, with group revenue dropping 4.7% to R6.64bn and operating profit before depreciation and amortisation falling 5.5% to R927m for the year to end-June 2024.
Free-to-air broadcaster eMedia was the one group to buck the trend. Its media and broadcasting revenue rose marginally from R1.51bn to R1.58bn, and operating profit increased from R190m to R221m. — Larry Claasen
Retail
The retail sector outperformed the all share index last year, having started with low valuations which switched after consumers and investors gained confidence with the formation of the government of national unity, the suspension of load-shedding, lower interest rates and a liquidity boost from the two-pot retirement system.
But retailers are now at the point where valuations are no longer cheap.
The ports are still performing poorly, and apparel retailers have been hit hard. Even so, Mr Price’s share price nearly doubled, TFG was up 57% and Pepkor jumped 51%. Pick n Pay surprised the market, rising 55% after getting back on track from ballooning debt. Woolworths was the only retailer to deliver negative returns last year.
Analysts continue to prefer Clicks over Dis-Chem as an investment, despite Clicks being fully valued. Spar offers low-hanging fruit to fix and sell offshore loss-making assets, with the opportunity to restore the balance sheet and resume the dividend payment.
Looking ahead, much in the retail sector depends on how the South African economy performs this year, with many people having fallen out of the middle class. Consumers are still in a tough financial position but continue to buy necessities. Risks include the government failing to deliver sustainable growth and the return of load-shedding. Infrastructure problems persist. — Adele Shevel
Tech & Telecoms
The telecoms side of the technology equation hasn’t been a happy story. Buckling under the pressure of slow growth in South Africa and much pain in Africa, MTN had a poor year in 2024 and Vodacom was slightly in the red.
Telkom pulled off a major rally towards the end of the year to get into the green, albeit not with an exciting overall return. The clear star was Blue Label, which put in a neat 50% return for the year. Given the complexity and a patchy track record for shareholder returns, Blue Label remains a left-field choice best reserved for industry specialists.
On the ICT and services side, Altron and iOCO (the renamed EOH) both had a strong 2024, thanks to successful value-unlock strategies and general clean-ups. If you’re looking for more maintainable growth, Datatec is a consistently decent performer.
PBT Group might also be worth a look if you fancy a purely consulting-based play. If you can stomach exposure to China in the Year of the Donald, Naspers/Prosus looks interesting after the drop related to Tencent’s designation by the US government as a military company. Fabricio Bloisi is doing all the right stuff and the focus on proper financial metrics (such as profitability, not just market share) is encouraging. There are sensible alternatives, but Prosus takes it as the company in the group with the higher proportion of global exposure (and no guarantee that any discount in the Naspers price will close). — The Finance Ghost
Tourism & leisure
Not a day goes by on social media without South Africans complaining about the price of domestic flights. With much of the competition having been wiped out in the aviation sector, the days of cheap flights are over. This has a negative effect on local leisure and business travel.
This has driven a need for City Lodge to change its business model, which is never easy. Despite its best efforts, City Lodge’s share price performance in 2024 was flat; it isn’t an obvious future winner.
The other business model that features strongly in the sector is that of casinos, which have fallen out of favour with consumers; the shift to online gambling has been immense. Though companies in the sector have all invested in this online space to get a slice of the action, it’s not enough to move the dial vs their underutilised casino assets. This makes Tsogo Sun, Sun International and even Goldrush difficult contenders as we head into 2025.
So, by process of elimination, we arrive at Southern Sun. It was the winner by a country mile in 2024, up over 70% in a year in which its major sector peers declined: Tsogo Sun dropped by nearly 20% and Sun International achieved mid-single-digit returns. Domestic flights might be expensive for day-to-day needs, but international tourists are still pouring in (especially to the Western Cape) and other opportunities, such as major conferences, remain a feature.
Southern Sun is the most appealing name in the sector by a long shot, though it’s unlikely that the blockbuster performance of 2024 will be repeated in 2025. — The Finance Ghost
Transport & logistics
There are only a handful of stocks in the JSE industrial transportation index and in 2024 much of the movement on the bourse was a direct result of corporate activity. The index gained only a modest 3.5%, though at its July peak was ahead 21%.
The boost was as a result of the surging share price of Bell Equipment. The majority family-controlled company received a buyout offer by IA Bell, which caused the share price to spike 76%. However, minority shareholders roundly rejected the family bid. The stock slumped and continued its fall as prospects for the company deteriorated, and the index retreated to its muted yearly growth.
The other key stocks in the sector are Grindrod, Santova and Super Group.
Grindrod had a spectacular year, with the stock running at 40%, but in October political protest in Mozambique erupted and led to temporary border closures. Investors worried that Grindrod’s operations in the port of Maputo would be affected and the stock has since fallen 25%.
Both small-cap international supply chain and logistics counter Santova and Super Group traded sideways through periods of volatility.
Santova’s share was flat on the year. Investors were kept on the sideline by mixed results, warnings and guidance as low freight rates and concerns over global tariffs hit trade.
Super Group had a rollercoaster year. At one stage the stock was down nearly 30% from its mid-2024 best as disappointing results slammed investor sentiment. A late recovery following the mooted sale of the group’s Australian subsidiary made the counter end the year unchanged. — Anthony Clark
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