Doing the heavy lifting

What industrial funds have been buying and selling.

This article was first published in the May issue of the Moneyweb Investor. Click here to read the magazine in full, at no cost to your pocket.

The most significant change on the JSE over the last 15 years has been how industrial stocks have come to dominate the bourse. The Top 40 used to be very resource-heavy, but it is now far more tilted towards the likes of consumer, retail and telecommunications counters.

The growth in a number of these shares, particularly those with a rand hedge, has been the biggest source of returns on the local market over this period. The most prominent of these has, of course, been Naspers.

As a result of this, industrial sector funds have been perennial outperformers among local equity funds. An an example, for the fifteen years to the end of March the Coronation Industrial Fund outperformed the Coronation Top 20 Fund by 5.9% per annum.

It is therefore an interesting exercise to have a look at what stocks a selection of these funds have been buying and selling. The tables below show which counters the Stanlib Industrial Fund, SIM Industrial Fund and Old Mutual Industrial Fund bought into, and which they sold out of between December 31 2015 and December 31 2016. The share must have had a weighting of more than 1% to be considered. 

The tables also show any substantial changes to positions within the fund. To be reflected, the change must be more than a 0.5% shift in the weighting of the holding which is due to not just price movement.

The final table shows their top five holdings at the end of December 2016.

 

Stanlib Industrial Fund

In

Out

Remgro

Woolworths

Curro

Nampak

Tiger Brands

Reunert

EPE Capital Partners

Grindrod

Up

Down

MTN

Richemont

Massmart

Mr Price

Source: Morningstar

 

The most significant addition to Stanlib’s portfolio was Remgro, which is now the fifth largest holding in the fund. The counter is basically flat over the last three years, but based on its long-term track record may be looking appealing at a forward PE of around 13 times.

Curro is offering less obvious value at a PE ratio of over 100, but the private school group is 20% off the highs it reached towards the end of 2015. The question is whether the business can continue to realise the exceptional growth rates it has since listing in 2011.

An interesting addition to the fund is EPE Capital partners, which offers access to private equity investments. The share has dropped around 8% since listing in August last year, but offers interesting long-term growth potential.

 

Old Mutual Industrial Fund

In

Out

Woolworths

Richemont

Hudaco

Foschini

Mr Price

Torre

Up

Down

Remgro

British American Tobacco

Mondi

Mediclinic

Datatec

Vodacom

Netcare

Rhodes Food Group

Holdsport

 

Aspen

 

Source: Morningstar

 

Old Mutual has cycled between a number of stocks within particular industries. Retailers Woolworths and Mr Price came into the portfolio, while Foschini went out. Among the hospital groups, the managers increased their exposure to Netcare, but down-weighted Mediclinic.

Like Stanlib, Old Mutual bought heavily into Remgro over this period. They also moved away from Richemont.

It’s noteworthy that the fund managers substantially increased their exposure to Aspen. The pharmaceutical company is currently trading at the same levels it was in the first quarter of 2014, having come a long way off its 2015 highs. At a forward PE of around 15x, there may be a feeling that it is once again offering value.

 

SIM Industrial Fund

In

Out

Mr Price

MTN

Barloworld

Foschini

Sappi

Remgro

Dis-Chem Pharmacies

Aspen

 

Truworths

Up

Down

Naspers

Mediclinic

Steinhoff

 

Richemont

 

Adapt IT

 

Source: Morningstar

 As a starting point, there are some clear differences in the approach taken by SIM and those of the other two funds. SIM sold out of Remgro, MTN and Aspen, while increasing its exposure to Richemont.

Interestingly, SIM also bought into Barloworld, which the managers may have seen as a way to gain exposure to the resurgence in commodities. Although Barloworld is not a commodity producer itself, its fortunes are heavily influenced by what happens in this sector.

A smaller stock that SIM has favoured is Adapt IT, which has shot up nearly 900% in the last five years. It has however shed around 40% from the all-time highs it hit in November last year.

It’s notable too that SIM added to its already significant holding in Naspers. The counter now makes up a quarter of the value of the portfolio. 

The table below shows the top five holdings of these three funds at the end of last year.

 

Fund’s top five holdings at December 31 2016

Stanlib Industrial Fund

Old Mutual Industrial Fund

SIM Industrial Fund

Naspers

Naspers

Naspers

MTN

Steinhoff

British American Tobacco

Steinhoff

British American Tobacco

Steinhoff

British American Tobacco

Remgro

Richemont

Remgro

Netcare

Curro

Source: Morningstar

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