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The JSE’s favourite share

No surprise, it’s Naspers.

Over the last few years Naspers has very clearly become the most important company on the JSE. It is now 16.50% of the All Share Index and 20.05% of the SWIX.

The surge in its share price has been remarkable. Ten years ago, in May 2007, it was trading at under R200 per share. It is now changing hands around R2 750 per share.

This rise has been so significant that, to a large extent, the difference between the unit trust managers that have outperformed over the last decade and those that have underperformed, has been a matter of which of them have held Naspers, and which haven’t. There are of course exceptions, but this has been a significant factor.

And yet, even just two years ago, Naspers was not the most widely held share among local unit trusts. A Moneyweb review of unit trust portfolios conducted in early 2015 revealed that Sasol had been the favourite stock on the local bourse for two years running.

At the time of that analysis, Naspers was only the sixth most popular stock among local fund managers, based on the number of unit trust portfolios in which it was included. It was less widely held than British American Tobacco, MTN, BHP Billiton and Anglo American.

As the table below shows, however, the media giant has now moved into the top spot. These are the ten most popular JSE stocks among local fund managers at March 31, 2017:

Counter

No. of funds that hold it

Naspers

376

British American Tobacco

361

Sasol

361

BHP Billiton

344

Steinhoff

336

Standard Bank

332

FirstRand

328

Old Mutual

325

Anglo American

323

MTN

301

Source: ProfileMedia

It is noteworthy that Sasol is still very widely held, despite having lost nearly a third of its value over the last three years. It traded as high as R640 per share in mid-2014 when Brent crude oil cost around $115 per barrel, but fell sharply when the oil price nosedived. Its share price is now just over R400.

There will be a number of reasons for why it has remained popular, but it is interesting that the top three companies in this list are all unique in the context of the JSE. There are no other listed companies on the local bourse comparable to Naspers, BAT or Sasol. They are therefore attractive investments not just because of their size and quality, but because they are the only way for investors to gain exposure to their particular markets.

It is also interesting, if understandable, that Anglo American has lost some of its appeal amongst local fund managers. For a very long time Anglo enjoyed the sort of prominence on the JSE that Naspers does now, and it was therefore a staple holding in portfolios. While it is still a substantial company, it is certainly not what it once was.

MTN has also fallen out of favour somewhat following weaker growth and concerns over the way it handled its regulatory problems in Nigeria. It is still in the top ten, but two years ago it was the third most popular counter on the local market.

At the other end of the scale, the table below shows the least popular stocks in the Top 40:

Counter

No. of funds

Life Healthcare

123

Gold Fields

134

RMB Holdings

164

Intu Properties

175

Truworths International

176

Discovery

180

Fortress Income Fund*

185

Sappi

185

Mr Price

186

Vodacom

187

Source: ProfileMedia

*Note: This is an aggregate of funds that hold either Fortress A or Fortress B, or both.

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Naspers is very far out of kilter with others on the JSE.

Naspers’ stock price is R2778.

Sasol at R407, Firstrand at R51, Standard Bank at R154 all have bigger sales, profits and assets than Naspers.

So are you telling me that the Naspers has gigantic IP that is pushing its price up? It doesn’t. It also doesn’t have any growth businesses in South Africa.

Naspers is a bubble that is going to have many investors crying snot en trane in the streets.

If you don’t believe me then ask yourself the question:
Is the Naspers growth steady and sustainable with its growth business understandable to its investors?

If not then when will it correct? How will you time the sale to draw your profits? Is it a good idea to have such big chunks of long-term funds sitting in Naspers?

My personal believe is that the profits from Tencent came at a time when fund managers were looking for a quick win and so created a lot of hype.

Their subsequent scurrying into Naspers stocks created a demand bubble that expanded the hype and has continued as such.

I believe that the Naspers share value (while being high at the moment) is completely hollow and anyone holding it should be taking profits now.

I’m staying far,far away from this one.

All I know abt naspers is that it’s fortune is based on its investment in tencent holdings which like Amazon, google Etc has grown exponentially. So I have tencent on my to buy list – but the one listed in New York not in China. I bought Amazon in sept last year at Us$700 – will probably break us$1,000 this week. That’s 50% up in 6 months for a company that barely makes a profit! Bubble?

Well done Naspers!

Lots of boere banks’ like Volkskas and Volkskas Merchant allocated a major part of their balance sheets to finance this market leading company for many moons…

…also not surprising that lots of people now wants to ”de-colonise” certain banks and Naspers!

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