Are you still on the right track with shares?

In 2017 I discussed two expressions that applied so well to the stock market at the time. The first was that it doesn’t help for you to only be on the right track, because if you stay there, you will still get hit by a train. During these last few months, we have definitely experienced high tides on the stock exchange, which brings me to my second expression: all boats will float when the tide is high. What these two expressions have in common, is that it’s always great to be on the right track or in the proverbial boat when the tide is rising, but things tend to become a little more complicated when, like what happened in 2017, all boats don’t float as well as they should.

In short, 2017 marked the last time the FTSE/JSE All Share Index (JSE) experienced 20% or more growth in a calendar year. The JSE grew by 21% in 2017 to be exact. But if you thought it was high tide all the way just by looking at these growth figures, you would have been on the wrong track. If you dug a little deeper, you would have discovered that Naspers was responsible for 14% of the total 21% growth, and if you were invested in all JSE shares in 2017, 30% of your portfolio would have delivered negative returns.

Back to 2021 and while the picture looks quite different to 2017, we are still faced with the question: are we still on the right track? Up to and including 20 May 2021, the JSE had been positive by 13% for the year, and only 11 JSE-listed companies had delivered negative returns. On a 12-month basis the JSE is now positive by 30% and obviously not as cheap as it was 12 months ago.

Please note that I am not saying that there isn’t any more value to be found in our stock exchange. Quite the contrary. I believe that there is a lot of value hiding in the JSE. What I mean by this is that it is there, you’ll just have to look for it, and also that now may be a good time for investors to take a good look at their portfolios. Investors who feel uncomfortable can always follow in the footsteps of the wise Warren Buffett. He works according to a very strict strategy through which he only buys when he sees value. When he doesn’t see value, he stays put in cash.

I have identified 10 shares based on Thomson Reuters’ consensus forecasts for the next 12 months as determined by top analysts. These shares should provide investors with good exposure to the FTSE/JSE All Share Index. These forecasts are based on target prices, as well as forward price-to-earnings relative to their own 10-year average price-to-earnings. These 10 shares are:

  • AngloGold Ashanti
  • AVI
  • Impala Platinum
  • Naspers/Prosus
  • Old Mutual
  • Richemont
  • Reinet
  • Remgro
  • Sanlam
  • Standard Bank

It’s important to note that these forecasts are made by analysts and, while they do not provide a guarantee, they can provide guidance on expectations going forward. If consensus forecasts are 100% correct, these 10 shares should deliver returns of around 26%. Over the same period, investors should also enjoy an average dividend yield of nearly 5% while the Index should yield only around 3%. While only time will tell whether the analysts were correct in their assumptions, the point is that there are still opportunity to be found, provided that you are selective.

However you choose to look at it, now is the time to grab a pen and paper and take a very good look at your portfolio. Does it still offer you the best prospects of higher returns at the lowest risk? After the JSE’s good run over the past 12 months there is definitely still risks in some areas of our stock market, but by focusing on value you may be able to stay on the right track when the tide starts to pull back.


The opinions expressed in this blog are the opinions of the writer and not necessarily those of PSG. The information in this blog is provided as general information. It does not constitute financial, tax, legal or investment advice and the PSG Konsult Group of Companies does not guarantee its suitability or potential value. Since individual needs and risk profiles differ, we suggest you consult a qualified financial adviser, if needed. PSG Wealth Financial Planning (Pty) Ltd is an authorised financial services provider – FSP 728

Schalk Louw

As Portfolio Manager at PSG Wealth Old Oak and with over 20 years’ experience in the investment industry, Schalk has consistently delivered solid returns to his clients and has certainly become one of South Africa’s most well-known strategists. He started his career in 1994 at the stockbroking company, Huysamer Stals (later ABN Amro). He joined SMK Securities in 1997, (later became BoE Personal Stockbrokers) and was later appointed as director and branch manager. In 2001 he co-founded Contego Asset Management and managed the company as CEO up to March 2014, after which he joined PSG Wealth Old Oak. Schalk has also become a regular household name with investors, with his reports being published in many of the national press. He completed his MBA in 2008.

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