South Africa’s top equity unit trusts are piling into Standard Bank and Sappi, judging from an analysis of the shares bought and sold by the 10 biggest SA general equity funds during October 2018. (General equity unit trusts invest in all types of companies on the JSE.)
But PSG Wealth portfolio manager Schalk Louw, who crunched the numbers, says fund managers are clearly split on the prospects of technology company Naspers and mining house BHP Billion.
While four unit trusts bought Naspers and four bought BHP Billiton shares last month, both shares also topped the most-sold list. Five unit trusts sold Naspers and five unit trusts sold BHP Billiton shares.
Naspers has lost almost 20% of its value so far this year, as investors worry about its key holding, the Chinese tech firm Tencent.
Chinese economic growth is slowing down, but the main concern is government meddling in Tencent’s business. Chinese authorities have refused to approve any new online games (Tencent’s main business) since earlier this year, and it is also clamping down on online finance, another Tencent business.
Louw, who has not been enthusiastic about Naspers as an investment for some time, believes the share is finally offering some value. After trading at R3,800 last year, it’s down to around R2,800.
He believes that Chinese shares – particularly those in the tech sector – have now been hit too hard. The Shanghai Composite Index has lost a quarter of its value this year, and Chinese tech companies that traded at a price earnings (PE) ratio of 40 to 50 times earlier, are now at 20. Naspers is sitting on a forward PE of 16 times. (A PE ratio is an indicator of how expensive a share is.)
BHP Billiton, the world's biggest mining company by market value, has jumped by 17% so far this year as commodity prices recover.
Louw is also a buyer of BHP Billiton, which he believes still offers value at these levels. The company recently announced that it would return $10.4 billion (R156 billion) to shareholders via a special dividend and the buyback of shares.
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