The JSE’s most popular stock (and it’s not Naspers)

Analysing changes in the portfolios of unit trusts can tell investors a lot. It shows which stocks managers are buying and selling, where they are increasing their exposure and where they are pulling back.

This gives a picture of the way professional investors see the current market. If you look over the industry as a whole, you can get a good idea of what is in favour and what isn’t.

One particularly interesting exercise is to look at which stocks are held by the most funds. Knowing which shares are the most popular can tell you what fund managers are thinking.

Before the oil price sank, Sasol had been the most popular stock amongst South African fund managers for some time. However, as its earnings outlook deteriorated, a number
offunds decided to exit and it no longer occupies that spot. Many might think that, given its incredible price growth and as it now dominates the SWIX, Naspers would be the stock to take its place at the top of the pile, but it actually isn’t.

Africa’s biggest media company is just edged out by a stock that is far more boring – the tobacco giant British American Tobacco (BAT).

The preference for stocks with stable earnings and predictable dividends is apparent in the number of large financial counters and the presence of BAT. There is also a clear rand hedge tilt in BAT, Naspers, Richemont and Steinhoff.

This is to be expected, as the stability of blue chip counters is their primary attraction. Most managers looking for a solid core in their portfolios are likely to look at exactly these stocks.

The two stocks that stand out, however, are probably Sasol and MTN. Both have been extremely popular in past years, but have had their recent troubles and so, it is interesting that they continue to be so widely held.

For Sasol, its problems have largely been due to external factors, specifically the oil price. The stock was trading at a high of over R600 per share in mid-2014, but dropped to below R380 a share before the end of that year as the oil price fell from over $100 a barrel to under $50 a barrel.

MTN, on the other hand, has problems largely of its own making. Regulatory issues, especially in Nigeria, and the company’s response to them have created a lot of uncertainty in the minds of investors. The share price more than halved from R230 per share in May 2015 to R118 per share in mid-January 2016.

The counter had been a market darling for some time before this though, so it’s likely that many managers felt it was worth holding onto. At a current dividend yield of over 8% and a price-to-earnings ratio of a little over 10, there may also be a feeling that it represents attractive value.

Probably the other most noteworthy thing about the list is that SABMiller is not on it. The share is actually only the 14th most popular stock among local fund managers, behind BHP Billiton, Woolworths and Growthpoint.

The brewing giant is up nearly 50% over the last year, and certainly ticks all the boxes in terms of stable earnings and offering a rand hedge. Perhaps the reason it doesn’t appear in more portfolios is that many funds have already taken profits ahead of its merger with Anheuser-Busch InBev.