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Johannesburg - Small and medium capitalisation shares have been on the shopping list for some investors, although questions remain whether the rally is sustainable.
Since March 10, the JSE/FTSE small cap index has risen by 18% - an almost identical move to the JSE Top 40 index.
Typically, investors will first look at bigger blue-chip stocks before expanding their small cap shares - a riskier investment than more defensive industry heavyweights.
On Wednesday the two best performing unit trusts over a 30-day period were the much-maligned Stanlib Small Cap fund, which was slaughtered at the end of 2008 and the RMB Small and Medium Cap Fund.
Unit trust holdings are disclosed on a quarterly basis and a look at the major holdings of these two funds at end-March makes for interesting reading.
The Stanlib fund retained its 2008 focus on infrastructure and construction shares and holds the likes of EsorFranki, Protech, Dawn, BSI Steel and Basil Read.
Stockbrokers in on the game
The RMB fund had more of a mid-cap bias including companies like engineering firm Howden (the fund's largest holding), Nu-Clicks, Adcock Ingram and Hudaco. However, education firm Advtech, media firm AME and Dawn each comprised 3% or more of the portfolio.
Stockbrokerage firms are also starting to see value in the sector. Over the course of June, stockbroker Imara SP Reid issued 23 recommendations to buy or add specific shares to the portfolio. Of these, 17 would be classified as small or medium cap shares.
Experts, however, have mixed views about investor sentiment. Asset manager Stanlib recently told clients: "On a balance of probabilities, say 70 to 30, we suspect that global stock markets (including the JSE) have seen the worst and that any pullback, as we're now experiencing, represents more of an accumulation opportunity than a selling opportunity."
Paul Theron of asset manager Vestact is less convinced, particularly on AltX-listed small caps. "We see occasional volume flashes, but only at the tail-end of a multi-day up market," he said.
Theron adds bids disappear as soon as the market turns down, which indicates a lack of conviction in the small cap sector.
- Fin24.com