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Johannesburg - What do Peroni beer, Cartier watches and Chinese online games have in common? Very little, except that all three are behind the South African stock market's gravity-defying run in recent years.
Since recovering from the 2008 financial crisis, stocks in Africa's biggest economy have blithely weathered all kinds of bad news - strikes, sputtering growth, credit downgrades and waning consumer demand - to notch up a string of record highs.
Johannesburg's benchmark Top-40 index has risen nearly 40% since the start of last year, outperforming many major developed and emerging markets, including India (28%), Mexico (11%), the United States (35%), although some of those returns have been eroded by the weakening rand currency.
But here's the curious part. According to some recent research from South Africa's Cannon Asset Managers, 25% of the performance comes from just three stocks: brewer SABMiller [JSE:SAB], luxury firm Richemont, and media group Naspers [JSE:NPN].
Since January 2012 Johannesburg-listed shares of SABMiller, known for Castle Lager and Peroni, have risen 80%. Richemont, the Swiss maker of Cartier watches and Mont Blanc pens founded and still run by the Rupert family, has seen its South African shares surge 137%.
Naspers, a sprawling media group with holdings in e-commerce companies in emerging markets, including a stake in Chinese internet giant Tencent Holdings, has clocked a stunning 166%.
Yet investors who owned all the other shares in Johannesburg, but not those three, would have seen an increase of less than 15%, Cannon CEO Geoff Blount said, a performance more in line with South Africa's fundamentals.
Blount's observations are intriguing for several reasons, particularly from a valuation perspective: "There is no doubt that the stocks that did well over this period are extremely high-quality firms, but - and here's the issue - many are very expensive, high-quality firms," he said.
At least in Naspers' case, "very expensive" may be an understatement. The stock, which this month eclipsed telecom MTN Group Limited [JSE:MTN] as South Africa's largest firm by market value and is now worth $40bn, is trading at a heady 29 times forward earnings, according to Thomson Reuters data.
Its share price is 36% above its intrinsic value, according to Thomson Reuters StarMine, which takes into account a company's future growth prospects.
So much for Africa
And despite all the hype about "rising Africa" and South African equities as a gateway to sub-Saharan growth, none of the three stocks are pure Africa plays.
Although it has significant pay TV and print operations, Naspers is seen as a "proxy for Tencent" as Jefferies analyst David Reynolds remarked in a research report last month.
Tencent, a $98bn company known for its wildly popular social messaging application WeChat and its lucrative online games, contributed about 40% of Naspers' revenue in the last financial year.
Richemont, which has its primary listing in Switzerland after being spun off from the predecessor of South Africa's Remgro Ltd in 1988, is also increasingly reliant on Asia, given the heavy demand for luxury items from China's wealthy.
For SABMiller, Africa outside South Africa is an increasingly important market, although it is still a smaller revenue contributor than Latin America, Europe and North America.
The three companies have something else in common: they show how much investors will continue to pay - or, arguably, overpay - for high-quality businesses with good growth prospects.
The challenge for South African investors is now to find the next set of companies that can deliver such stunning returns.
* Fin24 is part of Media24, a subsidiary of Naspers.
