Top 10 performing stocks to watch on JSE top 40 in 2020

With the JSE 40 well of the lows it recorded in March, we examine the top 10 largest companies on the JSE Top40 Index – in terms of market cap. Beyond that, we also look at their relative performance this year as well as the analyst outlook on these key stocks.

The top 10 shares on the JSE Index are as follows:

1. Naspers
2. BHP Billiton
3. Cie Financiere Richemont
4. Anglo American
5. AngloGold Ashanti
6. Prosus
7. British American Tobacco
8. Mondi
9. Gold Fields
10. Standard Bank

The JSE represents a highly top-heavy benchmark, with these ten companies alone accounting for roughly 70% of the index. . The below pie chart is a visual representation of the weightings of these companies:

Top 10 JSE performing shares by market capitalisation

The below table highlights South Africa’s Top 10 companies in terms of the market cap weighted JSE Top40 Index, highlighting their 2020 Performance, Broker Ratings, long term price targets and IG client sentiment views.

The share price performance figures show the respective performances of these shares from the close of business on 31 December 2019 up until 27 July 2020. 2020. The broker rating and long-term target prices are sourced from Thomson Reuters data.

British American Tobacco (*) although not tradeable as a CFD on the domestic (South African) account is offered to traders and investors on offshore international trading accounts. The client sentiment and broker rating data for this share is based on the UK listing of British American Tobacco.

Overview of the top 10 shares on the JSE

Naspers

Naspers, remains the largest publicly-listed company in South Africa, making up a staggering 22.7% of the index. The group has proven highly resilient to the current pandemic, having risen more than 30%, on a year-to-date basis. Centrally, the company focuses on two main areas: 1. Media and internet services focused in South Africa, and 2. Through its majority stake in Prosus, has internet interests outside of South Africa, including companies and investments in the online classifieds, food delivery, payments and fintech, retail, travel, education and social and internet platforms sectors, among others.

Interestingly, investors look to have discounted the value of the local interests out of the share price, rather tracking the groups holding in Prosus and in turn Chinese internet giant Tencent Holdings.

BHP Billiton

Mining giant BHP Billiton accounts for roughly 12.76% of South Africa’s Top40 Index. The world-leading resources company which extracts, processes and sells minerals, oil and gas has benefitted from rising commodity prices in the second quarter, particularly that of copper, iron ore and oil (recovery).

In saying that, the fortunes of these mining companies remain at the mercy of commodity cycles and their own ability to extract higher levels of operational efficiency. Even so, BHP has historically boasted strong management – and is currently represents the second larger miner in the world, in terms of revenues.

Cie Financiere Richemont

The dual-listed Swiss luxury goods business Cie Financiere Richemont is the third largest company the JSE, making up 9.56% of the blue-chip benchmark. Group sales are driven by a number of factors including geographic spread, mix of product type and by distribution channels.

While the stock is currently down year-to-date as a result of the coronavirus pandemic, investors will be hoping to see CFR’s sales growth pick up once economies re-open, particularly in areas such as Asia (mainland China) which offer some of the group’s largest opportunities for future growth. Importantly, Richemont’s products are considered discretionary purchases and will therefore be impacted by the level of consumer confidence within these markets.

Anglo American

Anglo American is the second miner in the top 10 list and accounts for roughly 8.4% of the Top40 Index. Centrally, the group’s portfolio of mining operations are based on the premise of quality and longevity; with AGL effectively deleverage itself over the years, down from levels which were unsustainable. In saying that, investors will likely be keen to see AGL maintain a strong balance sheet throughout the current business cycle. There is a keen focus on ensuring that the balance sheet remains robust throughout the business cycle.

AngloGold Ashanti

While AngloGold Ashanti remains South Africa’s largest gold miner (representing 3.57% of the Index), Harmony is set to become South Africa’s largest gold producer, once it completes its acquisition of AngloGold Ashanti’s South African assets. AngloGold is set to exit operations in South Africa and focus on less cost intensive operations in Ghana, Australia and America (North and South).

Prosus

Prosus, unbundled from Naspers, is primarily focused on investing and building leading consumer internet companies. Overall, the group is focused on operating and investing globally in markets with long-term growth potential.

Indeed, it is this exciting portfolio that has seen the company’s share price rise close to 50% since January. PRX’s portfolio consists of: Tencent (listed on the Hang Seng), Mail.ru (listen on the London Stock Exchange), Ctrip.com International Limited (NASDAQ listed), and DeliveryHero (Xetra Dax).

British American Tobacco

The British American Tobacco PLC (SA), boasts over 200 brands sold in more than 200 markets. British American Tobacco South Africa forms part of British American Tobacco’sEastern Europe, Middle East and Africa (EEMEA) region, and the Southern Africa Area sub-region.

Problematically however – the company, which represents the leading tobacco firm in South Africa – currently sees the sale of its products prohibited domestically due to lockdown legislature. Positively at least, the bulk of the group’s earnings are derived from outside of the country’s borders. Traders of the company will have to look to the UK listing for exposure to the share due to its inward listing in South Africa.

Mondi Ltd (SA)

Mondi is a leading global packaging and paper group employing around 26,000 people across more than 30 countries, working with thousands of local and global brands using paper where possible and plastic where necessary. The group’s portfolio of assets remain industry leading, with its pulp and paper operations a key value driver for the business.

Goldfields Ltd

Gold Fields Ltd - ADR is a globally diversified gold producer boasting nine operating mines across Australia, Peru, South Africa and West Africa and Chile. Like all mining companies, business in 2020 has been disrupted byglobal lockdown measures as a result of the coronavirus pandemic.

Strong demand for gold – based on its safe-haven and inflationary hedging characteristics – has seen not only the precious metal trade significantly higher year-to-date, but also companies involved in its production, run higher. Gold Fields, while having gained more than 130% year-to-date, remains well placed to capitalize on gains of the gold, should the safe-haven theme in 2020 remain.

Standard Bank

Standard Bank Group Ltd has now surpassed Firstrand Limited as South Africa’s largest bank, in terms of market capitalization. Overall, the domestic banking sector has underperformed in 2020, as earnings, linked to economic growth track a recessionary environment which predates the ovid-19 pandemic and its far-reaching consequences.

South African banks are currently in a situation where credit losses on both a retail and commercial level are rising as the domestic economy moves deeper into recession. These companies are now looking to retain earnings through withholding dividends, as the outlook remains unclear.

How to trade top 10 JSE performing stocks

If you want to trade any of the top 10 stocks we have discussed today, you can utilise IG’s CFD trading platform to speculate on the share price movements of the underlying asset – to buy (long) or sell (short) following these simple steps:

• Create an IG Trading Account or log in to your existing account
• Enter the company name or ticker in the search bar and select it
• Choose your position size
• Click on ‘buy’ or ‘sell’ in the deal ticket
• Confirm the trade

Trading the top 10 stocks in summary

• The 10 largest stocks on the JSE Top40 Index account for roughly a 70% weighting on the South African benchmark Index.
• Gold companies: AngloGold Ashanti and Gold Fields are the best performing stocks in this list year to date, as gold rises to all-time highs off the back of coronavirus-induced uncertainty.
• BHP Group, Richemont, Anglo American Plc, Prosus, Mondi, Standard Bank, Gold Fields and British American Tobacco all have long term ‘buy’ ratings (consensus of Thomson Reuters analyst estimates).
• Naspers has a long term ‘strong buy’ rating (consensus of Thomson Reuters analyst estimates)
• AngloGold Ashanti has a long term ‘hold’ rating.