2018 Top Performers – Pockets of excellence in a struggling sector
In a year, that SA hit a recession you’d think that most companies would lose money or at least those profits would shrink.
But the fact is that many of the best performing shares for 2018 have grown profits, market share, and revenues.
By far, the majority of these top performers are penny shares and small cap stocks.
Take Onelogix for instance…
You’d think an economic downturn means lower revenue for a logistics company as people buy less and shipping of products drop.
Yet, Onelogix rose 13.64% in 2018 on the back of 40% growth in headline earnings from continuing operations. It also managed to steal market share from larger competitors.
Torre Industries is up 44% for the year. This comes as the company successfully completed a restructuring of its operations and received a buyout offer from a private company.
Mustek grew 28% as the company managed to grow revenue around 10% and profits nearly 20%.
Here’s where I’m putting my money
Of the 53 shares that returned more than 10% for 2018, 37 of them are small caps or penny shares (market cap below R5 billion for the purposes of this study).
That means nearly 70% of 2018’s top performers are smaller companies and not the ‘safe and secure’ investments advisors punt all day long.
The reason for this is that these companies have lower costs, and can react much quicker to changing market conditions.
In fact, many times when the economy is struggling and larger companies shed dead weight, these small companies steal market share and grow!
Simply put – investing in smaller companies means you are more likely to beat the market.
And right now, I believe that the South African penny share market is at its most attractive for investors in years as I have explained to investors numerous times in the past months…