The best performers among large stocks on the JSE over the past year have been:-
SAB (global beer) up 24%,
Vodacom (local cell) up 31%,
BATS (global cigarette) up 33%,
Exxaro (local coal) up 33% and
Woolies (local retail) up 46%.
This highlights the breadth of exposure available to us here through large cap shares, but it obviously also calls for a question on valuation - how can these shares rise so strongly if the world is truly ending as we speak.
So here is a quick look at Woolies, with the latest financial report (2011 June numbers) giving a steer as to the trajectories for growth and margin.
As you can see, I am not being too bold, assuming a margin of 8%, a full point below what the group did this last year. So it appears that thi sstock is easily worth R35, closeish to its latest price of 38 and change. And it adds a billion of value more than its costs of capital each year. If anything, the price (blue) and retrospective valuation (red) chart be;low shows that this company seems to have been way neglected by market critics for that past few years, and is now far closer to being in equilibrium with Mr. Market. No panic at this price, I suggest.
Cheers
Stuart
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