Coal the big winner in Cristal challenge

Coal mining stocks may be out of favour with environmentalists and climate-change activists, but one has been good news for the leaders in this year’s Cristal Challenge, all of whom picked a coal stock that has jumped more than 200% this year.

Coal producer Thungela Resources, spun out of Anglo American in 2021, drove the success of the leaders in the competition, the brainchild of stock market industry veteran David Shapiro.

Participants in the Cristal Challenge pick five stocks for the year. The winner is awarded a bottle of pricey Louis Roederer Cristal champagne.

Shapiro, who has a 50-year history of investing on the JSE, devised the competition in 2021 to popularise individual stock picking.

This year, there are 77 participants, up from 10 in the inaugural year, and most are industry professionals. The top five participants at the end of July all picked Thungela. The share, which listed at R25, closed at R267.90 on Monday, up more than 820% since its first trade.

Coal stocks benefited from an energy crisis in the northern hemisphere even with SA coal firms limited by Transnet’s rail and port capacity constraints.

Shapiro encourages the public to use professional investment managers, but also urges people to know which assets they are invested in. “I have found clients who have handed over their savings to advisers that tick boxes and ... have absolutely no idea what they own.”

Looking through the investments and unravelling those products, he finds clients are exposed to thousands of underlying shares spread across a range of industries.

“When you do the analysis, you find that 70% of their worth is in maybe 100 companies.”

So much of what they own contributes nothing to their prosperity, he said.

At the end of July, the other top firms of the 127 that featured as choices in the competition were investment holding company Hosken Consolidated Investments, logistics firm Grinrod, construction group Stefanutti and technology firm Etion, which electrical and industrials group Reunert offered to buy in May.

Some of the worst-performing stocks popular among Cristal Challenge participants are multinational retailer Steinhoff, construction firm Aveng and Purple, the owner of Easy Equities. Purple, which was a top performer in the 2021 competition, hit R3.50 earlier this year but is now down to R2.08.

The winner in 2021, Betsie Schaap, is a full-time pianist who is placed fifth so far this year, again having picked Thungela, a stock she learnt about through the challenge.

She is the only woman and noninvestment professional in the top five.

“Shapiro’s Cristal Challenge will always have a very special place in my heart. I have learnt so much from this challenge.

“I came across stocks that I never knew existed,” she told Business Day. She started to read about Thungela during the 2021 challenge and added it to her private Easy Equities investment portfolio. Of her original choices, Purple is now down almost a third and Steinhoff has halved in value. Schaap said: “I seem to have a brilliant instinct for picking a dud stock! After all I am just a pianist.”

Schaap said she will never understand markets. “The thing that really messes with my brain is the fact that the moment you think you know what a stock is going to do, the exact opposite happens.” But she said: “I have learnt there is absolutely no better form of investment that comes close to investing in good companies. The sooner you start, the better.”

Among the competition’s dud picks is Tongaat, suspended from trade on the JSE after failing to submit its financial results on time. It was down almost a third by the end of July.

Hulamin, a specialised aluminium producer, was down 46.9% at the end of July after facing a lower aluminium price and a weakening currency. It is also a high energy user at a time of severe load-shedding.

Cement supplier PPC was a favourite choice as many participants hoped it would benefit from private and public infrastructure development, but it failed to kick off. PPC was down more than 45% at end-July.