Two South African stocks that could have doubled your money in 2024

South African equities have been on a rollercoaster ride since the start of 2024. Amidst this chaos, two local stocks – Quantum Foods and Eastern Platinum – have skyrocketed their share prices.

South Africa’s equity markets started the year on a positive note but have experienced some volatility as the year has progressed.

South Africa’s not alone in this – the global economic landscape has been marked by uncertainty this year, with concerns about inflation, interest rate hikes, and a potential recession impacting investor sentiment.

However, this global uncertainty was exacerbated by the build-up to South Africa’s general election in May, which was seen as the most pivotal and uncertain election since the advent of democracy.

This introduced additional uncertainty into the market, as the ANC stood to lose its majority for the first time in 30 years.

The markets were unsure of the outcome and, if forced to, who the ANC would partner with in a coalition. 

This also saw the rand experience significant volatility, which, in turn, impacted the performance of local equity markets.

Amidst this volatility, some sectors have shown significant resilience. Notably, consumer staples and utilities sectors have been more stable, while resources, including mining stocks, have shown significant movements reflecting global commodity price trends​.

Following the elections and an outcome generally regarded as positive – with several opposition parties forming a Government of National Unity – the local market has performed well.

Many asset managers have increased their exposure to South African equities, inspired by the positive election outcome.

For example, asset manager Abax Investments has increased its exposure to local equities, encouraged by President Cyril Ramaphosa’s economic reform plans.

The Abax Equity Prescient Fund, which only holds South African equities, has increased 7.3% so far this year, compared with a 3.9% jump in the nation’s benchmark gauge for shares.

In that period, the fund manager has raised its exposure to stocks in companies that operate in South Africa – rather than Johannesburg-listed firms with businesses elsewhere – to 47%.

“While we are not naïve about the inevitable challenges of operating a coalition government, a positive outcome has emerged with the government of national unity raising the prospect for more market-friendly reform, stronger economic growth, faster fiscal consolidation and employment creation,” Abax portfolio manager Justin Hollis told Bloomberg.

“The president’s focus on infrastructure development, cost of living, improved policing and structural reform bodes well for South African citizens, corporations and our domestic equity market.”

Abax’s upbeat view matches that of a survey of 17 local fund managers by Bank of America. 

About 82% of respondents said they expect more buys than sells in the next 12 months, compared with 65% who held that view in June. 

In the first six months of the year, the JSE All Share Index has delivered a 5.59% return – a strong performance for the year so far.

Among the top performers, two companies have stood out – Quantum Foods and Eastern Platinum. Both companies have seen their share prices more than double in the year to date.

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Quantum Foods – 149% increase year-to-date

Quantum Foods is a South African-based company primarily involved in producing and distributing animal feed, poultry, and eggs.

In Quantum’s 2023 financial year, the company’s revenue increased to R6.95 billion, but it reported a net loss of R35 million. 

This loss was attributed to several factors, with a vicious outbreak of bird flu being the most damaging to the company’s operations. 

The outbreak led to the culling of between 7.5 million and 8 million chickens across South Africa.

In September 2023, Quantum said the disease had so far affected approximately 1.5 million of its layer and breeding stock, which have an estimated value of R106 million.

In addition, the company struggled with high feed costs, with the increasing prices of animal feed having put pressure on the company’s profit margins.

Load-shedding – which was the worst it had ever been in 2023 – also weighed on the company’s operations.

 However, Quantum made a comeback in 2024, as its share price has skyrocketed by almost 150% in the year to date.

This is not due to a significantly stronger financial position, as the company is still dealing with the aftermath of the bird flu outbreak, and feed costs remain high.

Rather, Quantum has been the centre of a high-stakes takeover battle this year, which is the reason behind its soaring share price.

Investment analyst Anthony Clark, who specialises in small-cap stocks, wrote in the Financial Mail that the company’s share price has experienced extreme volatility due to the involvement of multiple parties:

• Country Bird Holdings (CBH): A larger poultry player with a history of failed takeover attempts of Quantum
• Silverlands: A private equity firm with a significant stake in Quantum, often acting as a counterbalance to CBH
• Braemar Trading: A shareholder linked to Zimbabwean tobacco barons who has been actively involved in corporate governance disputes
• Sovereign Foods: A potential new player with a small but strategically important stake

Clark explained that CBH has made multiple attempts to acquire Quantum Foods, recognising its strategic value in the poultry industry.

However, these attempts have been met with strong resistance from existing shareholders, primarily Silverlands and Braemar Trading, who have worked together to maintain control.

In addition, the emergence of Sovereign Foods as a shareholder has further complicated the situation, creating a potential wildcard in the battle for control.

He said the intense corporate manoeuvring has led to extreme volatility in Quantum Foods’ share price, with the stock experiencing significant gains and losses.

Quantum’s future currently hangs in the balance, with several likely outcomes to CBH’s takeover attempts.

Regardless of the outcome, Quantum shareholders have had a good year so far, with the company’s share price up 148% in the year to date.

However, Clark warned investors to approach the company with caution, as its share price is currently not in line with its underlying financials, the risk of significant share price volatility is high, and the potential for substantial losses is evident.

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Eastern Platinum – 168% increase year-to-date

Eastern Platinum (Eastplats) is a Canadian mining company that focuses on exploring, developing, and extracting PGMs in South Africa.

Although it is a smaller player compared to giants like Amplats and Implats, it is the best-performing platinum miner on the JSE in the year to date.

Eastplats targets high-grade PGM deposits, aiming to maximise profitability through efficient extraction and its projects are situated within the Bushveld Complex.

Crocodile River Mine is Eastplats’ primary operational asset. It’s a shallow mine with a processing plant that allows the company to re-mine and process tailings resources.

Through its growth strategy, the company aims to increase production to 60,000 ounces of PGM per annum by 2025.

For the year through December 2023, Eastplats reported impressive results.

Its revenue reached $106.9 million (R2.06 billion), a record full-year high representing a 98.3% increase. The miner also swung from a profit to a loss.

These positive results were largely due to increased chrome sales and improved mine operating income.

Earlier this year, it was also announced that the initial phase of the Zandfontein underground section of Eastplats’ CRM in South Africa is now fully operational. 

The company’s share price has performed exceptionally well in the year to date – up 168%. 

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