Just as the “Magnificent Seven” tech stocks dominated America’s stock market performance last year, South Africa’s “Terrific Ten”, mainly precious metal companies, did so too for the large part of 2025 back home. Gold, precious group metals and MTN were the biggest positive contributors to South African equity performance over the year.[1]
Times like these are challenging for active managers because, at one point, 84% of South African equity performance came from a handful of shares, while the rest of the market delivered far less impressive single-digit returns.
When stock tips are plentiful and come from every corner, especially about those whose prices have risen substantially in recent years, like our resource shares in 2025, investors may experience fear of missing out (FOMO) and be tempted to dive in. However, conventional wisdom says it’s time to be cautious.
So, what is the answer to the question of whether investors should bring their offshore money back to South Africa to get in on the resource stock rally?
Much of this stems from the ALSI Top 40’s 52% year-to-date return (in USD).[2] As an active manager who has managed client portfolios through many market cycles, concentrated markets like those experienced in 2025 are typically challenging.
A tale of concentration
The numbers are striking. Gold Fields’ total return for 2025 was 185.6%.[3] AngloGold Ashanti has surged 235.9%. Together, our other precious metals miners, Naspers/Prosus and MTN contributed 63% to the JSE All Share Index’s 41.8% 2025 returns. Strip out these, and the market would have gained only 15.5%, a pedestrian performance in a year when emerging markets substantially outperformed developed markets, with the MSCI EM rallying 34% compared to the MSCI All World Index’s 22% and S&P 500’s 18%.
During 2025, the US market experienced a mirror image of this phenomenon, with its “Magnificent Seven” tech stocks dominating because of their multi-billion-dollar investments in AI, all while South Africa’s “Terrific Ten” profited handsomely from mainly mining precious metals whose prices were rallying strongly.
The active manager’s predicament
The question on every active manager’s mind at a time when stock markets are as heavily concentrated as 2025 is how to manage money responsibly when investors are overwhelmingly interested in a handful of stocks. The average retail investor looks at Gold Fields’ performance and says, “Let’s buy more of that”, which is antithetical to everything we know about successful investing. You’re supposed to buy low and sell high, not chase yesterday’s winners.
A well-established investment philosophy that prioritises diversification helps mitigate the risk of falling into these traps, but it doesn’t eliminate the challenge completely. We believe allocating 50% of a portfolio to South African gold miners, regardless of their past or potential performance, would be overly speculative and not aligned with a risk-conscious, diversified investment philosophy.
The South African paradox
One also needs to remember that stock markets are not economies. The same is true in South Africa. Our GDP growth remains below 1%[4] and the outlook remains tepid, yet the precious metal-driven stock market rally suggests we’re in a golden age. This isn’t cognitive dissonance; it’s simply that revenue for many of the top-performing stocks isn’t tied to the fortunes of the domestic economy because their wares are sold abroad.
One positive impact on the domestic economy is the improvement in our terms of trade, driven by higher gold export prices and a weaker dollar, which benefits the fiscus through a more resilient current account. Taxes on mining company profits will also bolster government finances, which aids debt metrics.
The Transnet factor
While there has been much improvement of late, underinvestment in transport infrastructure over the past decade has left the actual volume of commodities leaving our borders lower than it could have been. This was true in 2021-2022, too, when platinum prices skyrocketed and we couldn’t move all of it either because trains were broken or ports were clogged. We couldn’t capitalise South Africa’s natural advantages.
In this regard, the recent licensing of private operators by Transnet offers hope, but even with these improvements, it is unlikely that we will reach the tonnage levels we achieved in 2019 any time soon. Let alone historical highs. However, albeit slow, it is progress.
Managing concentration risk
Investors tempted by FOMO should take heed: forecasting the future with perfect accuracy is almost impossible. Even professional investors only have broad ideas about possible outcomes. No-one has perfect insight into what will happen next. This is why it is essential to be exposed to select risk and return drivers. This approach reduces the risk of a material permanent loss of capital.
The critical point for us is this: we do want to participate in these rallies but are averse to jumping in after a 200% run in a stock and risk buying at the top. We constantly ask ourselves if you’re underweight in these positions, do you add more now or is what you have enough to deliver on our intended outcome?
Looking beyond the rally
While everyone was focused on the sterling performance of gold and platinum in South Africa and the AI heavyweights globally in 2025, we believe investors should be thinking about the “picks and shovels”, quite literally, in our case. Which industrial businesses could continue to benefit from the commodity boom? What about the tax revenue flowing into the fiscus? These second-order effects might offer more attractive opportunities than chasing mining stocks at still-elevated valuation levels.
The five-year figures provide a clearer view of how various asset classes and regions have performed. During this period (to the end of December 2025), the SA All Bond Index returned 80.4%, the SA All Share Index (ALSI) 148.4% and the S&P 500 117%, according to Nedbank Research. On a compound annual growth basis, the ALSI, which delivered 15.7% a year on average in the five years to end- 2025, outperformed the S&P 500 by one percentage point (14.7%).
When considering these longer-term performance numbers, you realise that a relatively concentrated emerging market like ours can at times materially outperform leading developed-market equities, but timing and patience matter.
The bottom line
Ignore South African equities at your peril, but don’t mistake a narrow rally for broad economic health. As investment managers, our job isn’t to capture every spectacular gain but to ensure our clients’ wealth survives and thrives across multiple market cycles. Sometimes that means watching from the sidelines as others get lucky on concentrated bets.
[1] Nedbank. As of end December 2025. All figures in rand.
[2] Bloomberg. https://www.bloomberg.com/news/articles/2025-10-09/goldman-sachs-sees-more-gains-for-south-african-bonds-equities.
[3] Nedbank. As of end-December 2025. All figures in rand.
[4] https://www.statssa.gov.za/?p=18124.
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