This sector put in a sterling performance in 2005, delivering a total return of 36,6%, well ahead of the industrial index's 26,4%. Last year's performance built on the electronics & electrical (E&E) sector's solid long-term record, which between the bear-market low in late March 2003 and the end of 2005 enabled it to produce a total return of 189%, compared with the industrial index's 162% and the all share index's 156%.

The 10-member E&E index's performance was dominated by three heavyweights - Reunert, Altron and Altech. Together they accounted for just over 90% of the sector's total market capitalisation of R30,2bn at the end of March 2006.

In terms of heavyweight share price performance in 2005, it was a neck-and-neck, two-company race for line honours, with Altron registering a 41,6% price gain and Reunert 41,1%. Since the bear-market low, the picture has been identical with Reunert's 203% price rise a hair's breadth ahead of Altron's 201%.

Altech, however, hit headwinds in 2005, slipping from top share price performer in 2003 and 2004 to a very poor third with a gain of only 7,4%. Altech's rise in 2005 brought its total gain since March 2004 to 154%.

Based on earnings and dividend growth, Reunert, the sector's largest company by market capitalisation and net profit, left no doubt which was the champion heavyweight. In the three years to September 30 2005, it grew EPS by an average 20,9%/year and upped dividends by 39%/year. Reunert crowned this with a 65,1% return on equity (ROE) in 2005. By comparison, in the three years to March 31 2006 Altron grew EPS at an average of 8,3%/year and dividends by 24%/year. Over the same period Altech's EPS grew by 12%/year and dividends by 20%/year.

The reason for much of Reunert's superior performance can be traced to strategic actions commenced in 1997 after the appointment of Gerrit "Bull" Pretorius as CEO. Casting off Reunert's image as a manufacturer, he focused on slimming the group down and on businesses that are strong cash generators and do not require heavy, ongoing capital investment.

Since 1997 Reunert has sold about 15 manufacturing operations, cut staff from 15 000 to 5 000, and strengthened its position in consumer electronics, office systems, telecom systems and electrical engineering and cables.

Over the past three financial years, only telecoms did not perform well, the division's operating profit slipping 37% to R132m. More than compensating, and reflecting SA's broad-based economic growth, office systems lifted operating profit by 74%, consumer electronics by 85% and electrical engineering and cables by 165%.

In light of Reunert's rapid growth over the past few years, Pretorius is upbeat on prospects.

"The economy is strong. Interest rates would have to rise significantly to do real damage," says Pretorius. Though consumer demand could slow, Reunert's other divisions' exposure to infra-structure spending appears likely to act as a strong counterbalance. Even the telecom division appears set for better things after Telkom's announcement of plans to invest R30bn in its network over five years.

Infrastructure spending holds similarly positive prospects for Altron. Eskom's R84bn capex programme over the next five years has potential for Altron's Powertech division, which includes a 50% stake in ABB Powertech Transformers, one of the world's biggest transformer manufacturers.

Altron CEO Robbie Venter says: "Over the past six months we have seen the pace of infrastructure spending begin to rise. Eskom in particular is spending a lot of money." The Altron group has also been ploughing a lot of capital into expanding capacity. In its past financial year alone R315m was invested, most of it in Powertech, says Venter.

Organic growth in Altron and Altech should be supplemented by the recovery of a number of ailing divisions. Among these is Altech's smart-card manufacturing unit NamITech, which was hit by the strong rand in 2005.

"We have taken out costs and put in new management," says Venter. He says that Powertech also took a knock last year from costs involved in the closing of its loss-making Aberdare telecom cable plant in Port Elizabeth.

But though the going looks good for E&E sector heavyweights, the big winners may well lie among the smaller-caps. This was certainly the case in 2005 when international vehicle tracking group Digicor's price raced ahead to finish the year up 70,3%. This was vindicated by a 40% increase in EPS and a doubling of its annual dividend and promises of further strong growth in 2006.

But in 2005 nothing could touch automotive component manufacturer and supplier Control Instruments (CI). Its price blaze ahead to end the year up 77,4%, bringing its total gain since mid-2003 to 720%.

CI was left looking fully priced and pulled back sharply, losing almost a quarter of its value in the first few months of 2006. But if MD Richard Friedman's strategy of growing CI into a force in niche sectors of the global automotive component market pays off, the pull-back could well have been a great buying opportunity.

The same could apply to Delta Electrical, though it now derives all its revenue from production of electrolytic manganese dioxide used in alkaline batteries, and would look more at home in the resources sector. But much depends on the rand, which has played havoc with Delta's profitability over the past few years.