Stock Watch

BUSINESS DAY TV  |  Podcast , ±24 min episodes every 2 days  | 
You've seen the business news, got the gist of the bourses and heard what the country's top CEOs have to say. It's now time for some in-depth markets analysis.

This half hour show was the first of its kind in the business TV market in South Africa – every night our anchors are joined by two markets experts who tell you what shares to be buying, holding or selling.

A Tiso Blackstar Group Production.

Keywords: money, opportunity, business plan, business ideas, business news, income, financial news

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Stock Watch - Stock Picks — Public Storage and Prosus

Nesan Nair from Sasfin Securities chose Public Storage as his stock pick of the day and Deryck Janse van Rensburg from Anchor Securities chose Prosus

Nair said: "It's a public storage company, and it plays to the theme of people living in smaller
units and then they have to pack their winter stuff away for summer and vice versa. It seems to me that as we move into more and more urbanisation, population grows especially around cities and that companies like this that offer you the ability not to throw your stuff away but to store them for when you need them is gonna become more and more popular so it's one of the ones we like"

Janse van Rensburg said: "I'm going for process tonight, it's obviously fallen out of favour since the recent unbundling or listing out of Naspers and I've been monitoring the discount to net asset value, obviously overlaying that with Naspers. So I think we have seen a little bit of a partial tick up in Tencent and that discount to net asset value in Prosus has actually gotten to an attractive level at the moment that I am prepared to pay for. Again you're making a call on Tencent so sitting around circa 330 Hong Kong dollars I still think that there's a lot of growth potential out of Tencent and my way to pay it would be through Prosus and obviously getting some of the periphery offshore assets inside of their Prosus listing.

Stock Watch - Stock Picks — US Corporate Bond ETF and RMI

Ian Cruickshanks from SAIRR chose US Corporate Bond ETF as his stock pick of the day and Rowan Williams from Nitrogen Fund Managers chose Rand Merchant Inv Hldgs.

Cruickshank said: I'm still bearish on the rand and South African economy so any protection for that I'd go to a
dollar priced ETF and would be happy to be there for a year or two on the S&P 500.

Williams said: "I'm going for RMI and it's kind of hedging your bets, it's a holding company and it's also moved to a wider discount. It's actually got a mix of local assets which I guess is somewhat interest rate sensitive Discovery, Momentum, MTN and then also OUTsurance which is actually a fantastic asset and business and has sort of been in a little bit of a lull. So a bit of a mixed balance at a fairly good discount to NAV."​

Stock Watch - Stock Picks — Growthpoint and Prologis

Wayne McCurrie from FNB Wealth & Investments chose Growthpoint as his stock pick of the day and Nesan Nair from Sasfin Securities chose Prologis INC.

McCurrie said: "SA listed property shares haven't traded at these levels in a long time and you are getting a good yield. Hopefully if the South African economy improves and they can get a bit of rental growth where the rands per square meters grow. All of these companies have slashed their cost base massively to try some growth in distributions. You are buying a good company at a decent yield. Over time, it will probably pay off.

Nair said: "I'm going for Progolis, an American property company that is very logistically focused. It's a big growth area now with logistics in terms of online and these guys are the world leaders in providing the logistics real estate. It gives you a little bit of a defensiveness against the volatility in the equity market."​

Stock Watch - Stock Pick — Ferguson and AECI

Jean Pierre Verster from Protea Capital Management chose Ferguson PLC as his stock pick of the day and Gerbrand Smit from N-e-F-G Fund Managers chose AECI Limited.Verster said: "I'm going with a company listed in London called Ferguson, it's a pluming and HVAC (heating, ventilation and air-conditions) company. Even though it is listed in London and you would think that they are exposed to the risks of Brexit, most of their profits are made from North America, so much so that they have now announced that they will unbundle their UK operations - Wolseley, which is very small in the context of the company. This made me realise that they are not exposed to the Brexit risk and indeed if there is a sharp weakening in the pound, which is the currency that their share price is nominated in, it will be positive because they make their profits in dollars."Smit said: "I'm going to go with a SA inc. company, AECI. They are not so much SA Inc. anymore as they spread their wings over the last few years but I just think the PE multiple is too cheap. It is trading at about a 10 PE and if you look at the latest numbers that they brought out they had growth and revenue and earnings of around 9%. With their restructuring they saved around R3 million which will reflect in the next set of numbers that are due to come out. I think you're sitting with a company that will do brilliantly over the long term with a cheap entry point. You have a restructuring, earnings enhancer coming through in the next 6 to 12 months."​

Stock Watch - Stock Picks — Super Group and Raytheon

Jonathan Fisher from PSG Wealth Sandton chose Super Group as his stock pick of the day and Drikus Combrinck from Capicraft chose Raytheon Co

Fisher said: "Super Group has done well, over the last year the share has actually come down. It is a transport logistics company, also with dealerships
in South Africa, Australia, Europe and the UK. 50% of the business is South African the other 50% is offshore and they've done quite well recently, they released junior end results which late August and grew headline earnings by 12.7%, which in my mind is a good result in this kind of market. Part of the
reasons why they did well is their supply chain Africa business which does
bulk commodities shipping in Southern Africa which has done very well because of the commodity boom so, it's a well-run business which we like. It also offers a return on equity of about fourteen point seven percent and they're trading on a PE of 7 times."

Combrinck said: "Raytheon is one of the four big defense companies that we've had in our portfolio for about four years. It has pulled back from its highs and I think it provides a bit of an entry at these levels. At these levels they are not extremely expensive for company that is very defensive in the light of the American government that keeps spending on defense, which is quite a big part of the budget. They are also growing by supplying technology products to the America's allies, and they're doing quite well."​

Stock Watch - Stock Picks — Remgro and Aspen

Waldo du Plessis from Nitrogen Fund Managers chose Remgro Ltd (REM) as his stock pick of the day and Gerbrand Smit from N-e-F-G Fund Managers chose Aspen Pharmacare Hldgs Ltd.

du Plessis said: "I'm going with Remgro, one that I have chosen recently. It is a typical old school holding company, they use capital and invest in other listed and private business that they hope to bring to market. Their biggest investment RMH is around 30% of the net asset value, just last week there was a 6/7% dispersion in the share price and if you think about it, you've got one asset where thirty percent of its value is determined by something that went up six percent and it went down one or two, it looks pretty cheap to me."

Smith said: "I'm going Aspen, we are all very worried about their debt problems etc. They certainly sold some of their businesses still Steven Saad never sold one of his shares that he's been owning. Most people back this company at a 35 and a 40 PE at R400 a share two/three years back. It's now trading at R85 a share, sitting at a six/seven pe multiple. They are deleveraging the balance sheet at the moment so they know what the problems are. They are tackling it and I they had lots of headwinds over the last two years, so I think you're probably picking up a bargain here and and you need to believe that Steven Saad and his management will do a good job going forward."​

Stock Watch - Stock Picks — Amazon and Airbus

Deryck Janse van Rensburg from Anchor Securities chose Amazon Inc as his stock pick of the day and Wayne McCurrie from FNB Wealth & Investments chose Airbus

Janse van Rensburg said: "Amazon is certainly got so much of the market at this stage from a retail perspective but I just think that this company with the
cash on balance sheet has got the ability to acquire, to horizontally integrate and if there are competitors out there they can swipe them up in a heartbeat. I think it's also about data, the data that they're able to get on all their online customers allows them to to really understand their base so well and really monetize on it, that's really what it's about for me. Obviously we're seeing a sharp pull back today in in the US markets and it could continue for a day or two. The stock is sitting it around seventeen hundred dollars a share I think it's starting to look interesting and if it does come down another hundred dollars I'll probably buy some"

McCurrie said: "Be proxy from mr. Shapiro I choose Airbus and he will explain it when he gets back because he asked me to choose Airbus for him"

Stock Watch - Stock Picks — Fortress B and Nike

Nick Crail from Ashburton Investments chose Fortress REIT Ltd B as his stock pick of the day and Bright Khumalo from Vestact chose Nike Inc.

Crail said: "I'm going to go for a local stock with a high dividend yield and that is Fortress B, a property share. You have the A and B shares, the A shares effectively guarantee a 5% increase in dividend on an annual basis. The B shares are the ones that take the beating should the overall company not have the ability to pay that out. But when having a look at that share at the moment, if consensus is right and you see the B shares actually growing their dividend next year, it could be around 18% dividend yield on a forward basis. If you even think that dividend is going to be cut by 20%, it is still on a forward dividend yield of 13%. Assets themselves are I think good quality and certainly I just think it is at the right price and something to get invested in.

Khumalo said: "I'm going with Nike, last week Thursday they released the Q1 numbers for the 2020 financial year. I like the fact that Nike direct is doing well. What do all luxury companies have in common? They all control their supply chain so that they can control the experience to the people. Apparently in New York, the Nike store experience is just amazing, you don't even need a card or cash to pay, you go onto the app to shop and the quality of the items is guaranteed to be better than the competitor. Nike direct is growing double digits as everyone is going online. As a result the underlying businesses are seeing more margin expansion."

Stock Watch - Stock Picks — EPE Capital Partners and US Corporate Bond ETF

Graeme Körner from Körner Perspective chose EPE Capital Partners Ltd as his stock pick of the day and Ian Cruickshanks from SAIRR chose US Corporate Bond ETF

Cruickshanks said: "I would look certainly in dollar terms for an ETF on the US corporate bond market. I think that we are going to see rates cut even further and I think that that is going to mean a surge in the liquidity globally and that would have a big impact on that sort of market. It may be quite interesting that it may be the only really performing game in town."

Körner said: "I've called Ethos Capital many times and if you look at the share price you'd say well there's evidence I have no idea what his doing. It started at ten bucks and today it got hits very late to R7,11 They released results earlier today, net asset value R11,39 so lets forget the R7,11 that was a bit of an anomaly. Even at R7,25/R7,30 it's sitting on approaching a 40% discount. It's not like the underlying portfolio is ridiculously valued, I think ebitda or multiple in the portfolio 6.9, comfortable levels of gearing. But for somebody who says okay well I believe in the Africa SA story and that good capital allocators in the private equity space will continue to do well, I think this team ticks those boxes. You get underlying exposure to many different funds in a portfolio of companies in one instrument and you know you must get the free pen and the 35% discount, so I think I can see no reason why this company, frankly, should trade on more than a 15% discount so theoretically you could get a 20% kicker there."​

Stock Watch - Stock Pick — Boeing

Wayne McCurrie from FNB Wealth & Investments has no stock pick for the day and David Shapiro from Sasfin Securities chose Boeing Co.

McCurrie said: "These trade talks starting next week are so important. If these don't hit resolution, find some sort of plan or at least come with a roadmap to a plan, world markets could be in for a torrid time, so I'm just sitting back."

Shapiro said: "I'm going for Boeing, I think we are at a point where the 737Max is going to come online and looking at their price performance you can see that it started to pick up, this gives me some comfort that the story is going to come out soon and once that happens they will be back in the game and this is very important for them."​

Stock Watch - Stock Picks — Ishares Trust US Medical Devices ETF and Shoprite

Gary Booysen from Rand Swiss chose IShares Trust U.S Medical Devices ETF as his stock pick of the day and Simon Brown from Just One Lap chose Shoprite Holdings Ltd.

Booysen said: "My pick is an ETF in medical devices and it is run by IShares. It is very reasonably priced at $250.50 a share. Medical devices is a field in the medical industry that is not as regulated as the pharmaceutical side. Part of when we build a portfolio is to see what the major blue chip companies are doing and what they are buying and selling and really across the board, medical devices is something that has been accumulated by the big asset managers globally."

Brown said: "The cons for this pick is that Shoprite lost the plot and that Africa is hurting them immensely and they are getting cost squeezed although they managed to hold onto their margins. The pros is that people would continue to eat, the lower LSM is always going to be in this space, the Africa issues will come and go with currencies and fade in time. Their self inflicted wounds ie. the strikes, IT issues etc are behind them, they managed to hang onto margins and it has always been my preferred food retailer for the last decade and a half."​

Stock Watch - Stock Picks — Microsoft and Distell

Nesan Nair from Sasfin Securities chose Microsoft Corp as his stock pick of the day and Sekgabo Molelekoa from Umthombo Wealth chose Distell Group Hldgs.

Nair said: "On their announcement of buying back 40 billion dollars worth of shares on Thursday, it had to be my stock pick. 40 Billion is 5% of the company, and one of the big drivers has actually been the cloud environment, so we see that growing even more and more. I think the offering that a lot of these cloud providers have is an affordable one for new startups and new businesses and I think in time, lots of businesses, particularly looking at companies like cyber security for example, the protection that cloud offers you vs your own infrastructure and I think we'll see a migration towards that in the years to come."

Molelekoa said: "I'm going with Distell, my thinking around it is that we are not seeing companies with real organic growth and these guys came through with organic, top-line growth and positive bottom-line growth. They also outperformed the peers in the medium to long-term in terms of that growth. And, on a rating perspective they are not that expensive either for the growth that you are getting, so they managed to expand their margins as well which we hardly see in this environment."​

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