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 - Super Group and Vukile Property Fund

Ashraf Mohamed from Arqaam Capital chose Super Group Ltd as his stock pick of the day and Mark du Toit from Courtney Capital Private Wealth chose Vukile Property Fund

Mohamed said: "My stock pick is Super Group, we have discussed the South African economy, we know how weak it is, we know how vehicle sales have been under pressure. However, I think we are coming to the bottom of that cycle in South Africa. The Australian business will remain under pressure on the motor vehicle sales side, on the logistics side there has been some margined compression but things are starting to pick up especially in Africa. We have seen a recession, although they have not admitted to it in Germany and we have also seen the German economy get some forward momentum. So, with that I think that the European logistics, African logistics and motor vehicles in SA will benefit and give it double digits earnings growth for the next twelve months."

du Toit said: "Sticking with the theme of quality stocks at the right price we like Vukile, we think their management team is particularly strong. We know Laurence Rapp and he is one of the smart, reliable and honest people and they have done a very good job at building up a very nice property portfolio. Roughly 50% in South Africa and 50% offshore - mainly in Spain. Spain is growing 3% GDP growth and 1% inflation so you have a tailwind there. Vukile is also trading at 8.5% dividend yield so at this price with this nice dividend yield, it's quite the stock to have"

Stock Watch - Stock Picks - Investec and Walt Disney

Nick Kunze from Sanlam Private Wealth chose Investec Plc as his stock pick of the day and Ricus Reeders from PSG Wealth Sandton chose Walt Disney Company

Kunze said: "Investec has underperformed against all the other banks recently, it is in corporate action at the moment and spinning off the asset management business. Traditionally we feel that it has been held back by Brexit problems, they are in the wrong space in the UK and the pound has been all over the place. We feel the valuation should be closer to R110 per share. It did have a recent "pop-up" and was trading closer to R91/R92 on Monday.

Reeders said: "Disney has been at the same level for five years until recently with the announcement of Disney plus which is the new subscription service. What has happened is a company that is fairly mature all of a sudden has a growth profile a​nd they will spend a heck of a lot of money in the next five years but they are so cash generative and I think for starters they said that if they get enough subscribers they will be cash positive in the next five years, well, I think that is an understatement, they will probably do better than that. This is a great opportunity to get into something that has a lot of scope, production capabilities, a good production library and at a very good price at $7 a month for the subscription option. It's now a growth company."

Stock Watch - Stock Picks - Khula Sizwe and Louis Vuitton

Bright Khumalo from Vestact chose Khula Sizwe as his stock pick of the day and Nesan Nair from Sasfin Securities chose LVMH (MTA)

Khumalo said: "I'm choosing the Barloworld BEE scheme, it's called Khula Sizwe. As a black shareholder initially you get a 5% discount to the entry and on top of that they have guaranteed growth of 8% on their second year's lease. So, already you know that you are getting 8% which means that you are guaranteed 13% in the first two years. This is a property company that used to belong to Barloworld which comprises of their retail properties, industrials and some mix uses. It's a nice stable business and a nice stable deal."

Nair said: "I am going for Louis Vuitton, they came out with their results on Thursday the market was expecting 8.5% revenue growth and they printed at 11% in the quarter. If you look at the share price over the last ten years it spent a long time between €110 and €130 but in the last three years it is over €345. There is still a lot of momentum in earnings and I think the prospects are going to be very good."

Stock Watch - Stock Picks - AVI and JP Morgan Chase & Co

Wayne McCurrie from FNB Wealth & Investments chose AVI Ltd (AVI) as his stock pick of the day and David Shapiro from Sasfin Securities chose JP Morgan Chase & Co.

McCurrie said: "Good solid South African consumer share, the snacks business has done extremely well, the shoe business has not done well at all but that can turn around, and everyone knows that the fishing business is a relatively tough business. Share price has been hammered but it is still a very good quality company. And if you prepare for a better South Africa and you think a better South Africa is going to happen then AVI can do well. Looking at the price chart it is now the cheapest it has been for a long time.

Shapiro said: "I think the US economy is still in very good shape, consumer are still around and are still spending. I know that the margins between what you can borrow and what you are lending out is pretty low at the moment but I think that relative to the rest of the market the banks there look very cheap and they give you very good yields"

Stock Watch - Fiat Chrysler Automobiles

Jean Pierre Verster from Fairtree Capital chose Fiat Chrysler Automobiles as his stock pick of the day.

Verster said: "Going for a global offshore share as usual. Fiat Chrysler Automobiles is listed in the US and in Italy. The company's long standing CEO passed away unfortunately last year but the new management team that has taken over have shown that they are well in control and still making good strategic decisions. The company has a good cost base relative to the volume that Fiat and Chrysler are pushing through in terms of their production facilities and they get positive operating leverage from that. Global car manufacturers have sold down in the last year or two mainly because of diesel and a slow down in vehicle sales in China. Fiat also has some of those issues but less so than a lot of other manufacturers. They also unbundled Ferrari two or three years ago - that did very well and then in terms of emissions they did a deal with Tesla to share the emission credits in Europe so that they will pay Tesla a certain amount and use the credit because Tesla vehicles don't have no emissions.”

Stock Watch - Stock Picks - Sasol and Hyprop

Jonathan Fisher of PSG Wealth Sandton chose Sasol Limited as his stock pick of the day and Nick Crail of Ashburton Investments chose Hyprop Inv Ltd.

Fisher said: "Sasol came out with a decent set of numbers for the half year December and they are now trading at a price to earnings ratio of around ten times which is below the market average. They do have a lot of debt on their balance sheet and they have spent a lot of CAPEX on the Lake Charles project but we believe that it will start to come into fruition next year and profits will start flowing through to the bottom line."

Crail said: "Economic fundamentals are not favourable for this company as it stands at the moment, our argument would be that you are still picking up a quality asset, quality management and quality retail portfolio and you're now picking it up at relative bargain basement sort of prices. So, yes - if you're of the opinion that our macros are going to get worse and worse forever, this is going to go down. If however you think you know what it's probably darkest before the dawn as much as we don't anticipate a radical recovery in SA's GDP in the next six months if we start moving in the right sort of direction, and just some positive sentiment comes into the property market but specifically this share, I think there's this is quite significant upside from these levels."

Stock Watch - Anheuser-Busch InBev and Afrimat Limited

Ricus Reeders from PSG Wealth chose Anheuser-Busch InBev as his stock pick of the day and Deryck Janse van Rensburg from Anchor Securities chose Afrimat Limited

Reeders said: "It has been about 4-5 years since the SAB merger and that is working out on the system. The concern about it has been debt and they have addressed that to a certain extent by changing the terms of that so at the moment with a strong Rand which I don't think is going to persist, rand/hedges like Anheuser is probably under pressure so I would cautiously take a look it specifically because you are getting a good yield of around 5%-6% at the moment and it's a safer play in a market that is pretty heated at the moment"

Janse van Rensburg said: "My stockpick is a risky one, it is Afrimat. I have looked at the top forty space and thought, okay, we need to move beyond that and look for something else with a bit of value so, I think there is a management team that I certainly back. They have certainly delivered over the last five years plus in terms of shareholder value that they have created. Recently they made quite a significant investment in the iron-ore space actually adjacent to Kumba Iron-Ore and they took on quite a bit of debt to pay for that acquisition. Obviously what has happened with the iron-ore price on the back of the Vale disaster in Brazil and some of the disasters that are taking place in Australia at the moment, this iron-ore price could potentially sustain these levels and if that is the case then I certainly think that this iron-ore investment that Afrimat made is going to be a big contributor to earnings if we just look forward from here on and out. I think that there is a lot of optionality cash that they generate and that debt will be paid down very quickly"

Stock Watch - Stock Picks - Naspers and Multichoice

Wayne McCurrie from FNB Wealth & Investments chose Naspers (NPN) as his stock pick of the day and Sekgabo Molelekoa from Umthombo Wealth chose Multichoice (MCG).

McCurie said: “Naspers as we well know peaked at around R4000 and has come back, their earnings are still there, they've done the unbundling of Multichoice and they are going to do their new listing in the Netherlands and unlock some value. Today Tencent announced that they are buying back shares. This must all add up to something half decent"

Molelekoa who chose Multichoice says that we hear rumblings about Netflix coming in and being the big disrupter in our market but Multichoice's strategy is to venture more into Africa. South Africa is highly cash generative and is funding the rest of the business. In fact, we are going to see a dividend resume again next year. The dividend yield is expected to be around 5%​.

Stock Watch - Stock Picks - Master Drilling and Investec

Drikus Combrink from Capicraft chose Master Drilling as his stock pick of the day and Gerbrand Smit from NeFG Fund Management chose Investec (INL)

Combrink says he chose Master Drilling, a small cap stock as it is quite a good rand/hedge stock. Master Drilling ha been building its business for the last three to four years, acquiring and doing bolt-on acquisitions and they are now three times larger than their next global competitor.

Smith chose Investec as part of the Brexit theme and says: "You are sitting with a company with an 8,7 PE (Price to earnings ratio) multiple and they came out with a trading statement just over a week ago that said that they will be okay, and that it's a bit above expectation. With Brexit looming you are most probably going to see the stock go up and with the breakup of the business it will become two very large companies and it will unlock value for Investec with a nice asset manager as well"

Stock Watch - Stock Picks - Shoprite and FirstRand

Chantal MaChantal Marx from FNB Wealth & Investments chose Shoprite (SHP) as her stock pick of the day and Paul Chakaduka from chose Firstrand (FSR)

Marx says that Shoprite experienced the perfect storm over the last six months to a year where they had some very serious security losses at their businesses. They also had a DC strike that dragged on. They implemented new information technology software which also dragged on their results. Shoprite had almost null food inflation which had an impact on their top line meanwhile your expenses continue to grow, even if it's below inflation it still has a very negative impact on margins and we believe that it is kind of in the base now and we don't expect these one-offs to repeat again. The share looks very attractively priced now relative to its history. If you run a model and do a fair value assessment now it's trading well below fair value at the moment. And, even in the context of poor economic growth in South Africa, people still need to eat.

Chakaduka chose Firstrand and said, "We want to go long FirstRand, they found their base and bounced off their recent lows. I don't think there is anything fundamentally that is going to change from now and their next set of results in three or four months time. What has changed though is the economics and the politics around which will give a lot of the banks some breathing room.

Stock Watch - Stock Picks - Adcock Ingram and Discovery

Mark du Toit from Courtney Capital Private Wealth chose Adcock Ingram as his stock pick of the day and Graeme Körner from Körner Perspective chose Discovery.

Mark du Toit said that he is looking more in the space of quality companies that don't have a lot of debt. Adcock has a very low debt to equity ratio, its earnings are defensive, it does like a stronger rand so one should bear that in mind as well. It's a good quality company at a fair price.

Körner said "rightly the market proxies and there's angst around what Moody's is going to do on Friday but I believe that Discovery is a fundamentally different business. It has lost 23% over the last year and it's a much better business. If you look at their results there was really not much to criticize. We have finally had the launch of the bank and we'll see how that goes but their history is one of building businesses that are disruptive and actually generate a return.

Stock Watch - Stock Picks - Transaction Capital and Airbus

Wayne McCurrie from FNB Wealth and Investments chose Transaction Capital as his stock pick of the day and David Shapiro of Sasfin Securities chose Airbus.

McCurrie said that Transaction Capital is doing very well and is operating in an industry that is tough but clearly they understand it. They are expanding in their product ranges, their debt collection side is doing very well and is also expanding overseas. The stock is trading at a reasonably low PE (Price Earnings) ratio and you should have fairly good earnings.

Shapiro chose Airbus and said "It's just one of my big themes at the moment, international travel, particularly the Chinese and Asian. With Boeing under pressure Airbus has done incredibly well." Shapiro added that their success is not a knee-jerk reaction to Boeing's woes but that Airbus's orderbook had grown over a number of years and that they have now started to deliver on that.

285 episodes

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