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 — Standard Bank and Discovery

Nick Crail from Ashburton Investments chose Standard Bank Group as his stock pick of the day and Graeme Körner from Körner Perspective chose Discovery.

Crail said: "My stock pick today is Standard Bank, I personally wished that I had picked this last night because it had a ripper of a recovery day today - I think it was up about 5%. But ultimately SA inc. and specifically the banks have taken a massive hit. Standard Bank is down 20% over the quarter and 15% down over the last 3 weeks.

Körner said: "I'm going to go with Discovery - forget about the solvency ratio, the life-book and the capital in the medical business. What we like about it is that it is a business that has gone from medical aid administrators and have grown into life assurance, investments, insurance and into the UK. Some teething problems in between but they have over 11 million lives onto vitality and a lot of people knocking on their door. What we like about this is there is a lot of recycling of operating profit into new ventures and barring their original foray into the US everything else has been a success. I think the bank is going to take a while to show a profit, but as time goes buy it is growing and being more balanced as a business."

Stock Watch - Stock Pick — Vukile

Nesi Chetty from Stanlib chose Vukile Property Fund as his stock pick of the day.

"Vukile is one of the companies that we have liked for a while. It has one of the most defensive retail portfolios in the property sector. It is a R35 billion portfolio but close to R30 billion of that is local assets. If you look at the company's performance over time it did well to go offshore into Spain. Their investment into Castellana started at around 300 million Euros and is now at around 900 million Euros. We think that over time it will do quite well from a distribution perspective. It is also trading at a discount to NAV and the yield is in excess of 9%. There is still select retail opportunities in the retail space."

Stock Watch - Stock Picks — Equinix and Progressive Corp

Gary Booysen from Rand Swiss chose Equinix as his stock pick of the day and Jean Pierre Verster from Protea Capital Management chose Progressive Corp

Booysen said: "I'm going with Equinix, it's essentially a large listed property REIT, so it's a property company but it actually creates data centers so it's another way to play cloud computing without actually holding the computing section of the the business. They essentially then rent out server racks and server space to different people and have many partners. Among their clients are about half of the Fortune 500 companies so it's a company that's growing very rapidly. It is fairly expensive at this stage to take a sell off as most things did overseas into December, so the year to date return on the stock looks incredible, at almost 50 percent up for the year. That is because you're buying off a low base (if you started at the 1st of January) but it is expensive. It's trading on forward PE of about 23 so it is high but at the same time if you look at its data equity ratio - that's been falling quite aggressively so the
balance sheet is getting stronger while the company is growing which is positive. It's very cash generative and all around it's it's not only a dividend play which which mode with most REITs are.

Verster said: "My stock pick is called Progressive Insurance, they are roughly the OUTsurance of the US, they really started direct insurance through the telephone, before we had the internet and then started via the internet, selling their policies as well. It also started with pay as you drive insurance which means that your premiums escalate with how far you drive so, very good in terms of really pricing for the risk which is also what direct insurance is all about. Getting good underwriting information rather than going through
brokers - not knowing exactly what the identities are of the people and their risk profile. So, Progressive Insurance is listed in the US, large insurance player in the sho

Stock Watch - Stock Picks — JP Morgan and Curro

Jonathan Fisher from PSG Wealth Sandton chose JP Morgan Chase & Co. as his stock pick of the day and Drikus Combrinck from Capicraft chose Curro Holdings Limited.

Fisher said: "I'm going an offshore theme, JPMorgan is a big multinational Bank domiciled in the USA. It's got a 350 billion US dollar market cap. It is priced about $108 per share. It is on a PE of 11 times and a dividend yield of just under 3% so certainly not an expensive company to buy from a valuation perspective. Last year they grew earnings by 42%."

Combrinck said: "I choose Curro, all of PSG's investments are falling at the moment, but I do you think some of it is unjustified. There is trading system that came out from Curro last week and that trading statement showed really very lean growth I think 6% to 9% at the end of the day, that is headline earnings per share growth it says that they maintained margins but they say nothing about revenue. They took on a lot of debt in the last 12 months, I thinking that interest expense is much higher and that the EBIT growth and the revenue growth is actually more healthy than the 6% to 9% percent headline earnings per share growth. The market has done to much on to little information at the moment."

Stock Watch - Stock Picks — cash

Deryck Janse Van Rensburg from Anchor Securities and Ian Cruickshanks from the SAIRR both chose cash as their stock picks of the day

Janse van Rensburg said: "If I was going to look for a stock to buy it would typically be in the US at this stage of the game, there is a gap between US Treasuries and where the markets are at the moment - it does concern me. I am a buyer of the US market but I just don't think we are at levels that I would like to see just yet. I'm keeping a close eye on things like Microsoft and Amazon but I'm keeping some powder dry, waiting, being patient and looking for an opportunity on a bit more of a pull-back."

Cruickshanks said: "What can you say about an economy that produced between one and two hundred thousand jobs every month. It has to be the only game to play, in that respect from my point of view, I would take whatever I can out of SA markets and keep it in dollars, in cash in the US at the moment.

Stock Watch - Stock Picks — cash

Both David Shapiro from Sasfin Securities and Wayne McCurrie from FNB Wealth & Investments chose cash as their stock picks of the day. McCurrie said: "We've seen this before, it happens fairly regularly every 8 to 12 years and it's not unusual. It has happened before it will happen again and we've recovered from situations way worse than this. 2008 is 40 times worse than where we are now it just doesn't feel like it because we forgot about 2008. We recovered from that, we survived and we are still here."Shapiro said: "Bitcoin, gold - anything that is not the stock market.Now is not the time to make major decisions."

Stock Watch - Stock Picks — Distell and Altron

Devin Shutte from The Robert Group chose Distell as his stock pick of the day and Rowan William from Nitrogen Fund Managers chose Allied Electronics Corp A (AEL)

Shutte said: "My pick is a small liquor company based out off Stellenbosch, and why I like it is because - you've got great operating earnings growth in a tough environment, a really good portfolio of assets that they're getting good growth in the alternative labels. Fantastic cost containments with a really strong balance sheet and as a result you've got this really great little compound that plows through the economic circle, irrelevant of what's happening so yes we think there's significant upside.

William said: "We are going with Altron, a similar kind of theme in terms of a great equity compound, I think you've got a business that had a difficult period, has gone through quite a significant restructuring and is now in a new phase of growth with a completely new management team. They streamlined service offerings with a very clear understanding of what it's trying to deliver to its customers around ICT and is on the cusp of some secular growth in terms of the adoption of technology cloud-based services. It has quite a big exposure to the UK as well, so it has diversified away from South Africa, it is still on a reasonable multiple and the earnings growth - at least for the next few years looks fairly certain and solid."

Stock Watch - Stock Picks — cash

Joseph Busha from JM Busha Investments and Nick Kunze from Sanlam Private Wealth both chose cash as their stock picks for the day.

Busha said: "Cash king right, for now... so, the American elections are coming next year and the volatility in the rand will be equal to the volatility of Mr. Trump's tweets until he realises possibly that he might lose whatever I wants to do, and possibly turn at that stage so the market is going to be very uncertain with massive volatility and until everything has settled down a bit, I think cash would do.

Kunze said: "This is the only time I've chosen cash since I've been on the show. I just feel that the rhetoric has increased so substantially in the last 48 hours and if you don't have to be in the market for now best to be on the side. But you'll get your opportunity. There is an expression that chaos provides opportunity and those are sitting with the cash will get their opportunity - at some point, but while things are still at such a head and there's an African expression when two elephants are fighting stay off the grass - so I'm staying off the grass..."

Stock Watch - Stock Picks — Visa and Standard Bank

Nesan Nair from Sasfin Securities chose Visa Inc as his stock pick of the day and Graeme Körner from Körner Perspective chose Standard Bank.

Nair said: "I'm going with Visa because their results have come out recently and they are doing an incredible amount of volume. More and more people are using Visa and MasterCard to settle payment transactions. I supposed it is a structural move from bricks and mortar to online where you can pay with cash. Why Visa and not MasterCard? I would chose both but making a case for one of them, Visa is twice the size and it's just a preference."

Körner said: "I'm going with Standard Bank as it's trading under R180. It is a SA Inc. stock, proxy for SA and down about 10% on a one month view with lots of concerns around ratings downgrades, Eskom and more recently the Rand. They are on a 6% dividend yield. It has been a while since it has been at these levels but if you believe that South Africa is not going to go down the toilet then I think this one will do well over the next two or three years."

Stock Watch - Stock Pick — Boeing and Airbus

Independent Analyst Liston Meintjes chose Boeing as his stock pick of the day and David Shapiro from Sasfin Securities chose Airbus

Meintjes said: "I think the story is very simple, I looked at Boeing when the first plane fell out the sky and it was at a price $100 higher than a year ago. I said surely this thing is gonna fall and it went down $5 it's by the way the largest stock in the Dow by a long way. And next thing another plane falls out the sky and it goes down another $5 so it's still $90 to $100 higher than it was a year ago before they had these problems and then they say - 'oh we're gonna give a hundred million to the to the victims, I don't think that's even close to the nearest billion and they made a loss. They're buying a Brazilian airline and they're having to go to the bond market to get the money to buy it with, I just think that those two things in combination are not good for that airline.

Shapiro said: "My stock is Airbus and I think they benefiting and they've done incredibly well and just look at their order book, if you want to buy an A320 or any of those you have to wait at least five years to get delivery.

Stock Watch - Stock Picks — AB InBev and Moody's

Ricus Reeders from PSG Wealth Sandton chose AB InBev as his stock pick of the day and Jean Pierre Verster from Protea Capital Management chose Moody's.

Reeders said: "Anheuser-Busch is a company that took on a lot of debt and as a result it didn't actually work out for it that well and the prices dropped considerably. But with the last set of results that debt situation which they are servicing and can service might actually work in their favour and considering that they're probably at a 10%, 15%, 20% discount to similar operations globally I think there's upside to that price. It also gives me the sense of comfort you've in being pretty defensive, being in beer, in a market that is as volatile and a bit crazy as it is globally and also locally."

Verster said: "My pick is a US listed company called Moody's. A lot of people will have heard of Moody's when they think about the credit rating of South Africa. Moody's is one of the largest credit rating agencies in the world and they rate sovereigns (governments), they rate corporates (individual companies) and through these credit ratings that they issue they get quite strong revenue. There's been a lot of credit issuance over the last decade so they've issued a lot of credit ratings and made a lot of money. That seems to be continuing with low interest rates, a lot of companies are issuing debt as well as banks and governments and therefore they need great ratings and they pay Moody's. They had a bit of a wobble in 2008/2009 and people said that they were giving high credit ratings for very low quality debt instruments off the back of the US financial crisis but that is sort of got out of the system, so at the moment with a lot of debt that need a lot of ratings, my pick is Moody's

Stock Watch - Stock Picks — Enbridge and Mr Price

Drikus Combrinck from Capicraft chose Enbridge Inc as his stock pick of the day and Nick Crail from Ashburton Investments chose Mr Price Group

Combrink said: "Enbridge is a midstream company and they transport energy which include gas and oil. A Canadian firm and also one of the bigger ones in their field that transport from Canada to the interior of the US. To get a pipeline running through any state is close to impossible at this stage, environmentalist and conservationists are bombarding these companies. It makes for a lot of headline risk but I think that is where the opportunity is. The share is trading at a 40% discount and is the cheapest it has ever been. With a 7% dividend yield in US dollar terms and I think they are going to grow revenue by 5%-12% over the next 5 years, very stable defensive company.

Crail said: "I think Mr Price is relatively defensive but it is without a doubt not going to escape the economic environment that we're in. I do think on a longer term basis it is well positioned to continue taking advantage of the landscape that we find ourselves in. I rate the management very highly and I think that stock price has come off significantly. And now looking forward, yes we are in a very depressing place at the moment, sentiment is very negative to almost all of SA inc and that it really does highlight opportunities because these are now trading at cheap multiples they are cheap companies and there are quality companies, Mr. Price I think it's a good bet."

347 episodes

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