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 — Lab Corp and Old Mutual

Ricus Reeders from PSG Wealth Sandton chose Laboratory Corp American Holdings as his stock pick of the day and Deryck Janse Van Rensburg from Anchor Securities chose Old Mutual.

Reeders said: "My stock is a US stock called Lab Corp, they are basically medical laboratories and they are one of the big players in the US, if not the biggest. They were under pressure and have recovered somewhat, sitting at a forward price earnings of 13 times, which doesn't make them expensive. They are also busy doing a lot of interesting stuff as far as digitising processes, gaining market share and also dealing with medi-care which have reduced their margins somewhat but they are adjusting to that and I think they are the right kind of company in an aging population in the right kind of market. If you are worried about emerging markets or SA in general I would say that Lab Corp offers the right kind of safety in a portfolio."

Janse Van Rensburg said: "I haven't chosen one for a while but I'm choosing a South African stock, Old Mutual. I think that the share price in the short term got battered on the back of the unknowns around why the CEO is leaving, the chart mirrors that sentiment as well. The stock is sitting at around R21,60 a share at the moment and I think it is probably one of the cheapest I have seen in quite some time. I don't see this running off to the races and bolstering towards R28 per share in the near term but in a market where things are benign and going sideways, I think you need to be very specific about picking quality and paying very special attention to fundamentals. So, it could remain cheap for a while around these levels but I'm quite happy with the current entry price if you just look at those fundamentals and take a 3 to 5 year view looking forward."

Stock Watch - Stock Picks — Coronation, Lewis and Mondi

Gerbrand Smit from NeFG Fund Management chose Coronation as his stock pick of the day, Sekgabo Molelekoa from Umthombo Wealth chose Lewis and Nesab Nair from Sasfin Securiets chose Mondi.

Smit Said: "I'm going for Coronation Fund Managers, it's something that no-one else wants to own at the moment as the market has been struggling and the All-Share is the lowest it's been in many years. Coronation is geared towards the equities markets so if they should see a pick up in equities markets they should see some performance fees filtering through."

Molelekoa said: "My stock pick would be Lewis, since the UFO acquisition the company has structurally changed and they are aiming to have less that 60% of their sales in credit so they have moved up in the LSM chain. They have no debt at the moment and their ROIs have really been sweet."

Nair said: "I'm going with Mondi, if you look at a chart of Mondi over the last two years it is sort of between the R290 to R400 per share level. The results normally don't disappoint, they pay a special dividend from time to time so you do get paid for holding the share and I think if you apply the strategy of accumulating at these levels and maybe if it levels up at the R400 level it is a way of generating a return."

Stock Watch - Stock Picks — Altron and Investec

David Shapiro from Sasfin Securities chose Altron as his stock pick of the day and Wayne McCurrie from FNB Wealth & Investments chose Investec

Shapiro said: "A business in that is doing very well in the challenging times. They got rid of all the old legacy businesses. It is a pure IT company with a high level of annuaty income of around 60%-70%. They are a services business, there is no capital outlay, they are not dragged down by capex."

McCurrie said: "I choose Investec, we all know they are splitting their company into asset management and the bank. On current valuations the asset management is a very good business and the bank is going to trade significantly below book value or net asset value and management there seems determined that they are going to cut their expenses, which they have already started by closing a few businesses to try and unlock capital. A lot of the legacy assets are out of the system now and it really does look cheap."

Stock Watch - Stock Picks — Alimentation Couche-Tard and Alibaba

Jean Pierre Verster from Fairtree Capital chose Alimentation Couche-Tard as his stock pick of the day and Deryck Janse Van Rensburg from Anchor Securities chose Alibaba.

Verster said: "My stock pick is based in Canada, Quebec and the company is called Alimentation Couche-Tard, and a couche-tard is apparently a night owl. Now this company owns many 24/7 convenient stores in Canada and are also integrating US based stores at the fueling stations across the US, as well as Scandinavia and the Baltic countries. When one goes to a fueling station you don't really worry about the price of the goods purchased so the company has very nice profit margins. I don't see the Internet and Amazon dis-intermediating convenient stores because it is about convenience and it is an impulse purchase. So they have a very wide mote, good management team, long standing business with the founder still as Chairman and it's listed in Canada which sounds like a good idea."

Janse van Rensburg said: "I'm going with Alibaba, they recently released 4th quarter numbers as it is a March year end. Doing a deep dive analysis into those numbers they delivered organic growth of around 39%. A lot of that was contributable to the cloud services component of the business. Their share price has been flung around with external factors like trade wars and tweets from Trump but that in its own setting often gives long term buying opportunities. Even at current prices I think that this company is well placed to deliver good growth looking forward."

Stock Watch - Stock Picks — Heineken and Pharmacare

Jonathan Fisher from PSG Wealth Sandton chose Heineken as his stock pick of the day and Nick Crail from Ashburton Investments chose Aspen Pharmacare.

Fisher said: "I choose Heineken, listed in Amsterdam and has a price of E97 with a PE (price earnings ratio) of 29 (times multiple) and dividend yield of 1.59%. Heineken has a market cap of E56-billion. Historically the group benefited from top line growth and margin expansion and they operate in 70 countries."

Crail said: "Although the price has been all over the place, what you have here is a company that operates in 55 countries and is in the midst of transformation. What makes them attractive is if the company survives and turns around successfully then ultimately you are getting it at a bargain at the moment"

Stock Watch - Stock Pick — Beyond Meat and Coronation

Bright Khumalo from Vestact chose Beyond Meat as his stock pick of the day and Chantal Marx from FNB Wealth & Investments chose Coronation Fund Managers.

Khumalo said: "I'm going short on Beyond Meat. I think the stock is over run. Beyond Meat make a "Beyond Burger" from wheat based material and all sorts of plants. Their argument is that basically that their market is not people who are vegetarians or the likes but rather people who want to eat less meat. I mean there's nothing wrong with the product I think the problem is just the evaluation, it's beyond and unfortunately and at some point it's going to come down and it's going to unwind to realistic expectations. If you look at the quarterly figures, all it takes is just one miss and this company is going to be flying down."

Marx said: "I would be a buyer of Coronation Fund Managers at these levels. Even though there is an expectation that volatility in equity markets are likely to persist, the reality is again everything has its price and from a valuation perspective the stock really looks compelling at the moment. So, when looking at an asset manager, we use a ratio called the "price to assets under management", this stock is trading at like a 13-year low in terms of its price relative to assets under management we think that most of the major outflows are of Coronation is probably behind the stock for now, and even though we do need a little bit of a tail wind from the South African equity market and we are unsure around when that will actually occur, you get a 7.8 percent dividend yield while you wait so I think it's a good time to enter Coronation."

Stock Watch - Stock Picks — Shoprite and Reinet

Wayne McCurrie from FNB Wealth & Investments chose Shoprite as his stock pick of the day and Rowan Williams from Nitrogen Fund Managers chose Reinet.

McCurrie said: "I'll go for an SA retailer and pick Shoprite. it's looking cheap the economy's at the bottom, it can turn around. Things cant get any worse so they'll get better."

Williams said: "We like Reinet, it does have a large exposure to British American Tobacco but that has reduced significantly from what it was, it is a bull diversify portfolio some exposure to PensCorp and the private equity assets. It looks like they are getting the portfolio in order, as well cleaning it, up doing share buybacks, doing the right things. So, it still trades at a deep discount to NAV and I think that discount can narrow."

Stock Watch - Stock Picks — Mondi and

Nesan Nair from Sasfin Securities chose Mondi as his stock pick of the day and Jean Pierre Verster from Fairtree Capital chose

Nair said: "I'm going to go for an old fashion company - Mondi, a packaging company with very good management. I think the share price has been beaten down quite a lot even though the trading update was quite solid. I expect to see good things out of Mondi and I think these are good levels to accumulate."

Verster said:"I am picking a US listed tech stock which makes it which makes its money elsewhere. is the Chinese equivalent to They also compete with Alibaba which is the biggest ecommerce business in China but has Tencent as a shareholder with 18% and Google also recently made a $500 million investment. also builds up their own logistics, so where Alibaba only connects buyers and sellers, actually sells a lot of their products from their own warehouses and that means you can trust the numbers. It's not just people sending packages to themselves which some might say might be happening with other platforms, so, I trust the numbers, I see it as a good competitor to Alibaba and it's trading in a large market. The stock is also cheap due to the current trade wars."

Stock Watch - Stock Picks — Investec and Burford Capital

Nick Kunze from Sanlam Private Wealth chose Investec as his stock pick of the day and Drikus Combrinck from Capicraft chose Burford Capital.

Kunze said: "We think the valuations are far closer to around R120 per share and it's currently sitting under R100. We think it has been far too discounted relative to its peer group and with their asset management spin off coming pretty soon it should unlock even more value. They have also been unfairly knocked with the hole Brexit thing which is hopefully coming to an end soon."

Combrinck said: "I chose Burford, it is the largest litigation finance company on the planet. It is still fairly small in a fairly young very fragmented industry. I think there's about 20 public listed companies scattered around the globe - most of them in the UK the does litigation finest. You will mostly find them were there is Roman common law. Smaller law firms would offer their client's financing needs to Burford which takes a lot of pressure away from the litigation team and from the law firm itself. This started with individual cases at the beginning so Burford at this stage the have raised capital and are now managing some of these finance pools basically as collective investments or as a fund and you can invest in that fund if you are a private equity holder or you can just buy the share on the London Stock Exchange. It is trading a 16 price earnings ratio. Projections are is that the industry will be five times the size it is now in the next 10 years and Burford is currently the industry leader."

Stock Watch - Stock Picks — cash and City Lodge hotels

Ian Cruickshanks from SAIRR chose cash as his stock pick of the day and Graeme Körner from Körner Perspective chose City Lodge Hotels.

Cruickshanks said: "I believe that being sure of getting your money back at the end of a fixed period is the most important factor and that sort of security is very important. The South African economy hasn't disappeared into a big black hole, we have great management, innovative and very able in difficult circumstances. They will pull it right in time and at that stage I want to have cash so that so we can get fully or over invested within the next 5 years."

Körner said: "I have a slightly different view, for 2019, the GDP numbers are in and we know it's terrible. We look forward and I'm going to go with City Lodge. I think it's an incredibly well run and well placed business. If the president is effective in galvinising the country and we start to see a little bid good news - which would be really nice, then suddenly business travel will start picking up and you will see 60% occupancy rate move up to 63% but the thing that I really like is that they just carried on doing their thing, and they build quite a few hotels elsewhere in Africa which means that they have grown their balance sheets by around 20%. So maybe not this year, fast track to next year and this stock could give you 9 or 10 rand of earnings.

Stock Watch - Stock Pick — Sasol

David Shapiro from Sasfin Securities had no stock pick and Wayne McCurrie from FNB Wealth & Investments chose Sasol.

McCurrie said: "I know Sasol is not the flavour of the month but, even with all the bad news with Lake Charles and everything thrown in a pot, as long as the oil price doesn't collapse Sasol can make in 2 - 3 years time R50 to R60 a share earnings. If you put that even at an incredibly low price to earnings ratio there is quite a bit of upside from this. "

Stock Watch - Stock Picks — CMH and MSCI world index tracker

Sekgabo Molelekoa from Umthombo Wealth chose CMH (Combined Motor Holdings) as her stock pick of the day and Gary Booysen from Rand Swiss chose MSCI World Index tracker.

Molelekoa said: "I choose CMH (Combined Motor Holdings) and we've seen it being very defensive, even in the way their vehicle results were falling. They are highly cash generative with around R514 million on a market cap of around R1,6 billion. Also when you compare them to peers, they are SA centrica so they are geared toward an economic upturn. They have the correct product mix since we've seen a big fall-off in luxury vehicle sales, they are able to compensate for that. Their dividend yield is also superior to their competitors, sitting at around 8%."

Booysen said: "I have an interesting stock pick, although I am restricted to the actual name of the stock pick, anyone with a decent financial advisor should know what I am referring to. A company that is listed in Bermuda and it essentially tracks the MSCI World Index. When you get this stock, you get total capital protection plus a 3% coupon over a 3.8 year period. On the upside you get two times gearing after the 3% up to a cap of 34% so in a moderate market you will outperform MSCI World every time."

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