Stock Watch

BUSINESS DAY TV  |  Podcast , ±22 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 — Nextera Energy and Sasol

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

Shapiro said: "Green energy has become a big subject and the one producer that we found that are still making profits in green energy is in Florida. It's a company called Nextera Energy, they do windmills and renewable energy and they still make money. They're up about 7% this year although we haven't pulled a trigger on this one in other words I haven't started buying it but a very very good business."

McCurrie "Sasol is my stock pick and this is trough earnings, and Sasol is sitting on single-digit PEs on trough earnings. I mean the cash flow and the earnings in Sasol in two years’ time will be approaching R50/R60. There's no more negative cash flows in the next year or two, it stops and this company generates serious positive cash flows. As long as the oil price stays where it is, which is always a variable because you don't know it goes to 50 bucks Sasol is not going up, but if it sticks around more less where it is you could make significant returns on Sasol from this level."

Stock Watch - Stock Picks — Shoprite and Astral

Nick Kunze from Sanlam Private Wealth chose Shoprite as his stock pick of the day and Joseph Busha from JM Busha Investments chose Astral Foods.

Kunze said: "So we like Shoprite, it currently closed at round about R115 and some change and is almost back at a 52-week low. Not that we necessarily think that the SA consumer is flying back but, if we're going to be in the space we tend to like the food retailers. It's not a demanding PE, sitting at a 15 times PE. If you look their retail numbers that came out last week, it was surprisingly on the upside, above 2%. We're hoping it's not just a Black Friday wonder and will know if that if December flows through. But, I think with these current holdings, with the margins where they are, Shoprite is a good buy."

Busha said: "Astral foods has done fantastic, I think from the price momentum perspective but if you look in terms of last numbers they were down about 55%. The main contributor or drive of their performance certainly is their feed stock and if we're going to have problems with maize and so on, given the fact that the rains are looking very patchy and your prices remain sticky. So you might not be able to get earnings supporting the press momentum. I think the share price was stuck at some place between R154 and R165 last year and all of a sudden it is trading it's R217. I think would basically not be buying and I'll be shorting it."

Stock Watch - Stock Picks — Alphabet and Mondi

David Shapiro from Sasfin Securities chose Alphabet Inc as his stock pick of the day and Wayne McCurrie from FNB Wealth & Investments chose Mondi.

Shapiro said: "If I had to choose a pick in the FANG grouping, I would say probably Alphabet, simply because their valuations are better than Facebook. I also think Amazon is a good option, they beaten off their competition and they continue to dominate."

McCurrie said: "With the e-commerce company's needing boxes, you need a stalwart like Mondi to produce the boxes for them to use for shipping and what people don't realise is that previously you would buy your 10 000 tubes of toothpaste at the supermarkets and they would put one box with 10 000 tubes in, take off the top and that would be your display. Individuals are buying it online now and you need many many more boxes."

Stock Watch - Stock Picks — Adidas and Facebook

Nesan Nair from Sasfin Securities chose Adidas as his stock pick of the day and Jean Pierre Verster from Protea Capital Management chose Facebook.

Nair said: "I'm going with Adidas, the German footwear and athletic-wear producer. We have been holding this for quite a few years now and it's one that I think probably still has a bit more legs."

Verster said: "Also going for a big international stock, one of the biggest - Facebook. I have picked it before but where we’re right now, it is almost trading at a brand new high. They've come through probably the biggest test that they could. If you have a platform that is dominant your biggest risk is regulators and the fact that they have come through a time where regulators scrutinise their business platform, and it did not suggest that the company be split up and, the fact that the users did not lose confidence in interacting with the platform after the issues with Cambridge Analytica and everything else that we had last few years tells me that a lot of people still gravitate to Facebook. That means that the eyeballs will be there, the advertisers will be paying for those eyeballs to see their ads and is very good for Facebook's business model."

Stock Watch - Stock Picks — Visa and Exxaro

Jonathan Fisher from PSG Wealth Sandton Grayston chose Visa Inc as his stock pick of the day and Gerbrand Smit from N-e-F-G Fund Managers chose Exxaro Resources

Fisher said: "I think I picked Visa a year and half ago, we still like it. It's expensive purely from a price multiple perspective, I mean we're talking heavy stuff here - 36 times multiple and MasterCard is 46 times which is a big competitor. Visa is a global payments and technology company, headquartered in San Francisco and basically facilitating commerce between customers, vendors and financial institutions, sharing information and taking a cut of every transaction and that's got huge economies of scale. They have a market cap of just over 400 billion dollars, you know the
payments volumes were up 7% in the last reporting period, transactions were up 11% and revenue was up 13% and that was in the last quarter."

Smit said: "Exxaro is one of the resource stocks that didn't do well, it's unloved with the Eskom stories at the moment. That's why we're picking it at the moment, if you look at the bulk of their business the only thing that's priced in at the moment is probably the iron-ore business, if you strip that out you're getting the coal business which is mostly fixed contracts with Eskom, not bad business and it's probably going to increase as well because there's lots of other little miners that needs to be eaten up to get the cost down of the coal that they're paying more for at the moment so, I think they're at a good space and you're only paying about a 1 multiple for the coal business (if you buy the whole business at the moment) so, I think it's almost giving a whole coal business for free and it's at R130 and it used to pay nice dividends over time. It sold some of its investments, I think we already about R16 or R17 per share over December just from dividends, so still at R130 a share, 1 PE multiple for a coal business is a must as coal prices are at a all time low at the moment."

Stock Watch - Stock Picks AB InBev and Anglo American

Drikus Combrink from Capicraft chose AB InBev as his stock pick of the day and Petri Redelinghuys from Herenya Capital chose Anglo American

Combrink said: "Second time going with AB InBev, they are down from the last time that I chose them. It's an emerging market play, so if emerging markets recover so will the stock. Secondly it's defensive, so if the market falls it will be defensive. It's a bit of an asymmetric, sitting on a 15 price earnings ratio which is the cheapest that this stock has been in a long time. It has discounted a lot of the slow growth that we've seen in the older matured markets like the US and Brazil. The other markets that they are in, they're growing volume, they are premiumization happening which means they are moving the customer to a higher margin beer and that means that margins will keep growing and expanding over the longer terms so I like that at these levels."

Redelinghuys said: "I'm going to go with Anglo American PLC for technical reasons. A positive news flow around the straight wall negotiations and that kind of stuff can really be good for commodities particularly in the very short term. This is not a long term trade and I'm not going to be holding it for the rest of my life. There was a nice bull flag set up that broke on Friday, so Monday was the buy basically and I think that sort of trades up to R435 so it's a short-term trade and it's based on momentum. We've got a very strong rally in the commodity space I think that’s where I want to be, I want to back the winners"

Stock Watch - Stock Picks — Sanlam and Metrofile

Nesan Nair from Sasfin Securities chose Sanlam as his stock pick of the day and Simon Brown from Just One Lap chose Metrofile

Nair said: "I'm going with Sanlam, it's one of those companies that have been sold down, just on negative sentiment. This is a quality business, have a look at their operational update from a few weeks ago, they are growing quite strongly, double the rate of inflation on volumes. I think we'll see this one in a few years’ time at much higher levels than it is right now.

Brown said: "Metrofile, I own it and there is a very simple play, they announced a potential take-over in October and yesterday it came out at R330 and we'll still potentially get a dividend for December. If they're going to be generous it is a ten cent dividend which means a R340 payout and currently you're buying at R285. So, you're paying R285 and you're making around 19%. If that deal takes six months it an annualised almost 40% return. You have a risk that perhaps the deal isn't in the bag there's some t's and c's, they have a BEE partner, they have to solve some issues and none of those to me looks onerous and I'm pretty sure the two significant shareholders have okay'd the R330, so this is the easy money in a market that is offering value but not a lot of return."

Stock Watch - Stock Picks — Investec and AECI

Nick Kunze from Sanlam Private Wealth chose Investec as his stock pick of the day and Ricus Reeder from PSG Wealth Sandton chose AECI Limited

Kunze said: "Investec is spinning off the asset management arms in the first quarter next year, I think it's called 9 1 or ninety-one. Investec is trading under ten PE with a nice dividend yield, and will the kick up with Brexit being out the way so you're picking it at reasonable levels and we like the share."

Reeder said: "AECI, first of all technical because they've gone to about R108 today so that's a new 52 week high. There's a technical rally up to 120 printed on that, the fundamentals on the back of that company that's been restructuring with the rains we're getting right now and also possibly a little bit of a rally in commodity it's going to be good for the explosives as well as the agricultural business so these fundamentals pushing behind it plus as I said a technical push under that that looks pretty good at the moment."

Stock Watch - Stock Picks — Peabody Energy and Discovery

Drikus Combrink from Capicraft chose Peabody Energy as his stock pick of the day and Graeme Körner from Körner Perspective chose Discovery

Combrink said: "I'm looking at stuff that's more cyclical that's hated, there is very little out there that's hated as much as coal. There is a company in North America called Peabody, BTU on the New York Stock Exchange. It was a fairly large company, I think it's down to about two billion dollar market cap, that restructured tremendously over the last few years with the weak coal prices. More than half of their production is now coking coal, coking coal can't go away, you can't produce steel without coking coal and the ebitda will be about half the market
cap in 2020"

Körner said: "One of the winners today was Discovery. it was up today but it's been hit really hard. I think a combination of NHI and you know SA Inc financial services. We still think it's a great story and the simple reality is that they've gone from circa three million vitality members to twelve million and total vitality is twenty million around the world. We still think it's a really good business. We think they're doing some amazing things, we don't think the bank is going to contribute on the short term but I think it's one of those businesses that you'll look back through five or 10 years from now and say you know I really should have bought some at a hundred and fifteen bucks. We drink the kool-aid, we buy the story and I think that as they add services to it becomes a formal powerful cross selling machine."

Stock Watch - Stock Picks — FirstRand and Novartis

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

McCurrie said: I'm going with FirstRand, it just really symptomatic of all the SA shares and here specifically the banking shares. These things have been pounded, now my view is that the future for South Africa is better than the past and at these valuations - if I'm right, you are going to make quite a nice return, but I've been saying it for a year."

Shapiro said: "I've been looking at Novartis, and it's probably one of the biggest pharmaceutical companies around, I like them lot because I like the new management, they are on an acquisition trail with some big acquisitions and I like the companies that are being bought. You know a lot of cleaning up of the Novartis investments and I think also they're going into certain areas of advancements which are coming right for them."

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

Ian Cruickshanks from SAIRR chose an unlisted US Corporate Bond ETF as his stock pick of the day and Mark du Toit from Oyster Catcher Investments chose Quilter Plc

Cruickshanks said: "I believe that interest rates are going to come down so you need some sort of gearing aimed towards that. I also think that the rand is going to remain under pressure indefinitely so therefore I'd look to investing in another market. I'd look at an ETF, trying to get an investment in corporate bonds, where I think there's an opportunity to go with them as they come down maybe from a 5%-6% to 2% or 3% there could be very good capital values."

du Toit said: "I'm picking Quilter tonight. There has been a lot of a noise today about the trade or possibly, the delay in the trade resolution between America and China but you've also got the UK election next week and I think that post the election (we hope that it goes the way of the Conservative Party and not the Labour Party) but I think if it goes to the conservative party it will be positive and then we will start to see resolution of Brexit shortly thereafter. So Quilter is the asset and advice management business that was spun out of Old Mutual and I think it's well positioned in that it has the second business tied advisor force in the UK. They sold their Life Assurance business and then returned three hundred million pounds to shareholders in either a special dividend or most likely share buybacks which I think will be a nice underpinning for the share price. I think the British Pound could strengthen in the in the medium term post the Brexit resolution, so I think the prospects are good."

Stock Watch - Stock Picks — Roche and Standard Bank

Jonathan Fischer from PSG Wealth Sandton chose Roche as his stock pick of the day and Gerbrand Smith from NeFG Fund Management chose Standard Bank

Fischer said: "I'm going for Roche, a Swiss-based company headquartered in Basel, listed in Switzerland. It is a diagnostics and prescription pharmaceutical company, they sell drugs for anemia, anti-coagulation therapy, leukemia - you name it. Whatever disease is out in the world they produce it and they sell it. It has market cap of 264 billion Swiss francs which is close to four trillion Rand. They're not cheap, from a just a normal pe of 22 times, they are similar to Sanofi or GlaxoSmithKline which is two of their competitors, they have a dividend yield of 2.6%. It's a global company that we like, a non-weakness probably looking to buy some of that, they had quite a nice run the past six to nine months, trading just over 300 Swiss francs."

Smith said: "I just think you buy stuff when nobody else wants them, that is certainly the case with Standard Bank as it falls into that category at the moment. There's a downgrade hanging over South African business and they are the leading African bank from South Africa's point of view in Africa. Nobody wants to be in Africa at the moment and Standard Bank is doing a great job we saw growth from that side and the latest numbers in South Africa is actually growing, their IT spend is behind them so I think people are missing the plot there. It's sitting at a 9 or a 10,5 PE multiple, decent dividend yield and I think you'll be rewarded over next year holding this."

409 episodes

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