Stock Watch

BUSINESS DAY TV  |  Podcast , ±23 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 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."

Stock Watch - Stock Pick — Amazon and Aspen

Gary Booysen from Rand Swiss chose Amazon as his stock pick of the day and Petri Redelinghuys from Herenya Capital chose Aspen Pharmacare

Booysen said: "Mine is Amazon, everyone knows Amazon, it's absolutely fantastic. Amazon Prime now moving from two-day delivery to one-day delivery, it's a very exciting development for the company and if you look at AWS which is Amazon Web Services and their cloud computing, it is just turning into such a cash cow for them and they're constantly being innovative and I think now that Jeff Bezos is no longer richest man in the world he's got a chip on his shoulder and it's your interests that they are looking after."

Redelinghuys said:"I'm going to go with Aspen, I think that obviously there was a huge catalyst which created a big gap, that gap has still needs to be filled, that needs to trade up to R136 in order for that to happen. Looking in the shorter term I see a fairly strong uptrend, we were tracking this as one of the sort of a "game plan of the week" things from Monday and it pulled back today and it got just within almost a few cents of the buying zone, which is the area between R113 and R111. It gets in there, it's on that trend line support, the trend is up, it looks to be dating into the space of the gap so I think target price R136,68 cents"

Stock Watch - Stock Picks — Investec and Tencent

Nick Kunze from Sanlam Private Wealth chose Investec as his stock pick of the day and Wayne McCurrie from FNB Wealth & Investments chose Tencent

Kunze said "I'm gonna pick Investec today, we like the stock as a house and we like what they doing. Their spinning off with the new "nine one" or 91 is coming before the end of the second half of next year. Nice set of results recently, they came out with a trading statement - they were really good. Stocks trading on an 8 p/e, they are growing their assets in an environment which is not easy in pounds - in real money and we think it's got further upside so we like it.

McCurrie said:"I'm going back to on a pick from not that long ago, I'm going for Tencent simply because I read the management statement that they made and they actually very bullish. I've never seen them make such bullish statements, they're very happy about their payment side, the people buying games and playing games has been declining for quite a while now, the growth rate has been declining and with the growth through almost zero. That's picked up quite sharply again. With the next set of results which is due to come out quite soon, they should actually show a really solid, almost a turnaround in their profitability. So I'm going for it again, on the back of management being very bullish."

Stock Watch - Stock Picks — Standard Bank and Amadeus IT

Nick Crail from Ashburton Investments chose Standard Bank as his stock pick of the day and Jean Pierre Verster from Protea Capital Management chose Amadeus IT Group S.A

Crail said: "My stock pick after this day as well as I suppose the last week is Standard Bank. Looking back into SA focused investing and really I think sentiment has been negative, it's been dire and then you see a bit of a
six-week recovery and now it's dissipated again. I think we certainly know we have challenges in this country and things that we are addressing, I think arguably too slowly. However there are green shoots and there are things that are actually starting to turn so in that environment I don't think we're seeing economic growth picking up significantly in the next let's say two years but longer-term there are opportunities ahead of us I
think, and for that reason I think when shares do get beaten down a little bit, I think there's some value
and I think Standard Bank is a quality company."

Verster said: "Mine is a company listed in Spain called Amadeus and Amadeus is one of three global distribution systems for airline tickets. So if you've ever bought an airline ticket, chances are you've used the Amadeus system. They connect travel agents and other buyers of airline tickets to the airline itself and because there only three of these networks internationally it means they are integral. Amadeus has been winning market share from the other players, they are especially strong in Europe and gaining market share in the US and because they control this network it means that they can raise prices every year and it's not very easy to switch from one provider to another if you're an airline. A lot of people thought that they would be disintermediated if you think of a lot of aggregator websites that allow you to buy a plane tickets, that has not happened. So because of that and the fact that there are so few players and they've got pricing power I think the valuation is reasonable and I w

Stock Watch - Stock Picks — Assore and Macerich

Joseph Busha from JM Busha Investments chose Assore as his stock pick of the day and Drikus Combrinck from Capicraft chose Macerich CO.

Busha said: "I think if you look in terms of what has happened in the last two weeks, iron price up about ten percent on Friday three percent, so the price has been depressed. They are down 23 percent for the year, today obviously a little bit of response and seven percent up so I think the earnings remain kind of high compared to the price and they have to converge at some stage. I think the price will respond to the earnings that have remained impressive. We're looking at the price possibly moving to about 284 if not just above 300."

Combrinck said: "It is listed in New York and it's one of the bigger mall REITs in the US. Its yielding almost 10 percent at the moment so those type of companies have been decimated, including the high quality Simon Property Group which I think these days are yielding about six, six and a half percent - which is much higher than they did a few years ago. It's all about ecommerce, taking away business from traditional retailers and those going belly-up. They own most of the property in the A-rated malls in the US and they have one of the highest quality portfolios globally."

Stock Watch - Stock Pick — Italtile and EPE Capital

Devin Shutte from The Robert Group chose Italtile as his stock pick of the day and Graeme Körner from Körner Perspective chose EPE Capital.

Shutte said: "I'm going Italtile, so this is a born-and-bred tile manufacturer, distributor and retailer and they've really integrated across that, they been around for 50 years and what I like about Italtile is that it is really just a consistent compounder over the year, it's got really stable balance sheets, ungeared in that regard and they managing to grow eternal equity, to grow profitability through really tough trading conditions and I think these are the businesses you want to own when I SA Inc maybe starts to move even just a little bit in faith."

Körner said: "I'm gonna go with one of my old darlings which is Ethos Capital, we talk about small caps and we're not scared of them. The hypothesis is the September NAV was was R11,69 it's trading at R7,25. When you watch that share as closely as we do, because we've got an obsession with it, you see sellers sitting at R7,45 buyers R7,25 there's not much stock. The other thing is, last time I was here we said Remgro because you just got the feeling that a lot of people are getting frustrated with these big discounts to NAV. We spoken about African Rainbow Capital as well. So you get to a point where you say; great underlying assets that a 40% discount is just stupid, so I think what I'm saying is the register has firmed up, my best guess is that there's a window of opportunity if you want to get these things before they take off."

406 episodes

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