Stock Watch

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 — Merck and Coca-Cola

Nick Crail from Ashburton Investments chose Merck as his stock pick of the day and Mia Kruger from Kruger International chose Coca-Cola.

Crail said: "I'm going for Merck, which is a very large US listed pharma company. They have a big portfolio largely in pharma and cancer drugs, but it's got 20% of its revenues coming from vaccines etc. So, in the valuation I think this is 20%-25% upside from these levels and looks quite attractive."

Kruger said: "I'm going with Coca-Cola today, it's a very well-known company with over 500 brands selling in over 200 countries. They became very well diversified over the last few years with their buy in of Minute Maid. The company now not only sells sparkling drinks they've moved away from the lower margin areas of their business, the distribution and bottling etc and actually just focus on on the drinks itself. They have a great footprint worldwide and they have a great area for growth. The price itself hasn't actually run as hard as the market has recovered, so it still offers value at these levels."

Stock Watch - Stock picks — S&P Global and Growthpoint Properties

David Shapiro from Sasfin Securities chose S&P Global Inc as his stock pick of the day and Wayne McCurrie from FNB Wealth & Investments chose Growthpoint Properties.

Shapiro said: "S&P global which is really a data collecting company, they publish indices but they are also an analytical company as well and I've been absolutely knocked out by the quality of these businesses, without any type of risk. So, if you look at the chart of S&P Global it just go from bottom left to top right. Very solid business."

McCurrie said: "I'm going for Growthpoint, because it's cheap, on a forward dividend yield basis, its cheap. Don't put all your money into it, you're going to have to wait for at least two years until you get proper dividend distribution from the property companies. But understand the share price is down 40%, the net asset down 15% and distribution will only be affected in two years, so you are buying this share at a decent price."

Stock Watch - Stock picks — Gold Etf and BAT

Alex Duys from Umthombo Wealth chose Gold Etf as his stock pick of the day and Joseph Busha from JM Busha Investments chose British American Tobacco.

Duys said: "I'm concerned about global prospects and we favour the Golf ETF at this particular stage. Considering that industries will probably remain lower for longer as all country's fiscal position looks dire it is also very like with all the stimulas that you've seen that perhaps there will be unexpected inflation in the future. Gold is probably the best hedge for such an environment."

Busha said: "Many may disagree but I'm going for British American Tobacco, they have promised to maintain their payout ratio of 65% and they offer a 6,5% to 7% dividend yield. From a momentum point of view there is an opportunity to buy and although the minister is having a few problems, smokers are still puffing away."

Stock Watch - Stock picks — Standard Bank and Long4Life

Gerbrand Smit from N-e-F-G Fund Managers chose Standard Bank as his stock pick of the day and Chantal Marx from FNB Wealth & Investments chose Long4Life

Smit said: "I'm going for Standard Bank tonight, I know there's a lot of negativity in the market but our banks are greatly run and have great buffers built in. Although some of these banks are down 60% locally, Standard Bank was around R200 a share a year bank and is now trading at around R105 or R105. I think there's an easy 30%-40% that you can make on Standard Bank in the next year or two."

One of the stocks that continues to stand out for me is Long4Life, it trades at quite a deep discount to its NAV and has a couple of really good assets. They have Sportsmans Warehouse, Outdoor Warehouse and that not only do they have these retail stores they're also manufacture clothing. They also have Sorbet and a big beverage business which should benefit from people drinking again.This stock is incredibly cheap and it's been cheap for a very long time. It also speaks to those holding company discounts that we've been seeing more of recently so Long4life is my pick. I am backing Brian Joffe and I think that the discount will unwind over time as these underlying companies continue to do well.

Stock Watch - Stock pick — SA Bonds

Kwame Antwi from KOA Capital chose SA Bonds as his stock pick of the day.

"We have been fairly bearish but sticking to our guns and prefer fixed income in the form of government bonds."

Stock Watch - Stock picks — Afrimat and Just Eat

Independent Analyst Chris Gilmour chose Afrimat as his stock pick of the day and Jean Pierre Verster from Protea Capital Management chose Just Eat

Gilmour said: "Afrimat is a mid tier open cast mining stock and there are a couple of things driving this stock. Not so much the construction related side at all but the industrial minerals are doing quite well. The big thing has been their iron ore and the Demaneng mine done in the Northern Cape and I just feel the market has ignored this one and just passed it by."

Verster said: "I'm going for is in the food delivery space it used to be just which Delivery Hero tried to take over which is in the Nasper/Prosus stable. They got out of that deal although Delivery Hero still own roughly a tenth of took over JustEat in the UK and now they're busy taking over GrubHub which is a US-based food delivery business. All these businesses benefit from scale and they now have some mature businesses with high margins as well as more developmental businesses that are growing very strongly and with that benefit of scale I think looks well placed in the food food delivery space."

Stock Watch - Stock picks — Distell and Mastercard

Devin Shutte from The Robert Group chose Distell as his stock pick of the day and Nesan Nair from Sasfin Securities chose Mastercard.

Shutte said: "I'm going for a local domestic economy facing play, the Distell group. A couple of reasons for picking them is that they are an incredibly well run operator that knows how to control costs. They have healthy margins coming through the business and it's a strong cash generator. "

Nair said: I'm a long time fan of Visa but have warmed up to MasterCard recently. I think it's possible to own both business in the portfolio and I think that MasterCard with their market shares is poised for growth from this point onwards."

Stock Watch - Stock pick — City Lodge and Royal Dutch Shell

Graeme Körner from Körner Perspective chose City Lodge as his stock pick of the day and Drikus Combrinck from Capicraft chose Royal Dutch Shell.

Körner said: "If you fast-track six months, things will start returning to normal. City Lodge was a business that I think bored a lot of people because it just did well. If you look over the last couple of years they were delivering earnings of around a R8 a share. I'm not saying they're going to get back to that in a hurry but there's quite a lot of pent up business travel and I would assume that City Lodge would be a beneficiary of that."

Combrink said: "I picked it a while ago, and the stock is Royal Dutch Shell, it's worth at least double and if the oil price goes to $50 next year. They have cut the dividend by about 65% and it still remains at 3% dividend. They are quite profitable at $40 which most oil producers can't say. Once the oil recovers in 2 to 3 years time you will have a higher oil price than you had pre Covid."

Stock Watch - Stock picks — Stenham Properties and Transaction Capital

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

Shapiro said: "I was asked to look at Stenham Properties by one of my clients and I was pleasantly surprised by the performance. If you look at their chart it's one property company moving in the right direction, from bottom left to top right. So have a closer look at it, don't take it as an endorsement, just look carefully."

McCurrie said: "I'm going for Transactions Capital, I think I have called it a few times before. If there is any price weakness tomorrow, buy it for the longer term."

Stock Watch - Stock picks — cash and Multichoice

Mia Kruger from Kruger International chose cash as her stock pick of the day and Ricus Reeders from PSG Wealth Sandton chose Multichoice.

Kruger said:"We've actually increased our cash positions luckily before Covid19 arrived and this was due to the fact that the market didn't look particularly attractive for us at that stage. We've seen the massive rally, we don't think it's sustainable and we much rather sit on the side, along side Warren Buffett and wait for a bit more clarity before we make investment decisions."

Reeders said:"My stock pick is priced too high and that's MultiChoice. I think it has a downside of about 10%-15% to about the R90/R92 level. It's trading at about R108, but what I like about it is that for a company who's fixed costs are very high but has a good cash flow; what this virus has done to a certain extent, there's been a catalyst and I think that catalyst is the tying up with Netflix, Amazon Prime and Edemy as far as online education is concerned. It's put a spin on what I thought was a company that might lose out, but they joined the competition and it makes it interesting. I think it's possibly not a bad buy at lower level considering that we are in a correction at the moment.

Stock Watch - Stock picks — Tesla and BAT

Nesan Nair from Sasfin Securities chose Tesla as his stock pick of the day and Mark du Toit from Oyster Catcher Investments chose British American Tobacco.

Nair said: "I'm going for Tesla, you cannot deny the price action if you look at where it was in October last year. It's not really gone on for that long but just the price action and the momentum behind the price is difficult for anyone to ignore. I think as a trader, this could potentially reach much higher than $1000 to where it is right now."

du Toit said: "I'm going for British American Tobacco. You are getting a 7% dividend yield in GBP, it is trading on a 10 PE and they just came out with their half year market updates. They managed to grow and steal a bit market share in the US. They did revise the guides down slightly but you're still getting another single-digit growth in earnings from the stock. They have the kind of growth story in the next generation products so I think that it's well priced at these level and I think in this environment where interest rates clearly are going to be even lower, even longer, you are going to be looking for stocks that have a decent income yield and there are not many companies that offer that. Even in this environment BAT is still able to pay a dividend and have earnings, and they don't have the volatility variance that some of the other stocks do."

Stock Watch - Stock picks — SA bonds and the rand

Wayne McCurrie from FNB Wealth & Investments chose SA Bonds as his stock pick of the day and David Shapiro from Sasfin Securities chose the rand.

McCurrie said: ​"If you buy a SA government bond you get a 9% yield and if you take out the currency of 6%, you take out the rand risk or the rand collapsing in total, and you take a 4% on a sovereign risk if the government doesn't pay you back in 5 or 10 years’ time."

Shapiro said: "I'm agreeing with Wayne and buying the rand, with the rand and the dollar under pressure looks like it's heading towards R16 to the $ and I thought R16,50 would be the base but it's looking much better and that is really on dollar weakness."

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