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 — ARM & Fortress

Mark du Toit from Courtney Capital Private Wealth chose African Rainbow Minerals as his stock pick of the day and Ashraf Mohamed from Arqaam Capital chose Fortress REIT.

du Toit said: "We like the fact that we have seen a lot of supplies coming out of the comodities space over the last ten years. At this point these companies are going to be throwing off a lot of free cash flow and ARM are still in the single digits multiple PE and it's a diversified miner so you get a bit more protection from the fact that they have more than one revenue stream.

Mohamed said: "I think there has been a lot of cleaning up within that group. They have an entirely new management team. Mark Stevens, one of the "old guard" has now officially stepped down and they offer a 13% forward dividend yield which is very attractive so you are now getting paid to take the risk. I like shares that pay you to take the risk. Most of their risks like NAV write downs have been taken into the share price so from this point onwards and it might take a while, you are waiting for that catalyst and for the buyers to say, yes these earnings are clean and we are comfortable, which will lead to the buy in. They have a very good management team in place now and I think the quality of earnings will demonstrate that."

Stock Watch - Stock Picks — EPE Capital and Richemont

Graeme Körner from Körner Perspective chose EPE Capital Partners as his stock pick of the day and Ricus Reeders from PSG Wealth Sandton chose RichemontKörner said: "I'm gonna go with Ethos Capital (EPE) and I'lltell you why; it gives you something different, if you look at a lot of the investment companies the like of Remgro for example they haven't been great allocators of capital if you have to be honest. These guys (EPE Capital) have got a 30 year track record of delivering IRRs of over 20%."Reeders said: "Also bottom of the barrel stuff but I like it. Richmond for two reasons, the Swiss market is pushing to new highs, Richmond will hopefully go with that crowd. Secondly, considering where we are on the market, sort of slowing global economy it is relatively stable because topping off of the luxury market and I also think unlike the tobacco companies they are selling products which are still aspirational, people want to wear it and be seen to be wearing it."

Stock Watch: Stock Pick — Sasol

Wayne McCurrie from FNB Wealth & Investments and David Shapiro from Sasfin Securties both chose Sasol as their stock picks for the day.

McCurrie said: "David and I are joining forces for the first time ever and we are going to go for Sasol. It seemed as though the chemical prices have more or less bottomed out in America. Oil - who knows but it'll probably stay above $60 a barrel more than it's going to stay below $60 a barrel. They will make very positive cash flows, they are gun-shy now and will not spend this money. They are going to give it to you as a dividend when it stops coming and you know two years out this thing is easily single-digit price earnings ratio which is cheap over time, so yeah I mean you might have to wait a while but it's certainly on a longer-term view does look cheap.

Shapiro said: "The only warning shot is that with the weakness that we've seen recently I hope that it's not pointing to some of the further disappointment or something else happening. We don't know, because normally when you see the share price responding like that you know it's for a reason unless there's some people who are just abandoning it for for some
other reasons, or you know maybe foreign shareholders for whatever it's worth, but on the news that we know at the moment I think it looks cheap."

Stock Watch - Stock Pick — Tesla and cash

Bright Khumalo from Vestact chose Tesla as his stock pick of the day and Ian Cruickshanks from the SAIRR chose cash.

Khumalo said: "Tesla, they released their production update saying that they delivered 95 200 cars, that's more cars that they ever delivered, for example for their whole year of 2015. This is a new record, apart from the one we saw in the fourth quarter of 2018. This is going in the right direction, this year they are expecting to release between 300 000 and 600 000 cars that they are going to manufacture this year. I'm really excited about this company, no one expected this as there has been a lot of teething problems and over 80% of the cars that they now produce are the model 3s and the model s and x was around 17 000, which is not a lot but there is still demand for these luxury cars. These cars save the world, and I like the management team and I think there is a lot of upside surprises going forward."

Cruishanks said: "I like to be sure of getting my investment back, I like security of capital at the moment so I would go for cash or a money market fund without a long deposit period. I think it is safety first at the moment. I'm not convinced that this rush we are having at the moment based on very low short term interest rates is sustainable.

Stock Watch - Stock Picks — Anglo American and Transaction Capital

Mark du Toit from Courtney Capital Private Wealth chose Anglo American as his stock pick of the day and Wayne McCurrie from FNB Wealth & Investments chose Transaction Capital.

du Toit said: "Interest rates are coming down world wide and the global economy, particularly in Europe has been lackluster and America is slowing. I think the next big thing is going to be infrastructure renewal and we're starting to see quite a few countries joining in on this theme. I think that diversified miners are well placed to play to that theme. Anglo has been through a torrid time, its balance sheet is looking a lot better than it has done in the past and there's not a lot of new mines coming online so the supply will not outstrip the demand. I also think Anglo America is a quality company and it will do well.

McCurrie said: "A smaller company but they seem to know the industry very well. They seem to be able to transact through thick and thin in up-down economies and two parts of the businesses are doing nicely. They are at a reasonable valuation and are fully integrated in the industry, and in this tough industry they are doing quite well."

Stock Watch - Stock Picks — Afrimat and BAT

Deryck Janse van Rensburg from Anchor Securities chose Afrimat as his stock pick of the day and Gerbrand Smit from NeFG Fund Management chose British American Tobacco

Janse van Rensburg said: "Tonight I'm going with a smaller mid-cap stock, Afrimat. What they did a while back was an acquisition in the iron ore price, but if you have been following the iron ore price, this is one commodity that has certainly been surging. I don't think the market has priced in what that does to Afrimat as a company from an income statement perspective in terms of that higher iron ore price and how that is going to deliver significant cash returns for Afrimat. Post this acquisition that have insinuated that they are doing their due diligence on an Australian coal listed business however, the assets actually happen to be in South Africa. It is quite a big acquisition and if they do decide to move forward with it there might be there could be a rights issue to have to pay for that acquisition but, this is a company that is printing cash at the moment and within the next two sets of results it is certainly a stock that I am going to be holding in to"

Smit said: "I'm going with a least favourite these days as they have debt on their balance sheets and nobody wants that at the moment. So, I'm going with British American Tobacco. We think that cash flow that these guys generate over time makes it okay to actually still purchase the share. Everybody wanted to own it at R900 a share but they're not willing to own it here at R500 a share. It is at a 11 PE with a 6,5% dividend yield. They have shown over many decades although volumes of cigarettes are going down they can still keep up the margin and actually they are pushing up the margin over time so their cash flows stays the same."

Stock Watch - Stock Picks — Burford and Intel

Drikus Combrink from Capicraft chose Burford Capital and Gary Booysen from Rand Swiss chose Intel Corp

Combrink said: "Their investment case is getting stronger at the moment with a big litigation case that has gone in their favour and they sold off a lot of the risk and this bumped their share price. But, there is a big seller in the market and its called Woodford income equity trust which is their second biggest holding. This company is based in the UK and is in trouble at the moment, facing big redemptions they opened the fund today and have been selling stock all over. Burford is one of the largest stock holders of Woodford and is an incredible opportunity for this investment case."

Booysen said: "My stock is Intel and I'm going chip makers just on the G20 theme. There are so many reasons to choose them for instance the application of their chips in AI technology, mobility through driver-less cars is required. If you look at the various chip makers as a whole they have all traded down fairly heavily on the back of the US, China trade tensions and if we do see the wars subsiding you will see significant gains on the way up in these tech stocks."

Stock Watch - Stock Picks — Old Mutual & Cash: Stock Picks — Old Mutual & Cash

Waldo du Plessis from Nitrogen Fund Managers chose Old Mutual as his stock pick of the day and Ian Cruickshanks from the SAIRR chose cash.

Cruickshanks said: I would stick with cash, I feel comfort in getting a pretty good return at the moment and knowing in a year or two years time I can get all that back and even with one of the new banks the risk is not high."

du Plessis said: "I'm gonna go with Old Mutual and it's obviously very exposed to the South African economy they've had a bit of a storm in a teacup is the way I see it with a CEO having some conflicts of interest it seems that they followed due process and frankly I think some of the large institutional managers agree that maybe they can find someone to drive the ship a little bit harder and so the stock has been hit and it looks like it was deconstructed not too long ago and so the pure insurance business is trading at about a 30% discount to its peers. I think it looks like a buy at these levels."

Stock Watch - Stock Pick — BAT

Nesan Nair from Sasfin Securities chose British American Tobacco as his stock pick of the day and Wayne McCurrie from FNB Wealth & Investments did not have a stock pick this week.​

Nair said: "I'm gonna go with British American Tobacco, I look at the dividend yields I think there's sufficient margin a safety there for the long-term investor so British American Tobacco for me."

McCurrie said: "I don't have one because we're waiting Trump for this weekend. Now there's three things that he can do. He can actually strike a deal with China then its whoopee and off to the races, he can leave the status quo in place declare victory and retreat or he can slam it into full-scale trade wars which would be catastrophic, so hold fire and hope."Stock

Stock Watch - Stock Picks — African Rainbow and Echo Polska Properties

Mark du Toit from Courtney Capital Private Wealth chose African Rainbow Minerals as his stock pick of the day and Drikus Combrink from Capicraft chose Echo Polska Properties

du Toit said: "I chose African Rainbow Minerals as the metal prices are running and there is not a lot of supply of new mines coming online and certainly the the current company is going to throw of quite a lot of cash now and African Rainbow Minerals haven't re-rated to the extent that some of the other mining stocks have and they have exposure to platinum and a little bit of gold trough their holding in Harmony. I think that you could get a market re-rating and go from a PE of 7 to 9 or 11 and that will be a nice catalyst plus it is going to throw off a good cash flow so I think in the short to medium term it is going to be good.

Combrink said: "Echo Polska Properties, locally listed but it's a Polish company. They're sitting at about a 9%-10% yield in Euro terms but essentially as a Polish company. Now our bond ten-year bond yields are sitting at 8% but our high-quality REITs are trading at about a 9%. The Polish ten-year sitting about 2.7% while you're getting this at 9.5% yield that is a massive discount and I think partially because you know they haven't got a listed counter in Poland or the UK. Part of the valuation disparity that you are seeing could be because their counter in Poland and UK is not listed and most of their stock is trader here in South Africa. Secondly they had a large loan to value of about 1.53 loan to value. They've also just announced that they sold 70 percent of one of the office Holdings and they're holding 30% of what is left of the sold off company which they will continue to manage for a fee and part of that will also be used to down lever the balance sheet and also to continue building retail space in Poland."

Stock Watch - Stock Picks — Richemont and Anglo American

Nick Kunze from Sanlam Private Wealth chose Richemont as his stock pick of the day and Joseph Busha from JM Busha Investments chose Anglo American.

Kunze said: "Richemont has been trading upper end of the range and I have a couple reasons for choosing them. There was actually a research note at last week on Forbes saying that by 2020 the the number of billionaires in China's risen nine fold so a lot of high net-worth people coming from Chinese space and also we've seen what has been supposedly little bit of shun towards America so away from Tiffany who's earnings in China down 20% and the rhetoric is that they buying closer to Switzerland and the likes of Cartier."

Busha said: "I choose Anglo American as I think there's a little bit of positivity that is coming through and purely this is momentum for some of the resource stocks in addition to that you know they had the diamond sales going up in DeBeers and certainly and they're storage facilities also showing an increase. I think there might a little bit of an upward momentum in there. The share price had gone to about R450 per share and came down a little bit about R309-R397. A short term momentum you might be able to gain 15%-10% up on Anglo American."

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