Stock Watch

BUSINESS DAY TV  |  Podcast , ±25 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 — Remgro and Prosus

Graeme Körner from Körner Perspective chose Remgro and ARC as his stock picks of the day and Mark du Toit from Courtney Capital Private Wealth chose Naspers and Prosus.

Körner said: "I have two that are quite at the opposite ends of the spectrum, I've been quite critical of Remgro for some time that they fell asleep at the wheel and it has lagged its underlying NAV, it is one of those companies that gives you optionality and their discount has swollen to much. The other one is African Rainbow Capital is at the opposite end of the risk spectrum and may very well be the new Remgro. I'm not disputing the fact that maybe there is a question mark when it comes to the rand valuation but it's a very difersified company that also offers a lot of optionality. It should not be trading at half of its NAV."

du Toit said: "We were busy playing the Naspers and Prosus inclusion in the indices, so if you remember we chose to buy Naspers ahead of the the split so have our Prosus and our Naspers shares. We sold the Prosus because it's only trading at a 15% discount to its assets and next week there's going to be a bit of a re-balance in indices so we expect to see the Prosus to get sold down a bit and then on the 20th of September the local stocks are going up weight the Naspers again and at that stage we'll re-balance back."

Stock Watch - Stock Picks — Shoprite and Naspers

Gerbrand Smit from N-e-FG Fund Management chose Shoprite Holdings Ltd as his stock pick of the day and Jean Pierre Verster from Protea Capital Management chose Naspers

Smit said: "I'm going with Shoprite, it used to be expensive at 20 PE multiples it did not drop earnings for 20 years and now it's done so. It had a bad first number at -32% with problems in Africa with currency etc, it had security problems in South Africa and cost problems. The second half in the full year was actually up against the previous second half with about four or five percent so at R100 a share you are sitting with close to R9 a share earnings for next year, which puts that on a 12,5 to 13 PE multiple is where it's trading at the moment. We think for a long-term quality company and quality play in Africa it doesn't look bad."

Verster said "My pick is Prosus and it'll list tomorrow. The share code will be PR X and you can trade it separately from your Naspers. It is primary in in Europe on Euronext and secondary on the JSE. You will have those shares on the JSE if you are a South African resident you can trade them from nine o'clock. I like the Prosus bit so I wouldn't sell my Prosus I would hold on to it
(that's this is not taking tax into account) and I would even, depending on the price try and swap Naspers and sell Naspers and buy Prosus - depending on the discount so, if it's a similar 10%
to 15% discount between Naspers and Prosus and Prosus and its underlying, I'd much prefer Prosus. Also remember that Naspers is ex-div tomorrow so you need to add another seven rand for the dividend as well. So when you look at your portfolio and look at your Naspers price and your Prosus price at nine o'clock and it is less then what your Naspers price was today or yesterday don't worry, there's an extra seven rand of dividends as well. But, between the two bits my preference is for process and I think it can do quite nicely and it can significantly decrease the discounts relative to eat some of

Stock Watch - Stock Picks — Mr Price Group and Visa

Nick Crail from Ashburton Investments chose Mr Price Group as his stock pick of the day and Ricus Reeders from PSG Wealth Sandto chose Visa.

Crail said: "I think it is largely factoring in the current macro environment, relative to the longer terms quality of these stocks and where it is trading at the moment. Ultimately in my view, Mr Price at a significant discount relative to where it should be trading even with the tough environment. In terms of its balance sheet and execution over a period of time it should demand that it trade at a premium relative to the sector.

Reeders said: "Visa just does what it does it has a growing number of transactions and a growing number of clients using their service and growing value. It sort of prints money and in that sense it is a growth story that I think can continue and I think it is a safe play."​

Stock Watch - Stock Picks — Nvidia and Anglo American

Bright Khumalo from Vestact chose Nvidia as his stock pick of the day and Greg Katzenellenbogen from Sanlam Private Wealth chose Anglo American.

Khumalo said:"I'm going with Nvidia another company that's been battered and halved at some point on the earnings front. This is a chip maker who makes gaming chips, Bitcoin mining chips etc etc and their technology's about eighteen months ahead of the game in terms of like their competitors such as AMD and I like the company because the basically powers every good computer you know"

Katzenellenbogen said: "My stock pick is Anglo-American Corporation, mining stocks are probably the cheapest they've been for about a hundred years, if you take cyclically adjusted PE ratio what they call the Cape. In fact the mining stocks at the moment are worse than when they were in the global financial crisis and in the dot-com bubble. The bottom line, so from a valuation point of view they are cheap. Anglo is well diversified, the price of these stocks at the moment is really indicative of the fact that the market is expecting that economic growth is going to fall over a cliff and I don't think is going to happen. Certainly there will be a slowdown but China will have to stimulate their economy and it'll be very good so I believe on a 12 to 24 months Anglo will be one of the top performers"

Stock Watch - Stock Picks — Spar

Wayne McCurrie FNB Wealth & Investments chose The Spar Group as his stock pick of the day and David Shapiro from Sasfin Securities did not have a pick.

McCurrie said: "Spar, why not, the market seems market seems to be turning, economy's looking better, Spar's a reasonable valuation, food inflation's returning to the system. So a very similar story to Shoprite and if you believe the futures better than the past at these valuations can do quite well."

Shapiro said: "I'm neutral, quite simply I just see choppy times for the next couple of months. Locally and internationally I just see too many problems ahead that need be solved. I'm not bearish and I'm not going short of the market but I'm in a hurry to buy."​

Stock Watch - Stock Picks —Remgro and Naspers

Waldo du Plessis from Nitrogen Fund Managers chose Remgro as his stock pick of the day and Nesan Nair from Sasfin Securities chose Naspers.

du Plessis said: "I'm going to go with Remgro tonight, it looks to me like it is trading at one of the widest discounts it has traded to its underlying businesses. Typically we see that in this kind of market, the holding company's shareholders are not as bullish as the underlying businesses, so typically one of the underlying businesses would have a run and RMI would lag for around a week or two before catching up."

Nair said: "I'm going with Naspers, we have just over a week before the Prosus listing in Amsterdam, I expect there will be an unlock of a certain amount of value so if you haven't gotten in, this is your chance."​

Stock Watch - cash and Compass Minerals International

Deryck Janse van Rensburg from Anchor Securities chose cash as his stock pick of the day and Drikus Combrink from Capicraft chose Compass Minerals International.

Compass Minerals International mine salt and 60% of of rock salt in the world is used for highway dicing which allows snow to melt allowing motorists to drive on the highways in winter months. They have been under pressure in the last few years mainly due to global warming - which has been priced into this stock. It's trading at very low valuations with 6,5% dividend yield with cash to spare after that. They are also producers of sulphate pot ash, which is a high grade pot ash but again the share is under pressure due to the export issues to China.​

Stock Watch - Stock Picks — Adcock Ingram and cash

Ricus Reeders from PSG Wealth Sandton chose Adcock Ingram as his stock pick of the day and Ian Cruikshanks from the SAIRR chose cash

Reeders said: "I"m going with Adcock, they have had decent results, obviously there is always the problem with regulation specifically with the National Health Initiative but their over-the-counter market is growing. I think there's great potential there specifically if people start having to go with the over the over-the-counter route rather than going to your doctor."

Cruickshanks said: "I would tend to go into the US market with a currency hedge first of all and I'd want to go in for to a fund which had commercial bonds because I believe if you have any rate cuts is going to be a capital gain score there and it's perhaps one area where income may be maintained as well I take that as my safe haven right."​

Stock Watch - Stock Picks — Mondi and Naspers

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

McCurrie said: "MondiThey put up the long-term share price and this is a quality company, it's proven itself time and time again to actually be a good well-run business. The future looks actually very good for them with all this online speciality packaging, anti plastic, anti straws which is very much placed into their field and yet the share price has done nothing since 2015. PE doesn't look bad, it looks reasonable."

Shapiro said: :"I'm going for Naspers, it's ahead of the Prosus launch and there's a chance this thing could work well. I think the fact that they relocating the operations or the expansion operations to Amsterdam as a core or center there, they've done well. We've tended to ignore a lot of the other businesses but if they start to build on them you know we might get that value unlock for the first time. Tencent is great I love Tencent I love what they're doing but I think for the first time we might find other areas that are all going to contribute to the bottom line.​

Stock Watch - Stock Picks — Anglo American and Sasol

Joseph Busha from JM Busha Investments chose Anglo American as his stock pick of the day and Gerbrand Smit from N-e-FG Fund Management chose Sasol

Busha said: "Anglo American has been hammered as resource stock and they certainly have their own issues, they had to settle their class lawsuit here in South Africa and Zambia has also issued one to say that they need to be able to pay, so from a momentum perspective you might be able to get it back again, possibly in the very short term but in terms of their sales year to date I think they almost half way there at about 7%, so there is potential but again I think it is a very short term momentum driven strategy."

Smit said: "I'm going against the stream here so it's not for the widows and orphans at the moment, just if you do a matchbook calculation on what's Sasol was worth (the old businesses) if chemical process do recover a little bit, we used to say that there is about R40 or R50 a share in it at a 10PE it should be R500 a share. It's market cap at the moment is R150 billion, it's less than what the whole Louisiana project cost in the States. All these delays are normal, I don't think it's a big thing although the cost overrun was huge and they were right to get hammered for that but to write off half of a company for an extra $3 billion is also not totally correct so, from a calculation of what the business parts are worth I think they are certainly well under priced at the moment."

Stock Watch - Stock Picks — Wells Fargo and Zambezi Plat

Drikus Combrinck from Capicraft chose Wells Fargo & Company as his stock pick of the day and Gerbrand Smit from N-e-FG Fund Management chose Zambezi Plat

Combrink said: "I choose Wells Fargo, they had some regulatory issues quite recently, the Federal Reserve is limiting the amount that they can lend out at the moment or at the speed at which they can grow and that forces them to be very efficient capital allocators. They recently changed their incentive structures which has led to the regulatory problems. They are sitting at a 6% dividend yield and they are buying back stocks. Because they are prohibited in increasing their lend-book, the buying back of stocks brings a lot of wealth back to the share holders in a different form.

Smit said: "I have picked Zambezi plat on a previous episode and it is still at the right price, you are getting 13,25% on a platter in a difficult market. You have another optionality here, the only risk is that Northam must survive with the current palladium basket price and Northam is making more than enough to bolster their new projects. The optionality is that Northam will most probably buy back these share over time."

Stock Watch - Stock Picks — Estée Lauder and Sasol

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

Shapiro said: "I've been looking at luxury goods and luxury companies as well and Estée Lauder came out with numbers which was staggering. Why I bring it up is that there's been criticism about the slowdown in China and there's no sense that the Chinese are not buying luxury, whether it's LVMH whether it's Ferrari whether it's Estée Lauder. Looking at analysts who cover it as well - they're very very bullish on this company.

McCurrie said: "Sasols current situation feels a lot like 2014 and 2015. Money has seriously been wasted on Lake Charles but the question is, is that in the share price? Sasol can literally abandon Lake Charles and could just walk away and the share price will go up."

361 episodes

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