Stock Watch - Stock Picks — Wells Fargo and Zambezi Plat
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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."
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."