Stock picks for 2015 Gregory Katzenellenbogen, Director Sanlam Private Wealth’s must-have stocks for next year. Alwyn van der Merwe, Director of Investments Anglo American 2014 was a truly annus horribilis for commodity producers. Anglo, in particular, was beset by strikes in the platinum industry, a plummeting iron-ore price and a lower growth outlook for China. These all conspired to send the share down 19% year-to-date. A focus on cost cutting, improved capital management, a target return on equity of 15% and the market realising that Anglo has a ‘gem’ in the form of De Beers could help the share rerate in 2015. Richemont The world’s largest jewellery maker with some of the most glamorous names in luxury, such as Cartier and Montblanc amongst others, has weathered the slowdown in China and the recent troubles in Hong Kong. Swiss watch exports to the US increased 22% in October from a year earlier. The US is the second-largest market for Swiss watches, accounting for 11% of exports. A recovering US economy will be an important driver for the company and shareholders could be rewarded handsomely. Steinhoff The proposed listing in Frankfurt (around June 2015) will bring Steinhoff to the attention of a whole range of European investors who could see the potential of the company’s European operations as a significant driver of returns in 2015. The German business is performing very well and there is progress in Eastern Europe, both helping to drive a 38% increase in full year profit. Conforama also continues to gain market share in France (15%) which makes up around 70% of divisional exposure. A recovery in Europe in general could be very beneficial for Steinhoff. Last year I applied a value bias in picking shares for this year; as it turned out, 2014 was a year where cheap shares became cheaper and expensive shares continued their upward trend. For next year I have picked shares that look relatively cheap and have experienced good short-term share price performance. SuperGroup This group’s successes are closely linked to that of SA’s economy as they are involved with logistics locally and in Africa, freight management services and motor dealerships. Hardly sounds exciting. The company has, however, managed to grow their earnings stream consistently in a tough environment and still trades at a healthy discount to the market. We believe the earnings trend is likely to continue; therefore there is still some runway left for good share price performance. Astral Foods Last year this company faced serious headwinds. Not only did very cheap chicken imports hurt the selling price; high input costs also weighed on margins for the chicken producer. Although chicken imports are still high, feed costs have moderated and restored margins. We foresee continued recovery in margins in the coming year as the full benefit of the lower feed costs is likely to boost margins further. FirstRand Having produced a superior return on equity (24% in last year) relative to the other banks, this bank’s capital position would also allow it to continue double- digit growth in advances or personal loans. Similar to the other three big banks, they also target Africa to grow their footprint; however FirstRand arguably has a better track record in terms of execution. Despite a marginally higher rating than the other banks, the operational performance might well support further share-price appreciation. Adcorp This is a cash-generative staffing solutions business with a five-year average dividend yield of 5.3%. On normalised margins the stock trades at 8x historical profit relative to a global peers average of 15x. Even if there is no growth in the difficult SA environment, the growth and higher rating ascribed to management’s international aspirations should lead to substantial growth in shareholder value. Afrocentric Medscheme, the group’s largest subsidiary, is well positioned to capitalise on market consolidation as one of the three biggest healthcare administrators in SA. This business is highly geared towards volumes and economies of scale from new memberships, a key driver of profitability. The group valuation is cheap relative to profitability and growth prospects. Howden Africa With 70% of current revenue exposed to the power sector, this engineering company is pursuing growth opportunities in Africa to improve diversification. Despite a strong balance sheet (net cash equal to 15% of market capitalisation) and a five-year median return on equity of 53%, the valuation is very low based on normalised profit levels. Wilson Bayly Management has a track record of generating relatively consistent returns in the notoriously cyclical construction industry. With low growth persisting at home, 65% of the order book is now Australia-based. On a normalised operating profit margin of 4.7% and valuation of 11x profit, we see value up to R170. Arthur Clayton, Branch Manager
2
Embed
Stock picks for 2015€¦ · Stock picks for 2015. Gregory Katzenellenbogen, Director. Sanlam Private Wealth’s must-have stocks for next year. Alwyn van der Merwe, Director of
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Stock picks for 2015
Gregory Katzenellenbogen,
Director
Sanlam Private Wealth’s must-have stocks for next year.Alwyn van