Analysts unveil their hot share tips for the new year
SANCHIA TEMKIN and ARTWELL DLAMINI
Published: 2009/12/22 06:37:10 AM
BOE Private Clients is punting a mixed bag in its annual stock picks for next year that includes Bidvest, MTN and Woolworths.
But other analysts are more upbeat on industrials and mining, especially in the second half of the year when the recovery from the recession was expected to deepen.
BoE said yesterday it expected emerging markets to outperform developed ones, with China setting the pace. 'For SA, we should see gross domestic product (GDP) recover to around 2,5%-3% with the Soccer World Cup playing an important role', the BoE report said.
'Local share prices are up 27% this year (up to December 4), and it could be argued that a lot of the expected growth is already being discounted by the market,' it said.
BoE expects the JSE all share index to gain a further 10%-15% next year. 'The key will therefore be to try and identify the outperformers,' said BoE in its annual Christmas Stocking report.
Darryl Owen, chief investment officer at BoE, said yesterday that its top stock choice for next year was the Bidvest Group.
The Bidvest Group had been contracted to supply a wide range of World Cup services. About 35% of earnings were from offshore food services, making it a reasonable rand hedge, Owen said.
BoE's other stock choices include giant mobile operator MTN. 'It will definitely perform better in the coming year,' Owen said.
The company suffered some hiccups after falling out with Indian operator Bharti earlier this year, leaving investors disillusioned.
The decision to slash interconnect fees in March, and poor growth in SA also affected the company.
'However, given the strong market position of the company in most markets, it was expected that there would be an improvement in margins,' Owen said.
Another favourite on BoE's list was retailer Woolworths. 'Recent visits to stores have led us to believe that a lot more work by management has definitely culminated in a better range of clothing and far more value in the food offering,' he said.
Chris Gilmour, an analyst at Absa Asset Management, said the more attractive option for the commodity investor would be stocks such as Anglo American, BHP Billiton and Kumba Iron Ore, which offered a broad range of products protecting them from market fluctuations.
Gilmour said it was best to stay away from gold at the moment with Eskom wanting 35% electricity tariff hikes and the African National Congress Youth League talking about nationalisation of mines.
He said Discovery Health remained a top contender for next year. 'However, we can expect to see plans on the table for national health insurance.
It is unclear as to what effect it will have on groups such as Discovery,' Gilmour said.
He said the banking sector could expect another tough year. 'Earnings forecasts do not look good.
'However, as 2010 progressed there should be a loosening up on lending criteria, and from June onwards banks should be in a position to perform better than this year.'
Sasfin Bank fund manager David Shapiro said next year might not necessarily be the turnaround year.
'However, if things do turn around, the real winners are Anglo American, British American Tobacco, Naspers, SABMiller and BHP Billiton. 'These companies were being driven by the turnaround in China and higher commodity prices, Shapiro said.
'If there is a recovery in the economy, then the raw engineering stocks will lead the way, such as Barlow and Altech', he said.
Richard Hasson, fund manager at Select Equity Investments, which is part of Old Mutual Investment Group SA, said that MTN had good earnings growth prospects as a result of low penetration in the markets in which it operates.
Hassan also favoured Anglo American.
'It has a great portfolio of undervalued mining assets.'
Anglo American also has one of the best project pipelines in terms of growth of output of commodities over the next five years, he said.
Karl Leinberger, chief investment officer at Coronation Fund Managers, tipped Standard Bank as a top favourite.
'It's priced the same as local banks. However, we don't think the market gives it credit for a broader emerging-market bank.'
Andrew Vintcent, portfolio manager at Investec Asset Management, said FirstRand looked particularly attractive.
Vincent said that with lower interest rates, banks would experience some relief on bad debt, and they should have a strong earnings recovery relative to the retailers. |