Take a look at these retailers
Well-managed trio will be able to lure foreign investors
Our retailers have been buoyant, driven by the stronger rand, a lower petrol price and the receding probability of increased interest rates.
Are they still a buy for longer-term investors? The technicals indicate that several are — particularly the larger counters, which benefit from the renewed interest in emerging markets and the resulting foreign flows into our quality stocks.
Here I look at Shoprite, Woolworths and TFG. All are large, well-managed companies with solid fundamentals and yields attractive enough to find favour with foreign investors. Shoprite This is arguably our most attractive retail stock. Exceptionally well managed, it provides a low-risk entry point for foreign investors seeking exposure to the African consumer. At the time of writing it was trading at 208.70.
Shoprite’s three-and-a-half-year consolidation formed a giant bull-flag (in red). A bull-flag is when the price range angles away from the prevailing trend, which is up.
It has emphatically broken out of this trading range, setting up a target of R228. The target is the height of the flag projected up.
It is now attacking the prior high of R205.75, set in December 2012. A prior high is usually strong resistance and some consolidation can be expected. It may retreat as far as R190.
Once it strongly clears the prior high, the second target becomes R255.
The long consolidation and strong break indicate a price beyond R255 is possible, but targets will need to be determined as patterns build.
Stop is a weekly close below R182. Longer-term investors can use the 200-week moving average, currently at R165. The Foschini Group (TFG) TFG is well managed and trading on a generous forward yield of 4.4%. It can be expected to attract significant foreign interest. At the time of writing it was trading at R157.25.
It has formed a lovely Reverse Head & Shoulders (S-H-S) with a target at the previous high of R199. It may spike to just over R200.
The right shoulder is “resting” on the 200-day moving average, which strengthens the picture.
Stop is a daily close below R149. Woolworths This is always popular. The Australian dollar is strengthening so the David Jones business should continue to provide good rand earnings. At the time of writing it was trading at R94.10.
Break of the important 200-day moving average was followed almost immediately by a break of the neckline of an S-H-S. Such a double break is bullish.
Target out of the pattern is R106.40, this being the height of the pattern projected up.
Stop is a daily close below R90.
The writer owns Shoprite, TFG and Woolworths shares