Protect yourself against the excessively strong rand
The worldwide recovery in share prices over the past 18 months – following the near-bankruptcy declines of 2008 – seem to create the impression 2009, and especially 2010, were excellent investment years. Yes, those who bought early in 2009 did well. But remember all those longterm investors who were in the market before the collapse in 2008 are still looking longingly for new peaks.
For this year the prospects are slightly different. The recovery is complete and now the investor must look for new opportunities. Let’s first look at the risks for 2011. Investors must try to protect themselves somehow or other against the currently strong rand and the inevitable turnaround of that which must occur sometime in the future. Unlike the situation in the past, it’s not commodity shares that will now offer the best hedge against a possible fall in the rand’s value. In fact, it’s the fall in commodity prices that can cause the weakening of the rand. Quality foreign shares – especially BRIC assets – that are also listed on the JSE offer a good opportunity.
At the top of my list are and Note the absence of Naspers, because its exposure to Tencent is just too high.
Locally, I pick Unlike Shoprite and Massmart, Mr Price hasn’t yet expanded much north of the Limpopo. There are definitely opportunities for its affordable clothing in the rest of southern Africa, where economic growth over the next decade could be even better than in SA. Even Mr Price Home can learn a lot from Lewis, and the furniture/financial services division can still expand a good deal.
For the novice investor, there may be two opportunities between the small and medium enterprises. In IT, still offers a nice opportunity, even though its price has climbed considerably over the past few months.
Further down, the little ‘un with the market value of just more than R100m –
– still draws my attention. Briefly, the group specialises in security goods. The panic button in your house comes from AER. However, there are millions – and I mean millions – of homes in SA’s former townships that don’t have any security provision. In case you didn’t know, there are break-ins in the townships too.