Stu­art Kan­tor

Finweek English Edition - - COVER STORY -







1 AN­GLO AMER­I­CAN PLAT­INUM Weight­ing: 20%

The think­ing be­hind this and other com­mod­ity stock picks is that buy­ing an unloved stock makes los­ing fur­ther money less likely as much of the risk is al­ready priced in. Am­plats, along with many other min­ers, has em­barked on in­tense con­sol­i­da­tion and re­struc­tur­ing ac­tiv­i­ties in an at­tempt to cut costs and re­duce any (over) sup­ply. When mar­kets truly re­cover (ie sov­er­eign debt falls, em­ploy­ment stats im­prove) then watch plat­inum stocks soar as le­git­i­mate growth and de­mand en­ter the sys­tem.

Am­plats’s his­tor­i­cal P/E is very high as a re­sult of poor earn­ings, but it’s for­ward P/E is a more re­spectable 37.

2 SA­SOL Weight­ing: 20%

Am­plats, Lonim and Sa­sol are all based on my the­sis that the re­duc­tion of fur­ther QE stim­u­lus is in­evitable and when the search for yield is re­placed by the search for cheap as­sets, com­mod­ity stocks will rally. Even if th­ese stocks re­main unattrac­tive for an­other two years, when the cy­cle turns, your op­por­tu­nity cost and more will be re­warded.

Specif­i­cally, with re­gards to Sa­sol: oil prices will rise. As the hu­man race hur­ries along to 9bn by 2050 and sup­ply shocks in­ten­sify, Sa­sol will be a di­rect bene- fi­ciary. Of course, al­ter­na­tives will and have emerged such as biotech and frack­ing. Sa­sol re­mains a highly in­no­va­tive com­pany and will surely be at the fore­front of many so­lu­tions.

3 DIS­COV­ERY Weight­ing: 25%

When I think of any in­surer, I can’t help but hear the melo­di­ous jin­gle-jan­gle of cash, cash, cash. Sure, in­sur­ers make mis­takes in terms of money al­lo­ca­tion, but the core busi­ness prin­ci­ple is sim­ple – price risk ac­cu­rately, cre­ate a con­tract, sell fear and bring home the ba­con.

No doubt, there is a fair amount of com­pe­ti­tion in this space, but as long as lapses do not oc­cur too fre­quently, busi­ness re­mains good. More specif­i­cally, I have cho­sen Dis­cov­ery given its con­stant in­no­va­tion, ex­cel­lent man­age­ment and bo­da­cious mar­ket­ing ef­forts.

Fi­nally, with Dis­cov­ery’s 20% ac­qui­si­tion in Ping An Health In­surance (a health in­surance com­pany in China), this is cer­tainly a team worth back­ing.

4 RE­DE­FINE Weight­ing: 20%

With a more at­trac­tive his­toric P/E than Growth­point and a bet­ter look­ing for­ward yield, this prop­erty stock is cer­tainly a wor­thy con­tender. Given its rel­a­tive size, prop­erty has been se­verely over­looked by most multi-as­set, as­set man­agers and has left many in­vestors dumb­founded. Prop­erty stocks have run hard and a healthy rerat­ing would be ap­pre­ci­ated. That be­ing said, new bank­ing laws, ris­ing elec­tric­ity and mu­nic­i­pal rates etc… have made di­rect prop­erty in­vest­ment more com­plex for in­di­vid­ual in­vestors and with shel­ter/ prop­erty rank­ing sec­ond in Maslow’s hi­er­ar­chy of needs, own­ing Re­de­fine Prop­erty for 10 years should yield ex­cel­lent re­turns on in­vest­ment.

5 NASPERS* Weight­ing: 15%

Wait for an ac­cept­able (at least 20%) re-rat­ing be­fore buy­ing in. Naspers has ex­tremely strong man­age­ment who have es­tab­lished a sig­nif­i­cant amount of value for share­hold­ers. This has been done through their de­ci­sion to en­ter pay tele­vi­sion; their de­ci­sion to digi­tise and the ini­tial in­vest­ments in Mail.ru and Ten­cent. The com­pany is set to achieve high growth via its emerg­ing-mar­ket as­sets. It’s the mar­ket leader in the coun­tries that it op­er­ates in. Warn­ing – Naspers has the high­est P/E when com­pared to the stocks in this set. This could be at­trib­ut­able to a high pre­mium placed on ex­pected re­turns. Let’s hope this bet works out. *Fin­week is a Me­dia24 publi­ca­tion, which is a sub­sidiary of Naspers.

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