Keep it on the radar
I AM STILL largely bearish on my outlook for equities in 2014 and wouldn’t pile into this position, but I do think that the sentiment toward resource shares is slowly turning and it might be time to increase a bit of exposure in the portfolio. According to analyst consensus forecast on FT.com, seven analysts rate it as a ‘Hold’ while four rate it as either ‘Outperform’ or ‘Buy’. There is one ‘Sell’ recommendation on the stock. What caught my attention, though, is the consensus forecasts for the 12-month price targets with the low recommendation being R134, median being R160 and high being R187.
In the past six months, I have had some success trading Exxaro by buying it around R143/share with a Contract For Difference (CFD) and then cashing in at around the R155/share mark. Not big profits but it seems to consistently find a base in the early R140s, suggesting some margin of safety.
In the last two weeks it was announced that Exxaro and the Congo government have agreed on a major project. The group has sold its share in the New Clydesdale Colliery and there are also discussions doing the rounds that the company will sell off its 44% stake in offshore operator Tronox, which could free up the balance sheet. I wouldn’t pile in boots and all, but I do believe that if there is a pullback in the market then Exxaro is one you want to consider for your portfolio. Just give yourself a bit of downside protection if you’re going to go the geared route.