Keep it on the radar

Finweek English Edition - - INVESTMENT -

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.

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