to invest in shares where the balance sheet carries little debt and has a strong cash flow, according to Jacques Pretorius, a fund manager at Consilium Capital.
“There aren’t a lot of areas where you can find value in the domestic market today,” he says. “We don’t see growth on a broad base.”
As the local interest rate cycle starts to rise in the run-up to a potential monetary tightening by the US Federal Reserve amid increased economic activity, local financial shares may be worse off.
“There will be increased pressure on local financial and industrials assets, especially on consumer and retail stocks, as the interest rate increases,” Pretorius says.
With regard to the fund’s top stocks, Pretorius likes Datatec as the stock is a rand hedge that generates most of its income offshore. The fund also invested in PSG Group during March and took profit on over the last month, according to him.
“The fund has now turned to invest in PSG’s underlying assets, such as Zeder,” Pretorius adds. He sees Zeder, which is majorityowned by PSG and invests in agricultural assets, as a defensive stock due to its large holding in Pioneer Foods.