STOCK TIPS FOR 2017
Analysts choose the stocks they expect will offer the most value to investors.
Gary McNamara Portfolio manager at Sanlam
While McNamara says this business has performed poorly on the stock market over the past two years, the recent sale of the non-core Indian business, together with management’s focus on reducing debt over this period, has left the company with a strong balance sheet and very little debt.
The share is currently trading at R48 apiece and on a historic dividend yield of 2.5%.
While this company has been hard-hit by the Brexit vote, McNamara believes that a sum-of-the-parts valuation of the business puts its share value at approaching R110 apiece.
With a dividend yield approaching 5% and a recovery in interest rates for offshore banks post the recent Trump victory, a rerating of the share could be on the cards.
Investec posted one-year returns of -6.37% and is currently trading at around R93.
While this share price has been under pressure in recent months due to some poor competitor trading updates on a historic price-to-earnings ratio (P/E) of 15 times with a dividend yield approaching 5%, McNamara finds the company “very attractive” at current levels.
Woolworths offered disappointing returns in 2016 of -23.37% and is currently trading at about R65.26 a share.
Pieter Fourie Global head of equities at Sanlam Private Wealth UK
Fourie says Pernod’s share price has underperformed for a few years and appears attractive, at 16 times earnings for 2017. The company also remains geared towards a wider recovery in liquor sales in Asia after a very subdued period over the past three years.
The Paris-listed group offered oneyear returns of 7.52% and is currently trading at €104.95 a share.
Describing the company’s global reach and consistent organic growth as, in many ways, “unrivalled”, Fourie notes that Nestlé has grown dividends per share by 8% compound over 25 years.
While the company has struggled to perform over the past few years, he expects announced savings of at least 150 basis points in operating margin over the 2017-2020 period.
Nestlé offered returns on the US exchange of 8.17% in 2016, with the share currently trading at around $74.70.
Aberdeen Asset Management
Even though the external environment remains tough for the company, Fourie says it remains geared towards a general recovery in equity markets and emerging markets in particular.
The stock is trading on 12 times earnings for 2017 and yields 5% at current levels.
Aberdeen offered full-year return of 15.39% on the London stock exchange in 2016, and is currently trading at around £272.50.
Adrian Saville Chief strategist at Citadel
Saville’s pick of the internationally listed automotive manufacturer comes despite it posting year-to-date returns of only 2.55% on the New York Stock Exchange in 2016.
Currently trading at around $31.31 apiece, the company’s deployment of its self-driving 7-Series fleet to the road this year could see an uptick in the share price.
The heavy construction group saw one-year returns, including dividends, of 37.18% in 2016, with earnings per share of R3.35.
The share is currently trading at around R26.
The group posted one-year returns of -23.37% in 2016 and earnings per share of R4.56. Upside potential resides in the recent acquisition of retail operations in Australia.
It is currently trading at around R65.26 a share.
Steven Schultz Head of marketing at Momentum Investments
Glencore is an integrated producer and marketer of commodities, with worldwide activities in the marketing of metals and minerals, energy products and agricultural products.
The share offered returns of 165.39% in 2016 and is currently trading at around R52.19.
The London-listed global resources company, which is among the world's top producers of major commodities, offered a one-year return of 109.40% in 2016 and is currently trading at £14.26 a share.
The group’s strong performance into the new year can largely be attributed to skyrocketing demand for metallurgical coal.
A combination of factors has seen a share price decline of 40% from its June 2016 peak of R211.00, but Schultz believes the share offers good upside potential.
Offering year-to-date returns, including dividends, of -0.50%, Mediclinic is currently trading at around R131.15 on the Johannesburg bourse.
Sizwe Mkhwanazi Portfolio manager at Sanlam
Mkhwanazi believes Standard Bank’s plans to invest $100m in ICBC Standard Bank will put the bank in a good position as the cycle begins to turn.
The bank has also invested heavily in IT infrastructure to convert its core banking system. Standard Bank is currently trading on 1.6 times price to book and 4.65% historic dividend yield and is an “excellent” dividend payer.
Standard Bank offered a yearly return of 53.54% in 2016 and is currently trading at around R150.49.
Anheuser-Busch InBev (AB InBev)
Earnings are expected to grow between 7% and 9%, and operating margins should improve from 31.9% to 33% over the next few years, says Mkhwanazi. This share offers rand hedge qualities and at the current level of about R1 450 offers good value over the long term.
AB InBev offered returns from its US listing in 2016 of -6.36% and is currently trading in the region of $105.64.
Although the World Platinum Investment Council’s latest report has indicated a decrease in autocatalyst demand, it remains the main driver of platinum use and Impala Platinum should benefit from this, Mkhwanazi holds.
The platinum price has declined since the November US presidential elections, resulting in a negative effect on platinum shares. Mkhwanazi has a target price of R66 over the next 12 months.
Impala offered full-year returns of 78.29% in 2016 and is currently trading at R42.70 a share.