A big blue-chip letdown

WHERE IS THE VALUE ON THE STOCK EXCHANGE? For SA investors used to double-digit returns, JSE blue chips have been a disappointment.

AlphaWealth’s Keith McLachlan recently tweeted that 51% of JSE stocks have delivered negative returnsthis year. This suggests some are entering value territory; the trick is identifying where to find this value.

We’ve built a list of blue-chip stocks to consider for your longterm investment portfolio:

Ashburton Mid-Cap ETF:

For those who see value in the market – particularly in growth stocks – the easy win may be to look at this exchange-traded fund (ETF) offered by Ashburton. Over two years it’s delivered 17.92%, four years 38.4% and five years a cumulative 58.05%. With gold shares influential in this ETF, much of the performance is likely to be driven by that of gold shares including Gold Fields (5.4%) and Sibanye (2.9%).

Brait:

Listed industrial group Brait has had a year it would rather forget. The share lost 51% this year and trades on a forward price-to-earnings multiple of 6.9% times earnings and a net asset value of R78.15 per share. For a share trading at about R52.50/share, this appears to offer some value, particularly if the UK finds some middle ground in Brexit negotiations.

Metrofile:

JSE small-cap shares have been battered as liquidity has been sucked out of the market. While many may offer compelling value, few are able to show a catalyst for growth. Metrofile has consistently delivered value and with a 7.5% dividend yield, savvy, patient buyers could be well rewarded in the medium term.

Afrocentric Investment Corp:

A high-quality counter which often flies beneath the radar, Afrocentric was an impressive performer in the most recent earnings season. The empowerment group trades on an earnings multiple of 13 and offers a 4.4% dividend yield. The dividend was up 16.6% y/y.

Pick n Pay:

The retail sector has struggled. Pick n Pay recently hit a 52-week low but stockbrokerage SBG released an updated note on the stock saying it issued a 12-month price target of R71 (now R57), saying it would realise operational efficiencies. The stock’s also estimated to have a rolling 3.6% dividend yield. While it’s come in for some flack around its offer of groceries on credit, it’s also experimented with Bitcoin, showing a desire to engage new consumers.

As Bloomberg recently highlighted, foreign investors have deserted stocks at a rate of knots in the past 12 months. Without them to drive share prices, shares are likely to fail to track foreign counterparts. But, if foreigners once again see SA shares offering value, these are just some stocks which could enjoy a kicker due to their high-quality earnings base.