Likely to be a year of stock pickers
FINDING undervalued shares is going to be one of the most challenging aspects for investors to deal with in 2013, according to one local asset manager.
This is particularly pertinent given the recent highs recorded by the JSE All-Share Index.
Rob Spanjaard, investment director at Rezco Asset Management, said 2013 is likely to be characterised as a year for stock pickers, as there are currently no clear sectoral winners in the market.
“The objective for most investors in 2013 is going to be about finding those value situations within a range of sectors.”
He believes that the only place where there seems to be some industry value at the moment is in the banking sector. However, Spanjaard disagreed with recent suggestions that Absa is set for a comeback in 2013, after recording the worst share-price performance of the big four banks over the past two years.
Spanjaard argued that the most value in the banking sector is likely to come from international stocks. “As the U.S. economy continues to recover, the larger U.S. banks should provide good returns over the next 12 months. We particularly like Bank of America and JP Morgan.”
“We also like Samsung, as it has done the impossible by leapfrogging Apple in the smartphone market. At current valuations, the stock is cheap and the company is expected to produce free cash-flow of seven percent this year.”
Spanjaard said the local retail sector is looking stretched. “When retail sales were growing at 12% per annum in nominal terms, one could buy almost anything in the sector and make money. However, early indications of poor Christmas sales are hugely concerning. We will be watching trading updates from the retailers to get a handle on the persistence of the trend.”
Spanjaard said investors in 2013 should not to become too overconfident. “2012 was a great year for the stock market, with the JSE providing a return of more than 20%. Some of the top funds, such as the Rezco Value Trend, even returned as much as 30%, which is not the norm.
Rezco Asset Management’s top three share tips for 2013 are as follows. 1. OMNIA
Omnia did very well in 2012, consolidating gains of almost 60% on the year, driven mostly by a strong increase in earnings. We believe that it still has a lot further to run and it is still cheaper than the average JSE share, but has much better prospects over the next few years. 2. DISCOVERY HOLDINGS
We expect Discovery Holdings to continue to perform strongly in 2013, despite achieving gains of more than 40% in 2012. The company is marginally more expensive than the average JSE share, but we believe that the true value of Discovery Holdings’ foreign interests is also not yet fully appreciated by the market. 3. SAMSUNG
Internationally, we also foresee value in Samsung. In 2012, it produced a phone that many feel is cooler than Apple’s iPhone. Samsung is far cheaper than the average international share, with better prospects. We believe that good earnings, with a rerating, will see the share move higher in the new year. — Business Editor.