Likely to be a year of stock pickers

Weekend Witness - - Scene Around -

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.

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