Hot stocks for 2014

2014-01-19 14:00

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Investing in the stock market requires thought and time. Thought to choose the best possible stocks for your portfolio and time so you can ride out the market’s ups and downs. Neesa Moodley-Isaacs reports

Standard bank

1 This financial services company boasts a strong management team, a renewed focus on returns, the potential of further African interests and a well-provisioned loan book. All these factors mean that it is only a matter of time before the company starts delivering strong returns again.

Johan Strydom, a senior portfolio manager at Sanlam Private Investments, says he is very comfortable having this stock in his portfolio.

Analysts also expect that the sale of the underperforming offshore business will allow management to focus on the local business and the group’s established network in Africa.


2 One of the top 100 companies listed on the JSE, Invicta Holdings manages assets of

more than R12?billion.

It is also the only JSE-listed company to achieve the Top 100 Performers status for 18 consecutive years – clear evidence of a top management team.

Management has proven itself with a track record of growing the company’s earnings, with 28% compound growth a year over the past 13 years.

Strydom says this track record, and the prospect of new contributors?–?Kian Ann Group in Singapore and HPE Africa?–?make him optimistic about the future. “This, and an attractive historic price earnings ratio valuation of 12.6, make it a must-have for 2014,” he says.


3 “Despite concerns about declining sales of personal computers [PCs] and mobile strategy execution, Microsoft represents an attractive investment opportunity,” says Aslam Dalvi, an investment analyst at Kagiso Asset Management.

“The business divisions have solid fundamentals with an attractive outlook and there is potential upside if the company successfully carries out its mobile and entertainment strategy.”

About 90% of profits in the business division are derived from corporate customers, where demand is expected to stay strong. While competition has increased from companies like Google, competitors have made little progress in the corporate market as its customers are heavily reliant on the Microsoft productivity ecosystem.

Dalvi points out that there is still low PC penetration in emerging markets, which provides scope for further growth.

“The company has strong underlying cash-flow generation and is available to investors at a bargain price. We believe Microsoft is a very attractive investment,” he says.

Life healthcare

4 Analyst Andrew Olanow of Morgan Stanley says Life Healthcare, which operates 63 hospitals in South Africa, is a play on solid underlying defensive growth. The company’s high margins still have room for upside and valuation looks reasonable.

“With any price regulations by the South African government for private hospitals delayed until 2014, we see added price pressure as unlikely before 2015,” says Olanow.

He adds that the company’s excess cash should drive a high dividend yield.

Olanow’s case view is for a 9% increase over the next 12 months.

But his most bullish scenario is that the stock will rise 33% over the next year.

Kumba iron ore

5 While the latest statistics indicate significant production problems from its Sishen mine, Kumba’s Kolomela mine has delivered to expectations.

“The iron ore price is remarkably firm while Kumba’s share price has responded to poor production numbers.

“The market’s dim view on production problems might well have created a buying opportunity,” says Alwyn van der Merwe, the director of investments at Sanlam Private Investments.

Iron ore prices had an overall good run last year compared with other base metals.

The price peaked to a high of $154 a ton in February due to the restocking conducted by Chinese steel mills and heightened demand from steel end-consumers, particularly the Chinese construction sector.

Iron ore demand remained relatively strong throughout last year. Domestic supply in China was insufficient to meet the demands of the steel industry and the housing market. This led to an increase in Chinese imports, which affected worldwide demand.

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