SA firmer, US softer, OPEC may curb production further - Three JSE stocks to buy with updates

by , 17 May 2017
SA firmer, US softer, OPEC may curb production further - Three JSE stocks to buy with updates
Local markets were slightly firmer across the board last week, assisted by some Rand weakness and better commodity prices. US markets were slightly softer, the UK rallied 1,8% while Europe was flat.

US economic data did not meet expectations, which has called the pace of continued rate hikes into question. The US dollar gave up ground against most major currency pairs. Political uncertainty regarding trade relations with China has settled down for now.

Oil spiked late in the week and pushed higher over the weekend on news that some OPEC members would support an extension of the current production curbs.

Weakness in the dollar and an improved tone for Oil appear to be providing some support for commodities.

Locally, Goldfields was up 11%, followed by Naspers, Remgro, MTN and Bidvest all gained close to 4%. Adcorp fell 17% after a profit warning, Datatec was down 7% and Richemont 6,7% after releasing results.

SA company results are in full swing: Santova, Transaction Capital and Dis-Chem will release results tomorrow, Stefstock and Afrimat on Thursday and Investec later this week.

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Three Investment Buys

Buy Gold - Finding support at $1227?

 
Gold Bullion has trended lower with a basket of commodities. Last week we indicated that they appear to have found some support and this week that picture looks more convincing. A turnaround in Brent Oil and weakness in the US Dollar provides for a change in direction. Buy below $1,230 with a stop loss at $1,210 look for your first take profit at $1,270.   
 

JSE Stock to buy: Richemont - Earnings outlook improving….

 
Once again, we see a large multinational company present results to the market and get sold off aggressively. Like MTN last week, we feel this provides a buying opportunity. Earnings momentum from Richemont has been improving after several years of declines. In addition, the Rand hedge characteristics are attractive considering the current vulnerability of the Rand. Buy at R108.50.

 

JSE Stock to Buy Coronation - Good Value at current levels

 
I often get asked about Coronation: a darling of the market and solid investment management business. The company share price has fallen 40% from over R100 a few years ago. Although they have seen some outflows over that time they are not material to the scale of its business. The dividend yield has always been an attraction and they remain a key player in SA markets. In my mind, their large positions in companies like Naspers, Mondi and BTI bodes well for upcoming results. The price decline of 10% recently provides a good level to pick up stock. Buy in the low R60’s for the medium term.  
 
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JSE Stock Updates

  1. MTN has rallied nicely following the Buy call last week. Move your stop loss to your entry level to remove the downside risk.
     
  2. Anglos: Diversified miners still look attractive, based on support for commodity prices, Hold.
     
  3. Life Healthcare pulled back as expected on their results announcement. The PE is demanding and we will keep an eye on this one – all trading positions have been closed.
     
  4. PSG Group has retraced 10% from our sell call at R270. The price is currently at R243, watch for a buying opportunity at R225.
(This article is an extract from Prodigy’s weekly Investor Digest. For more information contact Gavin McCarter on gavin@prodigyam.co.za.) 
 
Director of Prodigy Asset Management
    
P.S. Want more of these weekly buy/sell calls then why not start a 30 day trial of our Money Morning Premium service - you can learn more about it here.



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