Getting it right… 2 to buy and 2 to sell
Where is, the Rand going?
The biggest surprise last week came from the Rand which strengthened another 2,3% against the US Dollar and 3% to the Pound. This put Rand hedge stocks under pressure and the Resources Index fell 2,7%. The JSE Top 40 index was down 1,5%.
The Dow Jones Industrial Average rose 1,8% and the S&P500 1,5%, touching new highs. European markets were firmer but metered.
Murray and Robert shares jumped 36% on heavy buying and rumours this may be a precursor to some M&A activity. Management denied any talks. Bank stocks fell on the announcement of an investigation in collusive practices.
Last week we called Sasol a sell, it fell 4% and Shoprite has responded nicely on Monday, (up 10%) to an announcement of the withdrawal of the cautionary, relating to merger discussions with Steinhoff. Truworths was the best performer in the Top 40 up 10,3%.
On Thursday, Minister Pravin Gordhan will deliver the Budget; brace yourself for more taxes as he tries to balance expenditure demands with slow revenue growth. Key items to watch: Personal Income Tax, Sugar Tax, Fuel Levies, Sin Taxes and VAT.
2 Stocks to Buy
This commodity stock is looking particularly exciting right now
Technically Billiton shares have consolidated and are posed to trade higher after bouncing off support at R220. The shares are still a long way off the high seen in 2016 of R335. First half earnings may be the catalyst with significant commodity price improvements, particularly from Oil, Iron Ore and Copper over the latter half of 2016. Buy.
This long term favourite of mine is a buy
Pinnacle Technologies will release half year results on 2 March 2017. They will include the results of Datacentrix and Solareff which will boost revenues and provide scale to deliver more profits in the years ahead. It is an old favourite of mine and they have come a long way over the years. Rating is still reasonable. Buy up to R20.
2 Stocks to Sell
This stalwart is overbought - Avoid
A trading update from Discovery will leave the market questioning its current rating. Growth appears to be slowing and there are concerns that the implementation of RDR could hurt new business flows and embedded value. Share price has had a nice run and is overbought at R123,00. Sell, and expect to cover at R112,00 on results.
Will MMI maintain its dividend?
A trading update from MMI puts the extremely attractive Dividend Yield at risk. Headline Earnings will decrease between 25% and 35%. Similarly, (to Discovery) the price had a strong start to the year and is trading close to R26,00 where it is overbought and hitting resistance. Sell.
Guy Algeo is Director of Prodigy Asset Management.
P.S. February is Tax Year-end - Have you checked your retirement funding tax deductions?
A reminder that February is the Tax Year-end and the significant changes to Retirement Funding Tax deductions. Ensure you are making the best of these concessions. Contact Prodigy’s offices for a free Retirement Review. You can do a personal retirement assessment at www.retireplan.co.za