The state of our nation + 3 to buy and 2 to sell
The JSE Top 40 closed the week down 1,5%.
Higher commodity prices; Gold, Silver and Brent Oil were up more than 2%, while Platinum managed 1,6%. These were not enough to save the Resources Index (down 3%) from a stronger Rand. Industrials and Financials were also softer.
Anglogold up 9,3% and Harmony 9,5% responding to a firmer Gold Price (up 2,5%).
PSG rallied 6%, see comment below. Truworths fell 7,4%, followed by Sanlam (5,2%) and Mr. Price down 4,6%.
US Earnings: Facebook surprised the market with earnings that were well above expectations, while Amazon fell short and the share price was punished.
Last week I highlighted the nervousness that Trump leadership style is recreating. The build-up of resistance to his ban on certain immigrants is reflected in the VIX Index, it spiked 3,6%.
Locally, President Zuma will deliver the State of the Nations address on Thursday, it always has the potential to excite. For now, concerns over another cabinet reshuffle have subsided, watch this space.
3 Stocks to Buy
Buy PSG Group Stock
Strong growth from Curro and Capitec mean even more gains for PSG shareholders
PSG has broken out of its trading range and resistance at R220. Results from Curro and Capitec were well received, both shares have rallied and this is increasing PSG’s NAV. Technically the rally could have more upside, it should also create a strong support around R224. Buy on weakness.
Buy Tongaat Stocks
Better Rains mean better profits for Tongaat shareholders
After a torrid 2016 for food producers, due to the drought, the rains have now arrived. Catchment areas are recovering and better rains are expected for the rest of the summer bodes well for Yields. Property continued to develop well with better results expected in the second half of the financial year. The impact of a proposed “Sugar-Tax” is an unknown, but may create a buying opportunity. Till then Add at current levels.
Buy Reinet Stock
Reinet Shares are Trading at an Attractive Discount!
Reinet and British American Tabacco rallied 5% last week. BTI would benefit from global growth and we like the exposure to a UK listing (see comment on Pound below). The discount through Reinet is at historically high levels. Buy at current levels approx. R28,50.
Buy Jasco Stock
A little known IT stock with big profit potential
Jasco, which has struggled with numerous turn-around strategies appears to be gaining traction under the leadership of CEO, Pete da Silva. Per its most recent trading statement, earnings will improve by about 10% for the interim period. There is a lot of scale in this business, meaning that small improvements can have great impact for shareholders. Interim results will be released on 14 February 2017. Buy at 90c
2 Stocks to Sell
Dollar strength and US equities mean it's time to sell DBXUS
Our call to buy DBX US at the beginning of November 2016 has produced a return of 7% in 3 months. The Rand has extended gains, but US optimism on Trump’s policies has started to wane. Sell now and consider the DBX EU or DBS UK as alternatives.
Sell Bowler Metcalf Stcok
Bowler Metcalf Growth is Too Pedestrian Right Now
Operating costs have been increasing at a faster rate than the rather anaemic growth in revenue. Earnings remain under pressure, operating profit decreased 9% at the interim stage. Rand strength typically puts margin pressure on packaging operations. Sell.
February is Tax Year-end
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.
Guy Algeo is Director of Prodigy Asset Management.