Momentum in the markets - 3 to buy and 2 to sell
Dear MoneyMorning reader,
US Stock up 3%, Emerging Markets down 4,5%
US Stocks recovered from sharply lower levels after a reconciliatory speech from President elect Donald Trump which eased market fears; Energy and Industrials were the leaders based on his plans for infrastructural development.
Emerging Markets have been left out in the cold as investors evaluate the impact of a Trump presidency on global trade and growth. Capital outflows have been seen across most EM markets, particularly in Asia.
The Rand lost 5%: The Rand followed emerging market currencies lower.
SA - General Mining up 15%
Diversified mining stocks led a rebound in the All Share Index after the surprise results in the US election. They were buoyed by a surge in prices for basic materials and the weaker Rand. Glencore was up the most (25%) followed by Billiton (18,5%) and Anglos (14%).
Gold stocks down 11%
Gold stocks experienced a sharp sell-off when the gold price fell back as the market switched from seeking safe-haven assets to a higher appetite for risk assets.
Three Stocks to Buy
Buy Sibanye for a rally to R50
Sibanye Gold pulled back 11% last week, Gold found support at $1230, market uncertainty remains. Company results have been impressive and their recent acquisition of Aquarius, provides more diversification. Buy for rally to R50.
Remgro is well positioned for growth.
Remgro has been making some structural adjustments to their balance sheet post the delisting of SAB Miller, they have successfully complete a rights issue which will allow them to take advantage of new opportunities. There has been some weakness in the underlying portfolio which is reflect in the current price. It offers a well-diversified play on SA Financials and Healthcare which can be acquired at a discount.
Reinet is trading at a big discount – Get in now
Reinet’s position as a Rand Hedge with exposure to a rebound in the US, makes it attractive in the current investment climate. The discount has expanded to almost 30%, which is at the top-end of its range. The shares are trading just above the support level of R26,50 which last seen 18 months ago.
Two Stocks To Sell
Clicks under pressure with looming Dischem listing
We reiterate our view on Clicks after a strong set of results in October, HEPS were up 14%, the stock remains expensive in a difficult consumer environment. The PE has reduced to 26x historic earnings. It has been a star performer, however with Dis-Chem listing imminent we expect it to remain under pressure.
Rand vs US Dollar may have changed course…
Yes, we said sell the Rand last week and it has weakened 5%. The easy money may have been made, but we maintain that the Rand is still at relatively strong levels which provides an opportunity to rebalance offshore exposure. A Trump presidency is likely to place long term pressure on emerging market trade and currencies.
Guy Algeo is Director of Prodigy Asset Management.