We are now well into 2024 and it’s a good time to look at the potential opportunities and challenges in the SA market. I’ve identified three trends you need to look at this year…

Three trends to follow in 2024

Trend #1 – Real Estate recovers as the upward interest rate trend freezes

Property stocks are not the flavour of the month.

An October 2023 Moneyweb headline reads “Big five SA Reits have lost over R100bn in value. The worst investment you could’ve made in 2018.”

The narrative – and the media is full of it – is that malls are empty because people have switched to online shopping. And corporates have given up their offices – while employees exclusively work from home after the Covid-19 pandemic.

But the narrative is wrong.

Property companies have been hit hard with increased interest rates. But for the most part they are returning to pre-pandemic levels when it comes to rentals. Rentals and vacancies are improving, slowly for some and rapidly for others. Interest rates have stabilized and are likely to drop at least once in 2024.

In a recent report to Red Hot Penny Shares readers I revealed a property company that’s seen 6 out of 7 of its malls achieve higher turnover during December 2023 compared to 2022 – with average turnover growth of 10%. It’s also just seen its occupancy rate improve to 93.6% from 92.5%, and it is collecting on all of its rentals.

Despite this the company still trades at a massive discount to its asset value. This present a great opportunity for value investors.

Trend #2 – World trade will play a big role in 2024, and might even affect inflation

For centuries the oceans have been an important avenue for world trade.

And today 80% of world trade volumes are conducted via the ocean.

Roughly R5.1 trillion trade passes through the Panama Canal and as much as R19 trillion worth of goods pass through the Suez Canal annually!

But both are currently mired with problems.

A severe drought that began last year forced authorities to slash ship crossings in the Panama Canal by 36%

And the Suez Canal is badly affected by the instability in the middle east region and attacks on ships in the Red Sea.

The upside is – hundreds of ships have been passing through Southern African ports. And at least a portion of the money will make it to South African companies.

The company I have my eye on has 22 offices in 11 countries. This company’s improved revenue significantly in recent years…more than doubling revenue since 2017. It’s virtually debt free and trades on a single digit PE ratio!

Trend #3 – Dividends to shareholders take a front seat

If there’s one thing that’s become very important again it’s dividends. Companies paying dividends are enjoying more investor loyalty. And, if markets are tough, dividends provide you with returns while you hold on to these stocks.

In my favourite stocks for 2024 I identified a company that’s paid dividends every single year since 1992.

The company’s also invested in solar for its manufacturing premises, and is less dependent on Eskom.

It currently trades on a dividend yield around 4.71%, whilst the JSE Top 40 Index has an average dividend yield of 3.94%.

Some other important events that will shape 2024

Perhaps the biggest for SA investors this year is our local elections. These elections will be the most competitive since the dawn of democracy.

There’s also hope that global interest rates will see at least a small cut this year, providing economies the world over with only shallow recessions, or just slow growth, instead of big crashes or deep recessions.

Geopolitics will continue to play a big role. As mentioned, there’s the middle east and the crisis in the Red Sea. The Russia/Ukraine war is still ongoing. And more than half the world’s population will take part in elections this year. The year is sure to see more volatility. My advice – make use of market drops as buying opportunities.

PS. To see what I’m buying this year, get my favourite small caps here.

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