- We asked market experts which SA stocks look attractive to them right now.
The JSE’s all share index has gone nowhere since the start of the year, and is now trading at slightly lower levels than at the start of 2018. Share prices are also not looking particularly cheap: the price/earnings ratio for local stocks are above the long-term average.
Still, professional investors think there are some shares that offer value:
British American Tobacco
"My top stock pick is British American Tobacco," he tells Business Insider SA.
The company is geographically diversified with a mix of developed and emerging market exposure. It also has a good management team, generates strong cash flows, continues to gain market share, and is investing in next generation smoking products (such as vapour and heat-not-burn).
British American Tobacco trades at substantial discounts to its peers and global consumer staple companies. The market has taken an overly pessimistic view that tobacco has become less defensive, especially with the entrance of next-generation Products, and that possible US restrictions will be very onerous for tobacco companies.
The stock is undervalued and trades at 12 times its earnings (PE), offering an attractive 5.5% dividend yield.
Shoprite has a simple but highly effective business model with better metrics than the competition but at lower valuations, explains Brown.
More on Shoprite
- It's Africa's biggest supermarket chain.
- Shoprite plans to open its first stores in Kenya in 2018.
- Shoprite's share price hit an all-time high of R274.45 in February 2018 (currently trading at R244.00).
- Last year's turnover was R75.8 billion, up 6% from the previous year.
- Its dividend per share was hiked by 13.9%.
"Although pricey, Naspers is a good blue-chip stock," says Franck.
The market capitalisation of Naspers ($112 billion) is still lower than the value of its investment in the Chinese group Tencent, now worth $150 billion. This means that investors are getting all its other assets for free.
This week, it was announced that Naspers netted a $1.6 billion from the sale of its 11% stake in Indian e-commerce startup Flipkart. This type of deal - unlocking cash from its many investments - should help to close its valuation gap.
In addition, Franck believes that Tencent should still grow, and Naspers is also a rand-hedge stock that benefits from a weakening in the local currency.
Business Insider South Africa operates as part of Media24, which is owned by Naspers.
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